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Korea in next five years (December 24, 2012. The Korea Times)
- Date : 2013.01.24
- Views : 1112
Korea in next five years
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It is historic that South Koreans elected Park Geun-hye on December 19 to be the first female president to lead the country for the next five years. It was a neck and neck race, and Park defeated her opponent, Moon Jae-in, with a 3.6 percentage point margin. For the first time in Korea’s presidential elections, Park, representing the united conservative camp, and Moon, representing the united progressive camp, squared off fiercely on North Korean issues, regulations on Korea’s large conglomerates and broad social welfare programs.
In her victory speech, Park declared her victory to be one of the people who want to see the economy revived and that she will be a president who keeps promises and makes people happy. In his concession speech, Moon acknowledged his defeat and appealed for full support for Park and a successful presidency. The two candidates held cleaner and fairer campaigns than previous ones to upgrade Korea’s political democracy.
Now, the president-elect must face immediate and daunting challenges regarding the risks of the economic downsides. Korea’s economy this year is expected to grow 2.2 percent, down from 3.7 percent in 2011, and is forecast to grow about 3 percent next year amid a prolonged global recession and uncertainties surrounding the U.S. fiscal cliff, southern Europe’s fiscal crisis and the slowdown of the Chinese economy from the usual 10 percent performance to 8 percent a year.
During their campaigns, the two candidates proposed long lists of populist, welfare-related policies, means of assisting the poor and measures to treat major medical problems including cancer and heart disease to cultivate “voter fields.” Undoubtedly, welfare-related issues need to be addressed given Korea’s worsening income inequalities and massive unemployment while passing through two consecutive and unprecedented economic crises _ the Asian financial crisis in 1997 and the global financial crisis in 2008. True, a series of free welfare proposals can win ballots. But the two candidates fell short of addressing the rapidly declining growth potential due to the slow growth of capital stock and a rapidly aging population. Neither explicitly brought up how to improve national competitiveness and identify new concrete sources of economic growth in the 21st century.
In this context, Korea will arrive at a critical crossroads in the next five years. It could cross the last bridge to join a truly advanced nation group or suffer from an upper-middle income syndrome as observed in other countries helplessly engulfed in an excessive welfare trap beyond their fiscal means. Can we address welfare without growth? The answer is no. Park must reassess a series of free welfare programs within fiscal feasibility to reprioritize with different scales while addressing growth and global competitiveness issues. Both candidates also emphasized the importance of job creation, but without offering any specific proposals on encouraging investment. Public hiring by expanding the public sector is not enough _ it is shortsighted and inefficient, even. Private sector investment is the key to creating jobs.
We must recall that the economic development dictum is that growth must take place to increase equity issues and the reverse order has not worked. One-sided injection of free welfare programs without due strategies on new growth caused a complete economic debacle in Greece recently and in Argentina under Peronism, decades ago.
During the election, both candidates emphasized the promotion of small- and medium-sized enterprises (SMEs) and mom-and-pop stores while seemingly suppressing large conglomerates in Korea. It would be wrong to see the large conglomerates and SMEs as playing a zero-sum game. However, we must agree that illegal and unfair internal trading between large conglomerates and their subsidiaries must be regulated. The controversial circular share ownership system among large conglomerate needs to be revised according to global best practices. The candidates also failed to address that more enhanced global orientation of domestic-prone SMEs must be nurtured in overseas markets while taking advantage of global value chains and the competitive brand images of globally known Korean multi-national companies. Winning the public’s trust and confidence, President？elect Park could move Korea forward by crossing the last bridge toward a genuinely advanced economy.
http://www.koreatimes.co.kr/www/news/biz/2013/01/333_127524.html