Keep Korea’s economic lab open

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Keep Korea’s economic lab open


William Pesek

It’s very clear why President Park Geun-hye chose Lee Ju-yeol to run the Bank of Korea. The former deputy governor boasts 35 years at the central bank, experience helping the nation recover from the Asian financial crisis and natural smarts. His selection signals gravitas and continuity as the respected Kim Choong-soo prepares to leave the building.

And yet, there’s reason to worry Lee isn’t the best man for the job. I’d say “person” here, but who are we kidding? The idea that the tradition-bound and deeply hierarchical BOK will be run by a woman anytime soon is about as plausible as Koreans shunning kimchi. Yes, Koreans have elected a female leader, but the central bank is as male-dominated an institution as any in a country not known for gender progressiveness.

That’s something Kim has tried to change since April 2010. He worked to shatter the BOK’s glass ceiling by recruiting more women, scouring the existing staff for underutilized female talent and last year even promoted Suh Young-kyung as the first female deputy governor. The move raised many eyebrows, as did Kim’s drive to break the central bank’s seniority-based system and his advocacy of increased immigration to pump fresh energy into Korea’s aging work force.

Kim’s BOK reforms didn’t sit well with Lee. That became apparent in his April 2010 retirement letter, in which Lee complained that changes made in the name of “reforms” and “globalization” in the bank had hurt feelings. “It was chaos for many as the bank’s own values and rules built over the past 60 years were rebutted overnight,” he wrote.

Now that Lee is returning, and in charge, are Kim’s policies doomed? Let’s hope not. Kim, it’s important to recognize, has been using the BOK as an economic laboratory of sorts, something I explored in a February 2013 column based on my interview with the governor. The changes Kim championed over the last four years are ones Korea Inc. needs to pursue, too.

Korea’s obsession with seniority in hiring kills innovation and productivity. That’s why Kim moved early to leapfrog relatively young staffers to senior positions above their bosses. The key to Korea raising its global competitiveness is becoming more of a meritocracy. If you are 30, smart and exude leadership ability, Korea Inc. has little to gain from delaying your rise for 15 or 20 years.

Lee would be wise to let Kim’s reforms play out, including strengthening the BOK’s relationships with other central banks around the globe. By February 2013, Kim had his staffers team involved in 18 research projects around the globe (from zero when Kim began) to strengthen Korea’s ties and glean new ideas about the mechanics and direction of modern economics. This is where Lee should focus his energy - not pulling the BOK back to a time and mind-set that has little to offer Korea in a fast-changing world.

*The author is a Bloomberg View columnist.

By William Pesek

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