Park pushes ‘Korean-style QE’

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Park pushes ‘Korean-style QE’

President Park Geun-hye made Thursday a stronger push for a quantitative easing program to aid restructuring of ailing companies.

In a cabinet meeting in the morning, Park addressed the issue of the so-called Korean-style quantitative easing, first floated by the ruling Saenuri Party during the campaign for the April 13 general election. She said the process is needed to save the economy.

“We must aggressively consider a selective quantitative easing method, different from the indiscriminate money printing of the United States, Japan and European Union, in order to support corporate restructuring,” Park said. “In order to quickly resolve insolvencies from the corporate restructuring process and complete the task successfully, state-run banks, which will control the process, must preemptively secure their financial capabilities.”

Park also stressed that corporate restructuring must be led by companies and creditors and the government’s role should be limited to presenting a proper direction and minimize any unwanted fallout such as unemployment.

Earlier this week, Park first commented that she was in favor of the policy.

In a meeting with editors of major news organizations Tuesday, Park stressed that Korea was in an economic crisis and approved of the Korean-style quantitative easing program proposed by the ruling party before the recent general election, in which it suffered a humiliating defeat.

The proposal would have the Bank of Korea buy commercial banks’ mortgage-backed securities and quasi-government bonds issued by the state-run Korea Development Bank in order to ease household debt and support large-scale corporate restructuring.

The idea would require a revision of the Bank of Korea Act and the liberal parties’ support. Before the election, Bank of Korea Governor Lee Ju-yeol was unenthusiastic about the idea and so apparently were the voters.

The ruling Saenuri Party said it will sponsor a revision of the Bank of Korea Act in the next legislature, but opposition parties were skeptical.

Chu Jin-hyung, the deputy chief of the Minjoo Party’s economic campaign, said the National Assembly can discuss capital increases of the Korea Development Bank and the Export-Import Bank of Korea without revising the Bank of Korea Act. “The revision is not a proper way to tackle the issue,” he said. “It seems like a tactic for the government to avoid the legislature.”

The People’s Party’s newly appointed chief policymaker, Kim Sung-sik, said Wednesday the party will decide its position after the government presents a specific plan.

Shortly after Park made her comment Tuesday about her support for quantitative easing, Ahn Cheol-soo, the People’s Party’s co-chairman, ridiculed her. “I don’t think President Park knows what quantitative easing is,” Ahn said Tuesday. “An ignorant person on the economy is sitting in the Blue House. [She] does not know the economy but she is stubborn.”

After his remark was reported by the media, the Saenuri Party angrily demanded an apology. The People’s Party explained that Ahn was criticizing Park for acting irresponsibly by pushing for quantitative easing without first admitting her failed performance.

“Quantitative easing is an unconventional monetary policy,” said Kim Kyung-rok, the party’s spokesman, in a statement. “Before discussing this option, she must admit first that the economy is in a serious crisis and that her economic policy has so far failed. It is irresponsible for her to talk about it without admitting her responsibility.”

During Tuesday’s meeting, Park also expressed concern that a new anti-corruption law may harm the economy by discouraging domestic consumption. Park’s request to lawmakers to water down the anti-corruption law is causing another headache for the Saenuri Party.

In 2015, the National Assembly passed a tough anti-graft bill after years of debate, despite controversy over its vagueness and scope. The new law, named after Kim Young-ran, the former head of Korea’s Anti-Corruption and Civil Rights Commission who authored the initial draft, will take effect in October if it survives constitutional challenges.

According to the law, a public official will face criminal punishment for receiving money or favors worth more than 1 million won ($870). Beyond bribes, entertainment like expensive meals, rounds of golf and paid vacations are also covered by the law.

The law defines public officials very widely. Aside from civil servants and lawmakers, teachers at private schools and journalists are also covered because the bill considers the nature of their work public. Even their spouses are covered.

On Tuesday, Park said the law may go against the government’s efforts to boost domestic consumption despite its good intensions. “I believe the National Assembly can reconsider it,” she said.

“Farmers and fishermen relying on holiday gift seasons for sales of their products seriously complained, and the National Assembly must reconsider the law to make it reasonable,” said Rep. Chung Woo-taik of the Saenuri Party, who is chairman of the National Policy Committee. “The 20th National Assembly will discuss whether it should be revised or if the problems can be solved with loose enforcement ordinances.”

The bill, first submitted in 2011, saw slow progress but gained headwind following the sinking of the Sewol ferry in April 2014. That put pressure on the government to clean up the public sector. The tragic deaths of more than 300 passengers shed new light on the corrupt relationship between Korean officials and companies in the private sector.

Another Saenuri lawmaker, Kim Yong-tae, however, said the legislature can only discuss the law after the Constitutional Court rules on a pending petition about the law.

The opposition Minjoo Party and the People’s Party shot down Park’s comments.

“The president condemned the legislature seven times for delaying the passage of this law” Rep. Kim Ki-sik of the Minjoo Party. “Asking the National Assembly to revise it now is a self-contradiction.”

Ahn, co-chairman of the People’s Party, said reconsidering the anti-corruption law is not a proper approach to boosting the economy.

Rep. Lee Sang-min of the Minjoo Party, chairman of the Legislation and Judiciary Committee and the only opposition lawmaker who protested the bill last year, said it is irresponsible for lawmakers to just wait for the Constitutional Court’s ruling. He said he will submit a revision bill in the early months of the 20th National Assembly.

BY SER MYO-JA, PARK YU-MI [ser.myoja@joongang.co.kr]

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