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South Korea's government said Tuesday it plans to use tax breaks and other
incentives to fuel private investment vital for sustainable growth and job
In a meeting of economic policymakers, the Ministry of Strategy and Finance said it will revamp tax law so more benefits can be given to both local and overseas companies that seek business opportunities in the country.
The measures come as economic policymakers oppose artificial economic stimulus measures that could trigger more problems down the road, and after business investment growth fell in the past few years to hit minus 3.3 percent in the fourth quarter of 2011. This is in sharp contrast to the 25.7 percent growth posted for the entire 2010 year.
Under the plan, support will be given to companies engaged in such areas as logistics, pharmaceuticals, medical equipment, information contents, the environmental industry and breweries.
Tax breaks will be given for the development of vaccines and clinical testing of new drugs, with support for medical equipment designed to raise the self-sufficiency and export competitiveness of domestically made products. In logistics, the emphasis will be placed on getting big companies to outsource their shipments to promote the growth of smaller companies in the field.
For information contents and breweries, regulators will streamline red tape, and cash support will be offered to environmental preservation companies.
In addition, the ministry in charge of the country's macroeconomic policies said it is taking steps to help attract foreign theme parks to the country by designating Hwaseong and Chuncheon as special foreign capital investment zones.
Such designations exempt foreign investors from paying state taxes for five years, with additional regional tax cuts to be offered for 15 years.
Hwaseong, about 33 kilometers southwest of Seoul, hopes to attract Universal Studios while Chuncheon, 85 kilometers east of the capital, is eying the creation of a Lego Land park.
The ministry said to get more private companies to invest in the public sector, it will allocate 600 billion won for build-transfer-operate and build-transfer-lease projects. Seoul has set aside 68.8 trillion won this year on public building programs in energy and railway projects.
Companies engaged in such projects will be able to access low interest loans from banks.
The government, moreover, said it will introduce a "crowd funding" system to make it easier for very small venture start-up business to generate money online after meeting state requirements.
"This system, in place in some advanced industrialized economies, can assist small businesses that have growth potential get funding, without going to banks," an official said. He said related laws should be set up in the first half of 2013.
The government also said state-run financial institutions will expand their hiring of new employees this year as part of an ongoing effort to create good jobs.
The new posts will be created by such companies as Export-Import Bank of Korea, Korea Finance Corp. and Korea Technology Credit Guarantee Fund.