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South Korea Returns to Historic Trajectory
New government pursues traditional political and business paradigms
By: Shim Jae Hoon
Stiffening military preparedness against North Korea’s missile threats, and bringing more market deregulation to play in economic management – these are two principal orientations of the new government under president-elect Yoon Suk-yeol, who takes office on May 10.
That means South Korea, Asia’s fourth largest economy behind China, Japan, and India, is recovering its conservative center-right paradigms five years after the erratic stewardship of outgoing President Moon Jae-in, which is being met with relief in Washington, DC.
Yoon won the March 9 election with a razor-thin margin of less than one percentage point over his leftwing opponent Lee Jae-myung, who ran on the ticket of Moon’s Democratic Party. From foreign policy to economic management, Yoon is expected to pursue new leadership aimed at restoring the familiar course that catapulted South Korea’s development into an industrial powerhouse in a generation’s time. The new president is calling for closer alliance with Washington and forging a market-based economy, producing jobs and recovering big business roles, in the place of Moon’s leftwing campaign for income redistribution and more welfare spending.
In defense and security policy, Yoon will be aiming for stronger ties with the Biden administration, while keeping doors open for peace dialogue with the North. “But I won’t be begging for empty peace talks for dialogue’s sake,” he said during the campaign. “Peace talks without a firm defense posture is meaningless.”
Yoon has promised to beef up the South’s defense posture by pushing for new investments in indigenous missile development program. On top of that, he is also calling for more deployment of US advanced theater high altitude interceptor (THAAD) missiles, a battery of which is already deployed here.
Implementing this policy, however, is easier said than done. Outgoing president Moon’s left-leaning Democratic Party controls the single-chamber National Assembly, which stands opposed to a stronger defense program, insisting that an overemphasis on military preparedness can only aggravate tensions on the peninsula. Over the years, North Korea has dramatically expanded its weapons of mass destruction, already testing nuclear weapons and intercontinental missiles capable of reaching the continental United States.
Yoon’s policy of inviting more US THAAD missiles is especially opposed by China which regards them as offensively directed at it. Beijing has already taken economic reprisals by pressuring South Korean business firms out of its markets. Since the issue first surfaced years ago, China has threatened to take additional reprisals, dangling the possibility of cutting back the huge bilateral trade.
Outgoing president Moon has provoked widespread resentment at home by falling under Beijing’s pressure, by “assuring” China he will not accept any more THAADs, not join US missile system nor its future alliance with the US and Japan against China. Declaring this a “subservient diplomacy,” the president-elect has made a campaign pledge not to accept such pressure. At home, Beijing’s overbearing stance has provoked widespread anti-China sentiment.
But China’s opposition is just a part of the problem as Yoon pushes for a stronger South Korean missile capability. Even though it bases 29,000 ground troops in the South, the Biden administration is by no means eager to bolster Seoul’s own, independent anti-missile capability, as it remains concerned over security impact on the peninsula where both sides are armed to the teeth. Washington fears a powerful missile capability in South Korean control could sharply raise the already tense confrontation across the demilitarized zone.
Washington thus restrains Seoul’s independent missile capability under the Missile Technology Control regime, limiting missile’s range and power. How the new government will negotiate such hurdles remains to be seen.
Even so, president-elect Yoon appears more eager to share Washington’s stance of focusing on denuclearization as the central point of talks with North Korea, which Moon has appeared reluctant to accept, fearing it might hurt the chance of achieving peace talks with the North.
Yoon however agrees with Washington’s emphasis of focusing strongly on the denuclearization objective, as Kim continues with his provocative missile launches, even appearing ready now to end his self-imposed moratorium on further nuclear tests and ICBM development.
On a more hopeful note, Seoul under Yoon hopes to mend diplomatic ties with Japan, which has badly floundered under Moon’s nationalist posture. While history issues like wartime labor and wartime sexual slavery of Korean women remain a knotty emotional problem, Yoon hopes at least to avoid further aggravating them. Seoul-Tokyo relations reached a nadir during the entirety of Moon’s nationalist-left regime, with Tokyo placing import restrictions list against Seoul in retaliation for Korean navy holding military exercises near the disputed island of Dokto, called Takeshima by Japan and claimed by both countries.
Yoon hopes the two sides can at least avoid further inflaming the issue, given the recent geopolitical tensions over China-US rivalry. He rightly contends that North Korea’s security threats should take precedence over Korea-Japan history disputes.
By contrast, much hope and expectation ride with the new administration’s economic policy, with the president-elect calling for a sweeping market deregulation to free business from a variety of government control. Such hope has been especially high in the big business community that has been a target of Moon’s periodic attacks for its past “corrupt business-government nexus.”
Five years ago, Moon began his office with a campaign against corruption involving the big business community with the government in power. His campaign purporting to “purge age-old corruption and bad practices” involving chaebol conglomerates and every corner of government has driven fear across the country. In one such famous case, Samsung Group chairman Lee Jay Yong was convicted on charges of paying off former president Park Geun Hye, who was later impeached and imprisoned for abusing her presidential powers. His stern treatment of this case ran shivers over the entire big business community, keeping them on low, cowering posture.
President-elect Yoon, a former prosecutor general, wants to restore public confidence in the business community, while keeping an eye on crimes involving it. As president-elect, he is fighting to revive market confidence through a sweeping deregulation campaign. In a business community gripped with fear of Moon’s populism-oriented, ideologically-based view against chaebol conglomerates, labor militancy has risen everywhere.
The South Korean economy today is ailing with millions of youth unemployed, doubled housing prices in Seoul and militant labor disrupting many worksites. Wages have risen by an estimated 20 percent under his controversial income-led growth policy (based on this theory, bigger worker income results in more spending and thus boosting growth), housing prices doubled in Seoul as government responded with punitive taxes against speculators, and a rigid enforcement of 52-hour weekly work regime has prompted small businesses to close shop, unable to deal with high wages and shorter working hours.
Economic disruptions caused by these hastily and rigidly enforced regimes have resulted in largescale closures, made worse in the past two years by the Covid-19 pandemic. Fiscal expansion to deal with increased welfare payouts and rising consumer loans – equal in size to the country’s GDP – have in turn prompted higher tax burden on middle-class earners, prompting outcries that Korea was being led on a socialist economy. Moon’s hostility to big conglomerates has prompted them to take their investments offshore, thus exacerbating joblessness at home.
Meanwhile, Moon has earned notoriety by filling top jobs in state-owned enterprises with his political aides while ordering nuclear power plants shut down on misdirected environmental grounds, incurring a huge deficit for the state-owned Korea Electric Corporation which he will turn over to consumers.
It will be a tall order for President-elect Yoon to undo many of these misoriented policy problems. The despairing mood in the business community was well expressed by Choi Tae Won, chairman of the Korea Chambers of Commerce, who called on the new government to leave the market alone.
“We hope President Yoon will honor his promise to fulfill potential growth of our economy with sweeping deregulations and labor market reforms,” he said, adding: “It’s all about revitalizing business environment to allow more investments and create more jobs.”