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[Editorial] Change the course

Democratic Party lawmaker to propose bill that offers bold support for chip industry

July 2, 2024 - 05:30 By Korea Herald

These days, the ruling and opposition parties are caught in a spiral of political strife on almost every issue. However, when it comes to supporting the semiconductors industry, they are showing there is a possibility of cooperation.

While foreign countries have striven to enhance international competitiveness of their industries, the main opposition Democratic Party of Korea has been negative on government plans to support Korean chipmakers, condemning them as “special favors for large companies.” But a lawmaker of that party is seeking to legislate a special law that offers bold support for domestic chipmakers.

His bill is said to offer about 100 trillion won ($72.3 billion) in loans, increase tax deductions further and extend tax credits set to expire later this year by 10 years to 2034. The bill also makes it compulsory for the government to provide infrastructure such as industrial water and electricity supply lines and roads.

It is bolder than the government’s support plans and ruling party bills for the semiconductors industry.

Kim Tae-nyeon, the five-term lawmaker who authored the bill, said that semiconductors were at the heart of the nation’s strategic industries and that the present and future of Korea hinges on the chips industry. He also said his party should not regard support for chipmakers as a special favor for large companies. He is totally right.

Lawmakers of the ruling People Power Party have proposed bills to support the industry after the previous National Assembly failed to extend the K-Chips Act. Rep. Koh Dong-jin submitted one that calls for the establishment of a special council on the semiconductors industry under the president’s direct control and that also makes it mandatory for the government to supply electricity and water. Rep. Park Choong-kwon proposed a bill to extend the sunset deadline for tax credits by six years to 2030.

Coincidentally, the government unveiled plans last week to run a 1.8 trillion won low-interest loan program for the semiconductors industry from July and push to extend tax credits by three years.

Kim’s bill offers the longest extension of tax credits and the largest support fund, but the party has not adopted it yet in its official platform. Nevertheless, it is welcome that a veteran lawmaker of a party that has been lukewarm on support for chipmakers has recognized the importance of the industry and attempted to break away from the anticorporate, pro-labor stance.

His bill offers much stronger support than either government plans or ruling party bills, but it is a pity there is no mention of direct subsidies that could lessen the burden of initial facility investment. In an age of artificial intelligence, global competition for the lead in the semiconductors market is only growing fiercer. The United States, Europe, Japan and Taiwan are pouring astronomical sums into subsidies to keep their industries competitive. By comparison, Korea’s support plans are passive, and even those have been impeded by political strife.

So the Democratic Party is showing signs of change. It is apparent that the party aims at taking the initiative in industrial and economic policies, but it is still positive for both ruling and opposition parties to feel responsibility for the future of the Korean economy and move in the same direction.

Now that there is an agreement on support for the industry, there is no reason to hesitate. Both parties must begin discussions immediately. If a better plan comes out of the discussions, they must accept it without political calculations.

The Democratic Party has refused to expand tax credits for the semiconductors industry, criticizing them as support for chaebol or tax cuts for the rich. The party discussed the issue of reforming inheritance and comprehensive real estate holding tax systems, but eventually failed to overcome internal disagreements and pulled the plug on a tax reduction.

It must be different this time. When it comes to helping a major industry of the national economy, rival parties must stop partisan fighting and put their heads together.