The South Korean government has decided to greatly increase its investment in social overhead capital (SOC) related to people's everyday life, including urban regeneration, housing and sports facilities, in order to create jobs and stimulate the regional economy.
The move draws attention as the current goverment has vowed that it would not resort to civil engineering-centered SOC investment for temporary economic stimulus.
To avoid criticism that it is resorting to conventional SOC investment to stimulate the sluggish economy, the government has created the concept of "livelihood-improving SOC."
The government is asserting that it is not investing in conventinal infrastructure projects but in projects aimed at improving the living conditions in cities and rural areas. But critics say there is not much difference between the two.
Kim Dong-yeon, South Korea's finance minister and deputy prime minister for the economy, held a press conference at the Government Complex Sejong on August 9 to explain next year’s budget planning.
Kim said, “We will dramatically increase the budget for ‘livelihood-improving SOC’ related to urban regeneration and housing from this year’s 8 trillion won (US$7.15 billion).”
The government will also increase the budget for existing SOC, such as road and railroad, compared to this year, though it was planning to cut the budget next year. Kim said, “We will submit a higher budget for conventional SOC, which is centered on civil engineering, than 17.8 trillion won (US$15.91 billion) of the government’s budgets submitted to the National Assembly last year. The government announced to invest 7 trillion won (US$6.26 billion) in top 10 fields of “local-based life SOC,” including physical training facilities for residents and forest blocking fine dust, a day earlier. Combining the investment, the actual budget for SOC is expected to far surpass 33 trillion won (US$29.5 billion) next year.
The government is dividing the concept of SOC to increase investments in SOC because it aims to stimulate the economy and create more jobs through small-scale regional construction projects. According to the Korea Institute for Advancement of Technology (KIAT), the increase in the number of jobs in the construction industry fell 2.2 percent in the first half of this year from 8.2 percent from a year ago as the budget for SOC sharply declined 14 percent this year. The figure is also forecast to stand at 0.2 percent in the second half.
addition, the government announced to allocate more than 20 trillion won (US$17.88 billion) for next year’s research and development (R&D) budgets, up over 300 billion won (US$268.22 million) from this year, to back up innovative growth and inject 5 trillion won (US$4.47 billion) into eight main leading industries. Accordingly, the rise in gross expenditure next year is expected to exceed some 7 percent. However, Kim said, “We will surely restructure spending as initially scheduled.” He announced to restructure expenditures by up to 12.4 trillion won (US$11.09 billion). The figure is 500 billion won (US$447.03 million) lower than the initial plan.