Unless Korea Gathers Itself, Chaos May Follow

When reporters pointed out that the profits of Samsung’s core business were decreasing, Samsung Group Chairman Lee Kun-hee responded, “Korea should wake up. Korea may face a very chaotic situation after four to six years. This does not refer only to Samsung Group but to the nation as a whole.”

Chairman Lee blew the whistle once before back in 1993 when the semiconductor industry was still dominant, saying, “If we do not change now, no opportunities will come later. Change everything except your wife and your children.” The reason why his remark draws attention is because it seems that not only Samsung, but also the future national growth strategy, are adrift.

As Chairman Lee pointed out, Korea has failed to recover from a sluggish economy for the past couple of years. The prospects of its core industries, such as semiconductors, shipbuilding, automobiles, and mobile phone products, are dim. Exports are the only growth force, and potential traps to such specialization abound, including the Korean won’s strength, pressures from high oil prices, the soaring rate of household debt, and real estate price hikes.

In addition, the Bank of Korea (BOK) and economic institutes warned, “The IT industry, which has served as Korean growth engine, is weakening day by day. Korea might face a decade-long Japanese style economic recession.”

Korean companies, which are challenged by stiffer global competition, face other difficulties due to poor domestic economic and social infrastructure, including ideology-based economic policies, guaranteed labor unions, anti-corporate sentiment, negligence in investing in science technology, ineffective personnel management and a lack of mechanisms to resolve conflicts. The Korea-U.S FTA negotiations, an effort to open the market as part of an industrial structural reform and an attempt to enhance competitiveness, are even being held up by partial opposition.

The current government hates to mention the crisis itself. Instead, the president and his aides are busy scolding by responding, “The economy really gets worse because people mention crises. It does not make sense to talk about an economic crisis as we have achieved a growth rate of 5 percent.” And the government has even issued a report saying, “The economic results in Korea over the past four years are not bad at all.”

On the other hand, the government seems unwilling to backtrack from failed anti-market policies, just like someone who is unwilling to admit defeat. Instead, it seeks to pander to the temporary jealousy of the majority and push for anti-market policies, including housing construction price disclosures, which are likely to cause huge side effects.

The government should be the first party to return to market economy principles rather than seeking anomalies. In addition, the issue of which party the citizens will choose to lead the next government is directly linked with the fate of this country in the next four to six years.