Next pres. can revive economy, create jobs via economic logic

The presidential election saw fierce competition, and the Korean people made their choice.

The nation has chosen stable change over excessive reform and national integration over class warfare, believing that the former were the solutions to the economic difficulties of the people. Koreans should unite and help their next president, Park Geun-hye so that she can keep her campaign pledge of caring for the livelihood of all the people instead of representing the conservative camp only.

Over the past five years, the country has suffered from severe youth unemployment and difficulty endured by small businesses due to low economic growth of under 3 percent on average, as the global economy continues to reel from an economic crisis. Economic polarization has also taken away hope from the young generation and the middle class, with jobs being threatened. The global economic environment will not improve soon, however.

Experts say Park must focus on how to weather the sluggish economy rather than implementing the public welfare policies she promised in the presidential campaign. Nurturing growth potential rather than measures to boost the economy is the top priority to ensure that Korea will not suffer from a drawn-out economic slowdown similar to Japan`s. Labor, capital investment and productivity determine a country’s growth potential. Unemployed young people need to be trained to upgrade their skills to the professional level so that they can enter the job market and thus increase the workforce.

To induce more corporate investment, government agencies must go through papers asking for permission for business purposes piled high on desks, and swiftly carry out investment in public infrastructure such as transportation and energy. Productivity will increase when hindrances to productivity in the service sector are removed because 70 percent of employment is being created in that sector. The government also needs to drastically remove restrictions designed to protect suppliers, which have blocked companies from expanding business.

Public welfare expansion should be managed within the framework of maintaining sound fiscal balance. President-elect Park should rule out running up more debt to expand public welfare, as well as set a limit for sovereign debt and plan the time and pace of implementation of welfare policies based on the debt limit. If the funding needed to carry out her welfare policies cannot be raised by budget cuts or tax revisions, she could explain the need to raise taxes to the nation. This would be leadership of courage.

Policy promises for economic democratization need to be weighed vis-a-vis their effect on job creation before being pushed forward. Abuse of economic power by major conglomerates must be thoroughly regulated so that small and medium companies as well as the self-employed in the service sector can succeed in the market, which in turn will help more young people get hired at smaller companies.

On the other hand, restrictions on manufacturers owning financial companies or cross-subsidiary shareholding that are designed to change the practices of an owner family that runs a conglomerate should be gradually phased in. This should come after a thorough review of the measures’ impact on the Korean economy’s global competitiveness and capacity to create jobs.

Korea also needs safety measures to prevent household debt from causing another financial crisis. Mortgage loans account for 60 percent of household debt, and Koreans must repay such loans in a lump sum. This needs to be changed to a long-term loan to be repaid in installments over a period of 10-20 years. A system is also needed for debt liquidation.

Regulations on the real estate market also an overhaul, as tax and construction rules on the market are tied to the concept of one home for one household.

The Park administration should take the lead in building an East Asian economic community by rigorously promoting open economic policies rather than going backwards. Economic growth for Korea through domestic consumption will prove tough if the export climate turns sour. So the Korean economy must develop its market in China for the future.

Finally, President-elect Park will have to better communicate with those who did not vote for her if she wants to be a leader who helps overcome the economic crisis, improve the people’s livelihood, and nurture the middle class. To this end, she must establish a negotiating body comprising both the ruling and opposition parties that she participates in.

She can start a practice in Korean politics of the president persuading and compromising with politicians in the meeting. She also must establish a presidential economic advisory committee as a constitutional body and have it run by the chief executive.

With sincere wishes for success as a president who revives the people’s livelihood through national integration, a sobering reality needs to be emphasized. A candidate can win an election through political logic, but success in reviving the economy and creating jobs can be achieved using economic logic.