In its first policy briefing to President Lee Myung-bak, the Ministry of Strategy and Finance said Monday that it will make efforts to achieve 6 percent economic growth this year. That target is lower than the 7 percent GDP growth that Lee pledged when he was campaigning for the presidency, but it is nonetheless ambitious. The 2008 GDP growth target announced by the former Ministry of Finance and Economy to the previous administration was 4.8 percent.

In order to boost growth, the government said it would implement sweeping deregulatory steps, scrapping rules imposed on major business conglomerates that limit cross shareholding among subsidiaries, while making it easier for businesses to build factories in forest land and in the Seoul metropolitan area. Next year, the government will widen tax incentives, including the lowering of corporate taxes by 3 percentage points, while expanding corporate tax deductions on research and development and facilities investments from the present 7 percent to 10 percent.

In conjunction with the latest measures, the government has vowed to wrap up around 10 major policy objectives by March 31, including specific steps to enable businesses to set up corporations via the Internet. The government has set concrete deadlines for individual stimulus policies this year, including an April 20 goal to lower toll fees on highways during rush hour.

The government's 6-percent growth target for this year is possible only if these policies are implemented without hitch. If all goes according to schedule and the measure is ratified by the National Assembly, the corporate tax reduction pledge will become a reality for companies that close their books in December and pay their corporate taxes in advance in August of this year. If that happens, it will lead to W1.8 trillion (US$1=W965) in tax deductions this year, prompting businesses to contribute to a 0.2 percentage point growth in GDP. But it remains to be seen whether the National Assembly will cooperate with the government's schedule, and whether it will be possible to manage a nation’s economy like a company’s, as planned.

Complicating matters, the global economy is on a downward spiral, impacted by the fallout from the U.S. subprime mortgage crisis and soaring raw materials and grain prices. Against this backdrop, if the Korean government becomes fixated on simply meeting its GDP growth target, unrealistic macroeconomic policies will overshadow the reality facing the country's economy, leading to side effects such as rising inflation and a worsening current account balance. The government forecasts Korea's current account deficit to amount to US$7 billion. Korea has not posted a current account deficit in 10 years, since the Asian financial crisis.

From a broad perspective, deregulation and tax cuts are the right policy choices. But the government needs to pay close attention to details so that these choices don't wreak havoc on the environment and weaken the government's fiscal health. The government must not forget that bolstering Korea's long-term economic growth potential is far more important than simply achieving 6 percent GDP growth for 2008.