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Next Minister Suggests 5 Solutions to Economic Crisis

Posted February. 07, 2009 17:38,   


Strategy and Finance Minister-designate Yoon Jeung-hyun said yesterday that he fully supports the early introduction of a revised supplementary budget.

He said he will seek parliamentary approval after carefully reviewing the additional budget’s size and timing.

Analysts here said this clearly indicates Yoon’s willingness to draw up a supplementary budget to stimulate the domestic economy, which has rapidly slowed down and been directly hit by the global economic downturn.

“I will place top priority on overcoming the economic crisis in my economic policies,” he said at his confirmation hearing at the National Assembly.

The followings are five solutions that Yoon, former head of the Financial Supervisory Commission, suggested to overcome the crisis.

◊ Fiscal expansion

Yoon said falling domestic consumption and export are responsible for the deepening economic slump. On the government’s growth estimate of three percent for this year, he hinted at slashing the forecast, saying, “It is hard to say the figure is still valid.”

There is a chance that the economy will bottom out in the first half this year, he said. “The economic turmoil is expected to continue for some time. But the economy will likely recover slightly in the first or second quarter of the year,” he added.

Yoon also underlined the importance of taking proactive fiscal measures and stimulating domestic spending.

◊ Job sharing

On the dispute over extending the two-year period that a company can hire temporary workers without having them go onboard permanently, Yoon said the time limit should be removed, saying it will result in massive layoffs of non-regular workers.

He clearly went a step further from the Labor Ministry’s plans to change the maximum contract term of non-permanent workers from two years to four. Yoon also said he will expand tax breaks and financial support to companies participating in the “job sharing movement” and encourage a youth internship system.

◊ Corporate restructuring

Corporate and financial restructuring will likely speed up even faster to resolve uncertainty in the market and the liquidity crunch. “If the restructuring of nonviable companies is delayed, it will put a heavy burden on the economy,” Yoon said, adding that he will work closely with creditor banks to regularly conduct corporate restructuring.

“To prevent more financial companies from going bankrupt, I plan to raise a fund to complement capital in March. I will ensure the managerial independence of financial companies by minimizing government intervention.”

◊ Deregulation of the real estate market

“Real estate is the economy’s Achilles´ heel. But people are no longer buying or selling properties at the moment, shrinking the market,” Yoon said. “We should create the market while curbing speculative demand.”

Experts say he will likely ease the following three regulations: the removal of the three Gangnam districts of Seoul from the speculative area list; a tax waiver on unsold apartments in provinces; and the abolishment of the price ceiling on private land and apartments.

◊ Helping the newly poor

Yoon said the newly poor are exposed to the “blind spots of welfare measures,” including the self-employed who had to shut down due to the economic slowdown. “I will expand fiscal spending on the newly poor, but improvement of how the money is distributed is also very important.”

He will also seek international cooperation for an alternative to the Bank`s International Settlements (BIS) capital adequacy ratio. “Financial companies’ BIS capital adequacy ratios are outdated indexes,” he said.

On the separation of financial and industrial capital, Yoon said, “Why are they so upset and afraid of building a pipeline between manufacturing capital and financial capital?”

cha@donga.com leon@donga.com