South Korea unveiled a set of measures Thursday aimed at improving the country's business environment, the centerpiece of which is to help boost start-ups and corporate spending amid concerns of an economic slowdown.
According to the measures drawn up by the Finance Ministry, the government plans to provide a variety of incentives to start-up companies and exempt them from quasi-taxes, thus reviving entrepreneurship.
Also, the government will streamline the procedures for factory establishment and provide more land for industrial complex development.
The government plans to give start-ups which spend more than 500 million won (US$530,000) on facilities a subsidy equivalent to 10 percent of their expenditure. Also they will be allowed to hire extra foreign workers.
The ministry said it also consider further easing restrictions on building factories in areas surrounding the capital of Seoul.
Hynix Semiconductor Inc. plans to invest about $14 billion in Ichon, west of Seoul, which is now subject to restrictions on expansion.
The measures came amid concerns that the South Korean economy, Asia's fourth-largest, is losing its growth momentum. The pace is expected to slow to 4.6 percent next year from this year's estimated 5 percent gain.
Also, start-ups and new factories in Asia's fourth-largest economy have been on the decline since 2004 due to a slump in private spending and lingering regulations.
According to the ministry, the number of start-ups fell sharply to 9,435 in 2005 from 11,078 in 2004 and 12,445 in 2003. Also, the number of new factories fell to 6,991 in 2005 from 9,204 in 2004.
Meanwhile, local manufacturers are rushing to establish overseas plants to benefit from cheap labor costs and have easy access to overseas markets, the ministry said.
Overseas investment by local manufacturers is likely to reach $5.7 billion this year, up from $3.6 billion in 2005 and $3.4 billion in 2004, according to the ministry.
The ministry said high manufacturing costs, a labor shortage and regulations are discouraging companies from increasing spending in the local market and prodding them to go abroad.
According to the ministry, the government will streamline procedures for corporate establishment and ease regulations on industrial complex operations as well.
The government also plans to improve the system to increase supplies of highly-skilled human resources, thus reducing the labor shortage.
The government will ease regulations for companies to raise funds, thus helping companies securitize their movable assets such as technologies.
Also, the government will revamp the corporate taxation system by providing a variety of tax breaks. South Korea's business community welcomed the measures, but called for the abolishment of the so-called equity investment ceiling and further easing of restrictions on plant building in Seoul and its vicinity.
"The government's plans will provide a catalyst to boost corporate sentiment," said Lee Seung-chul, a senior official at the Federation of Korean Industries, a lobby for large business groups. "We expect the plans to be carried out smoothly."
Under the South Korean fair trade law, subsidiaries of business groups with assets of 2 trillion won or more are banned from making equity investments in one another, a rule aimed at preventing the distortion of conglomerate governance structures.
The regulations have been in place since the 1990s to prevent the country's conglomerates from making indiscriminate investments that could weaken their core business and hinder fair competition in the market.
But the business community has argued that the restrictions make it harder for them to enter new areas with high growth potential, claiming that the rules are unfair because they do not restrict foreign firms.
Seoul, Sept. 28 (Yonhap News)
Seoul unveils steps to improve business environment |
