[Editorial] Korea’s Economic Malaise

Germany used to be called the patient of Europe not long ago, but now it is leading the economic growth of Europe. Changes began when Prime Minister Angela Merkel took over the coalition government 14 months ago. As a result of Merkel’s government curing the “German illnesses” through increased flexibility in the labor market, the privatization of public sectors, and relieved regulations on enterprises, the economic growth rate jumped high from 0.9% in 2005 to 2.5% (anticipated) last year. The number of the unemployed was cut by one million.

Booking a good hotel was very difficult in Hanoi, the capital of Vietnam, at the end of last year, due to the concentration of reservations for end-of-year parties. Vietnam recorded a growth rate of 8.2% in 2006 based on foreign investment and active exports. Eight million jobs were created over the last 7 years from 2000 in which the average growth rate stayed above 7.5%. In the same period Kazakhstan has enjoyed growth rates of around 10% backed by its “oil money.” The foreign investments it attracted by opening itself for the last five years aggregate to 28.1 billion dollars.

China, India, Brazil and Russia also stayed true to their names, “CHINDIA” and “BRICs.” Despite the fact that China set out to stabilize its internal demands from last year having recorded growth rates over 10% since 2003, its anticipated growth rate last year is as high as 9.8%. It is expected that Europe will replace the U.S. in supporting the world economy and that Japan will maintain its expansion phase. The leaps of Indonesia and other Southeast Asian nations remain considerable, too.

Let’s check where we are. The government takes out a record card showing the growth rate of 5% (anticipated) as if to ask for generosity, but is unable to exempt itself from the criticism that the last five years were “lost years.” Professor Yukiko Fukagawa at Waseda University in Japan, who is an expert on the Korean economy, asks, “The Korean government stresses foreign investment, but when Korean enterprises are not investing (domestically), why should foreigners?” He also said, “Roh’s government did not deploy any economic policies besides policies in real estate, and ended up with low grades.” In the category of real estate, President Roh indeed conceded his faults.

As long as the government passes the buck with the economic policy of “growth without employment” after failing to realize its job creation goals, and follows failed policies that lead to “a real estate cancer” as mere processes of trial and error, the Korean illness will only degrade and become incurable. Though different states have different economic situations and growth routes, increasing flexibility in the labor market and lifting regulations as Germany did, and attracting foreign investment actively as Vietnam, India, Kazakhstan did, will serve as fitting prescriptions for the “Korean illnesses” too. Learn what is there to learn, act based on what was learnt. That’s the way to survive.