New gov`t to face grave situation in nat`l security, economy

The Lee Myung-bak administration in its first year in office in 2008 lost public trust after a string of negative incidents. Inflation surged due to the soaring prices of international oil and grain. The administratively sloppily handled the sensitive national issue of resumption of U.S. beef imports, and this led to mass candlelight vigils over fears of mad cow disease. The government thus lost its leadership initiative to spearhead national governance. As the U.S.-led global financial crisis broke out in September 2008, the Lee administration’s election “747 pledge,” which was to achieve 7-percent growth, 40,000 U.S. dollars in per-capita income, and have Korea become the world`s seventh-largest economy, went up in smoke. Other pledges in diplomacy and national security through North Korea’s denuclearization, opening and 3,000 dollars in national income also lost ground due to Pyongyang`s provocations, including the launch of a long-range missile, nuclear test, the shelling of Yeonpyeong Island, and the sinking of the South Korean naval corvette Cheonan by a torpedo attack.

The national security and economic situation that awaits the succeeding Park Geun-hye administration is even worse than that of five years ago. The Institute of Foreign Affairs and National Security under the (South) Korea National Diplomatic Academy said, "The next government will face the worst external environment in the 21st century." Tension will escalate due to military and economic competition between the U.S. and China, which have emerged as the world`s top two superpowers. Since Xi Jinping took over as president, Beijing is increasing its voice on the international stage. Tension stemming from the territorial dispute over the Diaoyu Islands (called Senkaku in Japan) could escalate into armed conflict with Japan, whose new government has a right-wing ideology. North Korea’s provocations that threaten peace and security on the Korean Peninsula could also become more complicated and get more intense.

The South Korean government has cut its economic growth target for next year from 4 percent to 3 percent. The number of new jobs will also reach just 320,000 next year, down 100,000 from this year. Ordinary people could find it more difficult to make ends meet and the government faces a potential decline in tax revenue of about 2 trillion won (1.88 billion U.S. dollars). If the Japanese government under Prime Minister Shinzo Abe steps up its efforts to inject more liquidity into the market to revive its economy, the Korean won will appreciate and hurt the performance of Korean exporters. If negative developments in diplomacy and national security are coupled with external problems, including negotiations over the U.S. fiscal cliff and expansion of government debts, the fiscal crisis and general elections in Europe, and hard landing of the Chinese economy, the new government in South Korea could see no way out early in its term both internally and externally.

A power transition is a time when loopholes in crisis management are exposed. The outgoing Lee administration should do its best until its term ends by banking on its experience of operating an emergency economic situation room at an underground bunker to revive the sluggish economy. The incoming Park administration should draw a big picture in diplomacy and economy by placing its policy focus on effective management of negative incidents to avoid losing ground early in its term. The new government will also need to preemptively operate a crisis response system to promptly cope with a North Korean provocation designed to test the new leadership in the South and unexpected external shocks to the economy. The presidential transition committee should remain vigilant in crisis management by mobilizing a close dialogue channel and cooperative network with the outgoing Lee administration.