Struggling economy faces resurging economic democratization

Struggling economy faces resurging economic democratization

President Park Geun-hye and her economic aides have suggested the ruling party’s crushing defeat in last week’s general election will not weaken their efforts to accelerate structural reforms, deregulation and industrial renovation.

They say that completing such tasks are crucial to create more jobs for young people and boost the country’s growth potential over the long term.

At a meeting with her senior secretaries Monday, Park said she would humbly respect voters’ will reflected in the election outcome and closely cooperate with the incoming parliament. In remarks seen as seeking improbable support from opposition parties, Park expected the 20th National Assembly, which begins its four-year term on May 30, to be a productive legislature devoted to improving people’s livelihoods and the economy.

In a press conference arranged to mark his 100 days in office Tuesday, Finance Minister Yoo Il-ho reaffirmed key policy tasks would continue to be pursued without being affected by the election results.

Yoo, who doubles as deputy prime minister for economic affairs, pledged to push for the passage of structural reform bills through parliament and boost future growth momentum by nurturing new industries and strengthening corporate competitiveness through drastic deregulation and the trimming of overcapacity sectors.

He also hinted at the possibility of further expanding fiscal expenditure, conceding the Korean economy is facing growing downward risks amid declining exports, slumping domestic demand and sluggish facilities investment.

“I think there will be no disagreement with the policy direction of creating more jobs by pushing through structural reforms,” said Yoo, when asked whether he was ready to show more flexibility in coordinating policies with the new parliament.

The minister said he would positively consider opposition parties’ election pledges deemed acceptable and explain why he could not accept others.

His remarks, however, seem to be far less than an accurate portrayal of the difficulty the Park administration is set to have making deals with the incoming legislature to be dominated by opposition lawmakers.

The main opposition Minjoo Party of Korea has blocked the passage of bills designed to reform the labor market and develop the services sector, making Park come forward repeatedly before last week’s election to deplore what she saw as political barriers to revitalizing the economy and increasing employment.

The election results, however, showed more voters were critical of the way the Park government has handled the economy over the past years, during which household debt and youth joblessness have soared to record high levels.

By gaining the largest number of seats in the 300-member parliament, the Minjoo Party secured momentum to carrying forward its pledge to promote economic democratization, a concept that is understood as efforts at curbing the influence of large business conglomerates and reducing the widening income inequality.

Its interim leader Kim Chong-in, who carved out the concept nearly three decades ago, helped Park win the 2012 presidential poll on the ticket of the ruling Saenuri Party as one of her key campaign strategists. But he later turned his back against Park, criticizing her for having ditched the pledge of economic democratization.

Business circles are increasingly worried that they will be burdened not only with inaction on reform bills but also more regulatory measures in line with economic democratization.

“The resurgence of issues regarding economic democratization may result in corporations avoiding further investments and thus exacerbating difficulties faced by the country’s economy,” said Kwon Tae-shin, head of the Korea Economic Research Institute.

Some economic commentators and corporate executives express hope the splinter People’s Party, which is expected to hold the casting vote between the two main parties, will check against measures being enacted to put excessive restraints on business conglomerates. But its emphasis on balanced growth between large and small companies may prove to betray such anticipation.

A rare common pledge made by the political parties is to increase jobs for young people, with the youth unemployment rate rising to a record high of 12.5 percent in February before edging down to 11.8 percent last month.

Many experts note it requires concerted efforts by policymakers, legislators and companies to create more decent jobs.

The government should eliminate regulations and restructure loss-making companies, while political parties need to pass a set of bills designed to reinvigorate the economy. Under these circumstances, corporations may feel pressured to refrain from turning to layoffs and try to hire more employees.

This tripartite endeavor that goes beyond controversy over economic democratization is needed to settle other problems confronting the economy, economic commentators say.

Floor leaders from the three parties agreed early this week to convene the last session of the outgoing parliament from Thursday to seek a breakthrough in legislative impasse. Observers will be watching for what will come from it as a precursor to where rekindled moves toward economic democratization will take the country’s struggling economy.


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