Tag Archives: Moon Jae-In

South Korea – The President and the Economy

Several presidents in South Korea have entered office with pledges to address the economy: former President Lee Myung-bak’s 747 economic plan; former President Park Geun-hye’s economic democratization; and current President Moon Jae-in’s “J-nomics.” The focus on the economy may seem surprising, given that the Korean economy is hardly considered a laggard by on most counts: in 2017, the per capita GDP was US $38,350, real GDP growth 3.1 percent, and unemployment at 3.7 percent. As a comparison, the OECD average per capita GDP in 2017 was US$ 42,252, GDP growth was 2.6, and unemployment was 5.77. This may sound like First World problems to many, but the economic weaknesses behind the stellar numbers is very real and may be a contributing factor to the country’s high suicide rates among youths and the aged. This piece discusses some of these weaknesses.

President Moon’s “J-nomics” relies on the principle of income-led growth based on job-creation and consumption as the drivers of economic growth in the country, with the public sector spearheading this new approach. The approach was embraced for its radical departure from the trickle-down blueprint of his predecessors that relied on corporate-growth to engender jobs and lead to higher incomes. The President’s bold reorientation of the economy took a major step forward with the implementation of a 16 percent wage rise to 7,530 won ($6.60) per hour from 2018 by the Minimum Wage Commission; this was followed by a reduction in the workweek to 52 hours in July 2018. To ensure that small and medium-sized enterprises are able to meet the new wage increases, the government rolled out huge subsidies for small- and medium-sized businesses as well as the self-employed that were hardest hit by the new minimum wage policy.

What are some of the economic weaknesses that this new approach is designed to address? One of the biggest problems for the Korean economy is labor market dualism. Korea has one of the highest incidence of low-paid work among the OECD countries, exceeding 20 percent, stemming from the high number of non-permanent workers in the economy, as depicted in Figure 1.

Figure 1: Total employment in Korea by status in employment, 2016 (number of persons and share of total, %) 

The large firms – particularly the chaebols that hire more than 300 workers – pay significantly better, as Figure 2 below shows. However, they have also significantly reduced their share of the labor market, generally contracting out work to the small- and medium-sized companies or outsourcing abroad, as shown in Figure 3.

Figure 2: Average hourly base pay in Korea

Figure 3: Share of labor market by firm-size

This reduction is higher than has occurred in other OECD countries, as Figure 4 shows, which is partly instructive of how poorly previous policies relying on trickle-down job creation has worked.

Figure 4: Persons employed by firm size, 2013 or latest available year (%)

At the same time, however, the numbers above also explain why President Moon’s policies have run into problems: small- and medium enterprises are the dominant employers in the Korean economy, and they have been unable to absorb the minimum wage increases, even with the help of the government’s subsidies. Meanwhile, the 26 percent non-regular workers are not beneficiaries of the minimum wage.

As a result, despite the President’s efforts, 2018 has been a challenge: unemployment rate rose from 3.8 percent in July 2018 to 4.2 percent in August; this is the highest level for the year, and the highest in the aftermath of the global financial crisis. The President’s popularity has fallen hard on the economic news, and there are signs that the increasing economic distress in the country is leading to open conflict in the President’s cabinet over the efficacy of the policy.

The President has, thus far, maintained commitment to the direction of the policy, but has also signaled a willingness to temper its magnitude. Meanwhile, there have been suggestions that a more successful approach would be to address the issue from a social protection standpoint. With social protection at 10.4 percent of the GDP, Korea is among the lowest of OECD countries where the average is 21 percent of the GDP. There is clearly room for steering the economy, particularly for those most vulnerable to economic shocks, in that arena.

South Korea – Presidential Elections, May 2017

The election of Representative Moon Jae-in as president on May 9, 2017, hands the political pulpit to the liberals in the opposition, following almost a decade of conservative policies under the previous ruling party, the Liberal Korea Party (LKP). The crowded presidential contest – up to 15 candidates declared or hinted their intentions at one point, likely spurred in part by the momentum of change leading to the impeachment of President Park Geun-hye – whittled down to five, from each of the parties in the legislature. Moon was elected to the presidency with 41.1 percent of the votes, ahead of runner-up Hong and the others in the race. Turnout, at 77.2 percent, is the highest in 20 years. 

Candidates Estimated popular votes
Representative Moon Jae-in, Minjoo Party 41.1 percent
Representative Hong Joon-pyo, Liberal Korea Party 24.03 percent
Representative Ahn Cheol-soo, People’s Party 21.41 percent
Representative Yoo Seung-min, Bareun Party 6.76 percent
Representative Sim Sang-jung, Justice Party 6.17 percent

Representative Moon Jae-in led the pack at the outset, but his lead was challenged regularly, first by former UN Secretary-general Ban Ki-moon, and then by his old rival-turned political partner-turned political opponent, Representative Ahn Cheol-soo. Former UN Secretary-general Ban was highly sought by the conservative parties, who saw his appeal to conservatives, moderates, and independents; early polls in December 2016 that gave Ban a lead over Moon seemed to vindicate that belief. However, that lead evaporated quickly, and Ban subsequently dropped out of the race on February 1, 2017. Both Ahn and Moon contested the 2012 presidential race, but Ahn left the race in favour of Moon to avoid splitting the liberal vote to the benefit of the conservative candidate, Park Geun-hye. That effort did not pay off: Park won the presidential election in 2012. In 2014, Ahn and Moon formed the opposition New Politics Alliance for Democracy (NPAD), but the alliance was fraught with problems and failed to cohere.[1] Ahn and his allies split from the NPAD in December 2015 to form the People’s Party, and went on to defy expectations by gaining 38 seats in the legislative elections held shortly after in April, 2016. Polls in early April showed Ahn gaining momentum in the race, even as Moon kept the lead; however, by late April, Moon had widened the lead over Ahn.

A large unknown in the elections is whom the conservatives in the electorate would support. The former ruling Saenuri Party splintered into the LKP and the Bareun Party in 2017: the LKP’s candidate is South Gyeongsang Province Governor Hong Joon-pyo while the Bareun Party’s candidate is Representative Yoo Seong-min. The LKP is renamed from the Saenuri Party after the Constitutional Court upheld the National Assembly’s impeachment of President Park Geun-hye; it may be interesting to note that Saenuri was renamed from the Grand National Party in an effort to distance the party from a series of scandals and voter dissatisfaction with then-President Lee Myung-bak. The Bareun party comprises members of the non-Park faction, many of whom lost party nominations for the general elections in 2016 to pro-Park supporters. Both Governor Hong and Representative Yoo did not have broad appeal to the conservatives; this partly explains the effort by the conservative parties to draw Ban into the race. However, with Ban out of the race and acting President Hwang Kyo-ahn’s declining to run, conservative voters began to rally around Governor Hong late in the race particularly in the traditional strongholds of former President Park Geun-hye. The endorsement of the former President’s sister, Park Geun-ryoung, for Governor Hong, may have helped increase support for Hong: in late April, polls show the candidate in second place. 13 legislators from Bareun Party left the party to return to the LKP, in order to boost the support for the conservative candidate. Importantly, that precipitated a flood of members and donations to Bareun Party, as voters express their disapproval of such politicking.

Expectations are high for the new president, particularly following the decade of conservative politics in the country that may have engendered the “imperial” presidency of former President Park Geun-hye.[2] President Moon has pledged to “yield the president’s imperial power to the people”; in addition, the president has signalled an important shift in the stance to North Korea (dialogue), while also negotiating with the US and China over the deployment of THAAD. However, the President also maintained a stance on “strong defense” for national security, perhaps to diffuse perceptions that the new administration will be soft on North-South relations, and likely also an olive branch to the conservatives in the country. On the domestic front, the president has already nominated his Prime Minister, the liberal governor of South Jeolla Province, Lee Nak-yon, an experienced public figure, and announced a presidential committee on job creation.

The President is clearly demonstrating an aptitude and preparedness to tackle the job. In the current international climate, it is certainly heartening.

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[1] Yap, O. Fiona. 2015. “South Korea – Opposition New Politics Alliance for Democracy (NPAD) Splits?” Presidential Power, http://presidential-power.com/?p=4263&cpage=1, December 16, 2015 <accessed May 10, 2017

[2] Yap, O. Fiona. 2017. “Presidential Profile – Park Geun-hye: The Imperial President? Presidential Power, http://presidential-power.com/?p=6177, March 20, 2017 <accessed May 10, 2017>

South Korea – The 2017 Presidential Candidates … so far…

 

Presidential elections in South Korea are scheduled for December 2017, but the National Assembly’s impeachment of President Park Geun-hye on Dec 9, 2016, with 234 to 56 votes (with two abstentions and seven invalid), potentially brings the election forward if the Constitutional Court supports the impeachment. The Court has 180 days to decide, and six justices must support the impeachment or it fails. If the Court supports impeachment, then presidential elections must be held within 60 days. Not surprisingly, presidential aspirants are lining up to declare their candidacies in preparation for a shortened primary and election campaign. Perhaps curiously, the prevailing favorites have largely refrained from formal announcements and have only hinted at running.

The contenders who have announced so far are:

  • Gyeonggi Gov Nam Kyung-pil, Barun Party, which is the splinter from the Saenuri party comprising the non-Park faction. Nam was a five-term who has criticized the Park government for its authoritarian-leanings. The governor is also one of the first party heavyweights to quit the Saenuri party in November, 2016, and join the opposition to demand President Park’s impeachment.
  • Yoo Seong-min, Barun Party, is the former Saenuri floor-leader of the non-Park faction who lost that position following a clash with President Park and subsequently also lost the party’s nomination at general elections.[i] Yoo was folded back into the party after he won his seat as an independent. He is one of the 12 members of the crisis management council that included former chair of the Saenuri Party, Representative Kim Moo-sung, to bring party members into supporting President Park’s impeachment.
  • Rhee In-je, a senior Saenuri party leader who was a member of the Supreme Council, and who has declared his candidacy three other times since 1997.
  • South Chungcheong Gov. Ahn Hee-jung, Minjoo Party, who at 52 represents one of the new generation of leaders from the liberal camp seeking higher political office to run the country.
  • Seongnam city Mayor Lee Jae-myung, Minjoo Party, a progressive who has revived the city’s economy and put in place an extensive welfare program in the city. Lee was among the few politicians who took part in the large protest rallies in Seoul against President Park beginning in October.
  • Sim Sang-jeung, leader of the Justice Party, a minority party with six seats in the legislature.
  • Representative Ahn Cheol-soo, 2012 presidential contender, co-founder of the People’s party and former chair. In 2014, Ahn co-founded the NPAD with the Minjoo Party, but then split from the alliance in spectacular fashion in December 2015 to form the People’s Party. Ahn dropped out of the presidential race in favour of Moon Jae-in in 2012 so as not to split the vote for the liberal camp; given the many charged conflicts between the two in the last few years, it will be interesting to see if Ahn – who is polling at fourth place in public opinion surveys – will wrestle for the liberal mantle till the end.

The current two front-runners have not been as forward in their candidacies, to avoid a potential backlash if they are seen as excessive politically ambitious. Still, both have signalled interests in the presidential race:

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[i] O. Fiona Yap, 2015. “South Korea in 2015: Battling to Set the Stage for Elections.” Asian Survey, Vol. 56 No. 1, January/February 2016; (pp. 78-86) DOI: 10.1525/as.2016.56.1.78

South Korea – Opposition New Politics Alliance for Democracy (NPAD) Splits?

Former presidential candidate Representative Ahn Cheol-soo announced his departure from the NPAD on Sunday, December 13, 2015, ending a troubled relationship with the opposition alliance that he co-chaired when it was officially launched in April 2014. The NPAD has had its share of problems, failing to fill the role as a viable opposition expected by members and supporters. Still, Ahn’s departure is a significant blow: it bares open the fractures within the alliance that the leadership has ineffectually tried to reconcile. Meanwhile, with about four months till the general elections in April 2016, the fragmented opposition is likely to hand the electoral advantage to the ruling Saenuri Party, as the following account shows.

The first signs of trouble in the opposition alliance surfaced soon after its founding, on the issue of party-nomination reforms which the NPAD had pledged to observe for the June 2014 by-elections. Closed-door party-nominations have been blamed for feeding corruption, public disapprobation, and distrust; consequently, the NPAD’s initial resolve on reforming the process promised to bring “new” politics to challenge the predominant politicking-as-usual. However, while the NPAD pushed hard for the reform, the Saenuri party maintained the party-nomination process, which advantaged its party candidates. In the face of the growing disadvantage, NPAD members challenged the reform while old-timers such as Gwangju mayor Kang Un-tae and party spokesperson Representative Lee Yong-sup quit the party. In response to the open rift, voters handed the by-elections to the Saenuri Party, giving the party 11 seats but only four to the NPAD. 20 NPAD party leaders, including co-chairs Ahn and Kim, resigned from their leadership posts to take responsibility for the trouncing and a major leadership change was underway.[1]

The leadership change seemed completed at the party convention in February 2015, with 2012 opposition presidential candidate Rep Moon Jae-in installed at the helm. At the same time, however, the contest laid bare the three major factions in the alliance: (1) Moon, who leads the pro-Roh Moo-hyun faction that comprise supporters of the deceased former president; (2) Rep Park Jie-won, a leader of the pro-Kim Dae-jung faction that comprise supporters of the former president and Nobel-peace prize winner; and (3) Rep Lee In-young, a leader of the 486 faction that comprises former student activists and protestors of the authoritarian regime. Moon’s successful election did little to stem the party infighting. As a result, notwithstanding poor approvals for the president and the ruling party, the NPAD managed to snatch defeat from sure victory (again), losing all four seats in liberal strongholds in the April 29, 2015 by-elections, with three going to Saenuri and one to NPAD-turned-independent candidate, Chun Jung-bae.[2]

Since the 2015 by-election routing, the NPAD has openly feuded over responsibilities for the results. Ahn is not the first to bolt the party following the rising hostilities in the party, but his standing in the party is likely to induce others to follow suit. Thus, Ahn’s confidant and chief-of-staff, Rep. Moon Byung-ho, is expected to announce his departure by mid-December, and Moon predicts between 20 and 30 current NPAD members will join Ahn to create a new party. If Ahn and his allies manage to pool at least 20 seats in the legislature, Assembly rules means that it will be entitled to government subsidies and other parliamentary privileges.

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[1] Yap, O. Fiona. 2015. “South Korea in 2014: A Tragedy Reveals the Country’s Weaknesses.” Asian Survey vol 55 no 1: 132-141

[2] Yap, O. Fiona. 2015. “South Korea – Will the Opposition be a Viable Challenge in the 2016 Elections?”