Big companies strictly restricted in owning financial units will be allowed to establish venture capital under their holding arm in hopes of spurring a new wave of venture boom to jump-start the Korean economy in the face of a recession due to virus pandemic, according to latest economic outline from the finance ministry.

The deregulation is accompanied by a big-spending plan on the five-year “New Deal” project at a total cost of 76 trillion won ($62 billion) to rebuild the economy after COVID-19 devastation.

In the sixth emergency economy meeting chaired by President Moon Jae-in on Monday, the government finalized the economic policy direction for the second half of this year, which includes a deregulation outline to enable large business groups to establish corporate venture capital (CVC). Through a CVC, a company can invest corporate fund directly in external startups instead of a third party.

Holding company of a large conglomerate in Korea is prohibited from setting up a CVC as local law bans non-financial company from owning a financial firm. But the government will seek revision in related laws by September to allow conglomerates establishing a CVC.

Tax exemption benefits for facilities investment will be expanded. The finance ministry will work to overhaul tax exemption system to give tax breaks on investment in all facilities except for land, buildings, and cars. It will also give an additional tax deduction for investment that increased compared to the average of those made in recent three years.

Moreover, the government will spend total 76 trillion won on the Korean-style New Deal program, or state projects to help the economy to regain vitality from damages of coronavirus crisis, until 2025. It plans to invest 31.3 trillion won until 2022 – 13.4 trillion won on digital sector, 12.9 trillion won on green sector, and 5.0 trillion won on enhancing employment safety net. Then it will inject an additional 45 trillion won on New Deal projects in the second stage, from 2023 to 2025.

By Lee Ji-yong, Park Yong-beom, and Cho Jeehyun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]