“No Changes in Economic Policies After General Election”

As the ruling Uri Party succeeded in securing majority of the parliamentary seats at the general election on April 15, the attention now is focused on the future direction of economic policy.

The government stressed that there will be no changes to the basics of the current economic policy. There is also a popular expectation that uncertainties surrounding the economic situation will be reduced now that the ruling party holding the majority in the Assembly.

However, there is a considerable possibility that the result of this year’s election will have a negative impact on business activities because a number of elected assemblymen once belonged to student activist groups with pro-communist sentiments, and the Democratic Labor Party, whose members may voice their support for anti-market reforms, made it into the National Assembly.

Economic experts voiced concern that the government and the political circle should be putting forth effort to create a business friendly environment, putting their theories in action.

--The government: “There will be no changes to the direction of the current economic policy.”

Deputy Prime Minister (DPM) and Minister of Finance and Economy, Lee Hun-Jai said on April 16 at the first regular briefing after the election that the focus of economic policy will not be altered and will be kept on promoting investment and creating jobs.

The deputy prime minister said, “the Uri Party agrees with the basic direction of the economic policy in that it should lead to growth and job creation.”

He said that he “expects the Democratic Labor Party (DLP) to demonstrate more responsibility now that it has made it into the Assembly,” and affirmed that the government will “engage in a wide variety of discussions with the DLP, but we have no intention in changing the fundamental structure of Korea’s market economy.”

The deputy prime minister’s remark seems to have taken into account the fact that there is no other alternative, aside from growth-centered policy led by the economic department, when considering the reality of the current economic situation, a serious economic recession with low domestic demand and a high unemployment rate.

Also, it seems that various governmental policies for investment promotion and job creation, including the “roadmap for land regulation reform” and the “growth plan for the service industry,” will also gain momentum.

Meanwhile, foreign credit rating agencies like Standard & Poor’s and Moody’s reported that they have no plans to change Korea’s credit rating in conjunction with the results of the general election.

--An alteration of policy cannot be ruled out

A number of experts view that although the basics of current economic policy centered on growth will be maintained for the time being, the weight may be shifted toward “distribution” in the mid to long term. They point out that the Uri Party might push for policies that mirror the opinions of the masses with less economic power that supported the party in the election once the economy recovers to a degree.

In fact, the Uri Party presented an election pledge to support the revival of account tracking, which the Fair Trade Commission promotes by revising fair-trade regulations.

Another factor in the matter is that the fact that a considerable number of candidates from the DLP, who are more active in promoting “distribution,” have advanced into the Assembly. The possibility of the Uri Party engaging in a race for public support with the LDP, which places much importance on the labor circle and distribution, with such goals of establishing a “wealth-tax” and an “obligatory youth employment system,” cannot be ruled out.

--Cooperation needed to “revive the economy”

Experts stress that the government, as well as the government party and the opposition party, should focus all their capabilities for the economy and the livelihood of the nation.

They are concerned that the Korean economy will be mired in difficulties if the nation fails to respond properly to the current situation of domestic demand and investment showing no hint of getting back into shape. This condition is worsened by external uncertainties such as the recent hike in oil prices and the instability of the currency exchange rate.

Oh, Moon-suhk, the executive director at the LG Economic Research Institute said, “when the parties join hands in the effort to revive the economy, the policies put forth by the government to promote businesses, plant and equipment investment and job creation will gain much weight.

Also, the experts assert that there is an urgent need to shed outdated ideology, to outgrow anti-business and downward egalitarian sentiments, and that more work is needed to eliminating fundamental obstacles that hinder the rebound of the Korean economy.

Jin-Hup Song jinhup@donga.com