Ambassador of South Korea to Finland
The OECD recently adjusted its South Korean economic growth forecast for this year to negative 0.8 percent from negative 1.2 percent in its updated OECD Economic Surveys: Korea 2020. While it is not that bad compared with that of other hard-hit countries, the forecast of negative growth paints a gloomy picture of South Korea’s already sluggish economy.
South Korea has achieved remarkable economic growth over the past several decades, becoming the seventh country to join the 30-50 club (nations with per capital gross national income surpassing USD 30,000 and a population of over 50 million in 2017). However, as Korea’s economy matured, the country began to see a decline in its growth rate. The average annual growth rate reached 6.9% in the 1990s but it declined to 2.9% in the 2010s deepening income polarization.
In the face of the COVID-19 pandemic, the Korean economy has encountered two major challenges: aiding recovery from an economic downturn while addressing structural transformation. Tackling with those tasks, the Korean government is looking to globally emerging trends of economy-digitalization and green growth. While the increased use of ‘untact‘ services has accelerated a digital economy, aggravating climate change has demanded a strong green economy.
The Korean New Deal was created against this backdrop to serve as a national development strategy. On July 14, President Moon Jae-in officially unveiled the Korean New Deal Initiative to support the country’s recovery from the pandemic crisis and lead global action against structural changes. The policy revolves around two core pillars of the Digital and Green New Deal, and a “human” feature, Stronger Safety Net. The government is supposed to commit approximately $94.5 billion into New Deal projects in five years and Korean companies and local provincial and city governments would invest another $37.2 billion.
The vision is clear: from a fast follower to a first-mover economy, from a carbon-dependent to a low-carbon economy and from a socially-divided to a socially-inclusive society. It has 10 key projects: 3 Digital projects (Data Dam, AI Government, Smart Healthcare), 4 Digital and Green projects (Green and Smart Schools, Digital Twin, Digitalization of SOC, Smart and Green Industrial Complexes), 3 Green projects (Green remodeling, Green Energy, Eco-friendly Mobility of the future).
The Digital New Deal aims to foster ‘untact’ industries promoting the use and integration of data, the 5G network, and AI throughout all sectors. This is well-aligned with the suggestions of the OECD. South Korea has been a leader in 5G, with an outstanding digital infrastructure and a dynamic ICT sector. The New Deal is expected to build on this lead by implementing 5G infrastructure and cloud computing for the government, while also continuing to promote the industrial convergence between 5G and AI. In full swing is the AI national strategy, announced in 2019, which aims to bolster the development of AI domestically.
To fight against global warming, the Korean government plans to move towards a net-zero society by supporting ongoing policies, such as the 2030 target to reduce greenhouse emissions by 37% against BAU and to have a renewables account for 20% of the country’s generation capacity. Korea also aims to have 1.13 million electric vehicles (EVs) and 200,000 hydrogen cars on the roads by 2025. In line with the green new deal, the Korean government recently unveiled a more ambitious long term plan to have 8.3 million electric vehicles and 2.9 million hydrogen cars by 2040.
The New Deal program also intends to provide more jobs and better social safety systems along with increased levels of investment in human resources. Recent statistics show the number of unemployed has risen to 4.5% due to pandemic. From the above measures and the funding of €157 billion in five years, 1.9 million jobs would be created in Korea.
Unveiling the initiative, President Moon said that “The Korean New Deal will set the foundation for Korea’s next 100 years.” Crisis breeds opportunity. South Korea is taking advantage of crisis as a positive opportunity to take a new leap.
Finland has a lot in common with South Korea when it comes to its strong digital and green economy. With strong IT sectors and a sense of urgency for climate change, both countries look to digitalization and green economy as a vehicle to refuel their economies, creating a huge opportunity for cooperation. Last year’s agreement to jointly develop a 6G network between South Korean research Institute ETRI and the University of Oulu is a clear sign of potential for this cooperation, not to mention the historic European Green Deal is what inspired the Korean Green new deal.
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