New Moon in Seoul

His victory signals hopes for a decisive shift

In electing the moderate leftist Moon Jae-in as President, South Koreans may have handed Donald Trump — and the world — a breather from the escalating threat of nuclear war implicit in the stand-off with North Korea’s leader, Kim Jong-un. Mr Moon bested two rivals to corner a landslide 41 per cent of the vote in an election that followed a political scandal involving the impeachment of the former president. No admirer of Mr Trump’s fighting talk and flexing of the US military muscle, such as the (hugely unpopular) deployment of the THAAD (Terminal High Altitude Area Defence) anti-missile system and the dispatch of the aircraft carrier USS Carl Vinson and the submarine USS Michigan, Mr Moon, a human rights lawyer and child of North Korean refugees, has talked of holding parleys with Pyongyang and involving China in the process. The outcome of this emollient approach is far from certain, given Mr Kim and Mr Trump’s unpredictability. But by eschewing provocative rhetoric, Mr Moon has displayed a realistic appreciation of geopolitical realities – Pyongyang and Beijing are neighbours, and the latter is the world’s second-largest economy with growing ties in the peninsula.

 

True, two divisions of US troops bolster South Korea’s security, but Mr Moon, who occupies the Blue House immediately, has sensibly sought to lower the political temperature at a time when he urgently needs to focus on serious structural challenges that assail Asia’s fourth-largest economy. At the heart of the problem is the kind of crisis that contributed to his predecessor’s impeachment; the nexus between Seoul’s governance establishment and the chaebols, family-controlled conglomerates such as Hyundai, Samsung and LG, that account for more than half of South Korea’s gross domestic product (GDP). The cornerstone of the country’s export-led dynamism, the chaebols’ dominance of the economy has constrained space for small and medium scale companies to grow even as their R&D capabilities are increasingly being challenged by Chinese competitors. This skewed economic structure matters because South Korea faces a record high youth unemployment rate of 11 per cent (against the overall unemployment rate of 4.2 per cent) and it is the SME sector that presents scope for job expansion. Yet, in the absence of robust institutional support, young people prefer jobs with the “safe” chaebols in much the same way as a public sector job is coveted in India. South Korea’s first left-liberal president in a decade has spoken of creating hundreds of jobs and tackling the chaebol problem. His tax policies, he had said, would focus on the super-wealthy and top corporate earners.

 

Commentators, however, have noted that key economic advisors come from the conservative establishment, including one from his predecessor’s tax-cutting, regulation-relaxing campaign manager, another former presidential advisor with World Bank/IMF credentials and a third, an academic with reputation as a chaebol sniper. Much rides on Mr Moon’s ability to wield these disparate elements into a cohesive policy that will reorient the South Korean economy and keep it on its high-growth path — an achievement that can do much to credibly underwrite Seoul’s role as peacemaker in a crisis precipitated by two of the world’s most maverick politicians.