On May 9, South Koreans elected Moon Jae-in of the liberal Minjoo Party to the presidency. The east Asian nation of roughly 50 million people has been hit by a presidential corruption scandal in the past year, resulting in the impeachment of former -president Park Geun-hye. The 2017 election ends 10 years of conservative rule.
Mr Jae-in, who campaigned on promises of job creation, SME support, stronger welfare provision and re-engagement with North Korea, is expected to drive corporate governance reforms, although many of his proposals will face significant opposition from other political parties.
Agathe L’Homme, Asia analyst for the Economist Intelligence Unit (EIU), summed up the president’s most immediate key pledges in a recent article for the EIU.
“The self -proclaimed ‘president of jobs’, Moon Jae--in has made a long list of campaign promises, which he announced will be financed by a Won900bn [$800m] stimulus plan,” wrote Ms L’Homme. “The proposed measures include creating about 810,000 jobs in the public sector, as well as raising the minimum wage.”
A pressing question is that of the influence of chaebols, centralised family-owned conglomerates, over South Korea’s economy and politics. The chaebols – examples of which include global powerhouses Samsung, Hyundai and LG Group – have long been accused of -obstructing the growth of SMEs, creating imbalances in the country’s economy.
Governments have often attempted to reform and curb the power of the chaebols, but with mixed success. Corporate governance reform and greater accountability for the chaebols, Ms L’Homme observed, is likely to progress under a Jae-in presidency.
“This will send a strong signal domestically in favour of SMEs, which accounted for 88% of total employment in 2016, as well as globally to foreign investors, who had complained about weak shareholders’ rights and opaque power structures in South Korean conglomerates,” Ms L’Homme added.
Challenges remain substantial (before even considering the military and political threat of North Korea), as Mr Jae-in’s Minjoo Party will not have the parliamentary majority in the country’s National Assembly required to pass more controversial legislation, and is set to face staunch conservative opposition.
“Beyond the first year of Moon Jae--in’s term, difficult questions remain on South Korea’s economic growth model in the medium to long term.
“Presidents are limited to a single five--year term, but in order to engineer a structural move away from export-oriented growth, sustained policy efforts will be required,” Ms L’Homme said. “We expect slow progress on developing
a more diverse economy and decreasing reliance on the chaebols.”