Swinging Economic Leaders, Plunging Economy

Economic policy decision-makers are being criticized for their expedient and reversing remarks that contributed to worsening the current economic situation.

The Deputy Premier and the Minister of Finance and Economy Kim Jin-pyo has not been leading his economic team in an effective way and the Bank of Korea’s President Park Seung is losing confidence due to his lack of ability in diagnosing the current economic status.

Wavering leadership for economic policy

As Cheong Wa Dae itself comes forward to sell off Chohung Bank, some strange atmosphere is being formed.

Presidential Office Civil Administration Senior Secretary Moon Jae-in said on May 28, that “the Labor Union of Chohung Bank agreed to hold closed-door discussions with economic officials and experts at Cheong Wa Dae in compensation for its suspension of the strike. It will be hosted by Cheong Wa Dae’s Policy Director.” Given that the issue originally belongs to economic leader, Kim Jin-pyo since it is a core part of restructuring the financial industry, it could be seen that the rightful authority has taken a back seat to the Office of the President.

Mr. Kim has expressed his will to maintain or relieve some rules related to the capital financing amount ceiling system. However, the Fair Trade Commission is going the other way in enhancing the system.

As he first took office announcing his will to lower corporate taxes, many people from Cheong Wa Dae opposed his opinion and even President Roh recommended him a more prudent attitude saying, “Lowering corporate taxes should be considered after looking at the overall financial structure and other possible effects they might have on our economy.”

Some people have criticized him for his frequent remarks about the economy. For example, he changed his attitude in some 15 days saying, “I might consider deficit finance if necessary” after making that announcement at a press conference, “I would not go for any short-term economic stimulus package.”

Public Administration Department Professor Kim Suk-jun at Ewha Woman’s University said, “This unsynchronization comes from the fact that in real power men or ministers do not recognize Kim’s leadership in steering the national economy.”

In order for enterprises to carry out economic activities under positive conditions, the predictability of economic policy is more important than ever and a single voice should be announced through the economic leader despite many other different opinions within the government.

Wrong economic prospects and ground-losing financial policies

Bank of Korea`s President Park Seung said at the New Year`s press conference on January 3, “This year, exports and facility investments will lead in economic growth. With more active investments, consumer prices will become unstable.” This makes it possible for financial market participants to expect that the Bank of Korea will raise or maintain call interest rates.

President Park did not object to lowering interest rates despite several bad factors such as the Iraqi War, the North Korean nuclear issue and the SK Global problem saying that the economy will get better in the latter half of this year or by next year.

However, starting in May, he lowered the call rate himself by emphasizing the importance of the stimulating economy under the current situation where the domestic economy gets worse every day.

High-level officials from financial circles said, “The Bank of Korea should lead other economic players by reading economic trends in advance. How can we trust financial policy if it cannot even make a one month prediction?”

On May 29, he said at a press conference: “We will be faced with an era of low growth rates and high unemployment.” With his remarks, some people criticized he was too gloomy about the current economy, which shows how contradictory his attitude has been since his inauguration.

Financial experts said, “President Park should focus more on stabilizing the overall financial system from a different point of view than other economic policy makers.”

Kwu-Jin Lim Kwang-Am Cheon mhjh22@donga.com iam@donga.com