Economic Policy Directions: “Pro-growth” or “Pro-reform”?

All eyes are on the government’s economic policy directions now that the Constitutional Court has overturned the vote to impeach President Roh Moo-hyun, reinstating him on May 14.

At the center of the attention is which position will the president will take, considering that serious “ideological conflicts” occurred among the “pro-reform” and “pro-growth” policy supporters in the government departments and the political arena while he was suspended from his duties.

Which Side Will the Reinstated President Roh Moo-hyun Support?—

It is still unclear which economic policy direction President Roh will take between “pro-growth” and “pro-reform.”

Supporters of “pro-growth” policies argue that the top priority should be on facilitating investment in order to solve problems such as extreme contraction of consumption and facility investment, not to mention external difficulties including high oil prices. However, those who back “pro-reform” policies rebut that the government should take advantage of this opportunity to improve corporate governance of conglomerates and to actively intervene in distributing wealth.

“When a ship (the Korean economy) is in the middle of the sea with no wind to help it sail, the captain (Minister Lee himself) will eventually have to take the helm,” Lee Hun-jai, “pro-growth” deputy prime minister and minister of Finance and Economy, confidently said on May 13.

His words have backed the assumptions that Minister Lee has a “shared view” with President Roh on economic policy directions. “According to an official of the Ministry of Finance and Economy, Minister Lee said that the president’s position regarding the market economy is firm after meeting the president several times.

The fact that some politicians and the Fair Trade Commission are at the center of those insisting on “taking this opportunity to bring changes” draws more attention on the choice of President Roh.

Of course, there are a considerable number of politicians who think growth and reform are compatible but nevertheless, the major direction of economic policies and the details of reform will determine the extent of the impact on the economy.

Overturn of the Impeachment Vote Provides an Opportunity to Eliminate Uncertainties—

Economic experts emphasize that uncertainties in the economic policies must be eliminated as soon as possible to overcome severe economic recession demonstrated by the high youth unemployment rate, snowballing household debts, and weak domestic consumption as well as the external problems such as oil prices hike and the China shock.

“The government must take the overturn as an opportunity to remove uncertainties and focus more on the ‘livelihood’ of the general public,” said Kim Jong-suk, professor at Hongik University. He pointed out, “To make people’s lives better, the top priority should be facilitating investment by giving up ideological obsession and improving the business environment.”

Oh Moon-suk, managing director at LG Economic Research Institute, also insisted, “The most important task is to overcome ideological conflicts that arose since the end of the general elections and to eliminate confusion on policy directions.” “The economic players only make investments or spend money when they can predict the future. Thus, the government must provide psychological assurance by clarifying policy directions.”

Finance and Economy Minister Lee attended the Asian Development Bank Annual Meeting at the International Convention Center, Jeju Island on May 14. At the meeting, he predicted, “Execution of our economic policies will gain momentum with the elimination of uncertainty (impeachment).”

“Despite disagreements and confusion, the government will soon set the direction of its policies,” the deputy minister said. He added, “The Ministry of Finance and Economy will fine-tune the problems regarding irregular workers or the Fair Trade Act. The related departments will naturally announce the directions once they are decided.”

Jong sik Kong kong@donga.com