Leadership for the economy

[PARK YONG-SEOK]

Korea is under the leadership of Prime Minister Hwang Kyo-ahn, who is acting on behalf of President Park Geun-hye while her impeachment is under review by the Constitutional Court. Hwang’s leadership could last up to six months, given the legal deadline for the court ruling, and it will have a grave role during this tumultuous period.

In the meantime, an unconventional government under Donald J. Trump will be inaugurated in Washington, demanding timely response to sweeping changes on the security and economic fronts. Economic governance should be in emergency mode. Hwang must set the stage for the deputy prime minister to exercise proactive leadership as commander in chief of the economy.

Aggressive and confident economic leadership itself can help put people and businesses at ease and strengthen foreign markets’ and investors’ confidence in the Korean economy.

Even before Trump’s surprising victory, the market had anticipated the U.S. Federal Reserve would start raising interest rates in December and carry out two more quarter-point hikes next year. But given the pledges of aggressive fiscal stimuli actions through tax cuts and infrastructure spending and near full-employment economic performance in the United States, inflationary pressure could speed up the tightening campaign.

The move will further strengthen the dollar and accelerate foreign capital migration from emerging markets to the U.S. We should prepare an appropriate action plan to act upon the potential ill effects on the local market. We need to wrap up currency swap negotiations with Tokyo and seek financial backup and cooperation from other countries and international lenders.

The incoming Trump administration is expected to first reassess trade pacts in multilateral platforms like the North American Free Trade Agreement and Trans-Pacific Partnership and move on to its bilateral trade deal with Korea. Washington could toughen trade barriers to make up for the worsened current account balance from a stronger dollar. Government offices under the command and moderation of the deputy prime minister should posture themselves for the challenging battle on the trade front.

Domestically, the government must expedite industrial restructuring and structural reforms as well as navigate the soft landing of the household debt amid rising interest rates to not only stabilize the domestic economy, but to keep up its international credibility. It must pay heed to advice from experts and be extra careful that its policy on corporate restructuring, such as in the shipbuilding sector, does not trigger subsidies or other complaints from trading partners.

The government should officially protest excessive retaliatory action from China following Seoul’s decision to deploy the Terminal High Altitude Area Defense system. Even if Beijing maintains it cannot know the private sector’s actions, the government should request its attention to specific damages to the industry and companies. It should also explain the process and progress in talks to the domestic and foreign press.

Beijing as the host of this year’s G-20 summit has the duty to exercise leadership in containing trade protectionism. It will inevitably have to take formal and informal action if Seoul makes the issue public, which could jeopardize the reputation of a G-2 superpower.

All these actions can only be possible when the deputy prime minister has strong power. The deputy prime minister should hold regular cabinet meetings to map out and coordinate policies in times of crisis and communicate persistently with the legislature and press. A leader with conviction that fends off populist temptations is essential during such a critical period.

Korea has endured numerous serious challenges to its security, politics and economy over the last half decade. We have combated them to turn crisis into opportunities for further development.

Korea’s crisis management capacity now faces a test, and the world is watching. Hwang’s interim cabinet must demonstrate Korea’s resilience to crisis once again and help push the country into the ranks of advanced democratic societies.

Rivaling parities should set aside differences to join forces and fight the crisis together. They should draw full public support to come out of the crisis stronger.

Translation by the Korea JoongAng Daily staff.

JoongAng Ilbo, Dec. 14, Page 32

*The author, a former finance minister, is an adviser to the JoongAng Ilbo.

SaKong Il