Suffer the economyPresident Moon Jae-in compares public spending to boost welfare and create jobs to priming the pump. He could not have used a better expression. The pump that drove the Korean economy over the last half century has been overused and gone out-of-date. It squeakily coughs out water only when the government pours some in first. But the government cannot go on pouring water into an obsolete pump. It needs to replace it.
A new pump refers to a new growth engine. Growth produces decent paying jobs and tax revenues. The government has a duty to draw up an outline for new industries and ways to promote them. It would be great if enterprises paves their own way, but if not, the government has to provide at least some traction.
Moon has inherited the incomplete job of his former boss, President Roh Moo-hyun. Roh ordered his government to come up with a new growth engine and development strategy as the country was competing with emerging industrialized countries. He instructed economy-related ministers to find innovations and businesses that would ensure future prosperity for the economy. Then-minister of commerce, industry and energy Yoon Jin-sik sat down with business leaders and picked 10 industries to groom for future growth. They included new-generation semiconductors, wireless technology, rechargeable batteries, displays, bioengineered drugs, robotics and future vehicles.
The finance industry also came into the spotlight. Roh envisioned making the country a financial hub for Northeast Asia. Legislation removing barriers in the financial industry and facilitating new financial instruments was passed. Funds mushroomed, helping to boost stock prices and enabling companies to raise funds.
Such efforts are not made in the Moon administration. Its economic policy revolves around welfare. There is no policy to aid industries or the financial sector.
Moon has promoted the small and mid-sized enterprises administration to a ministerial-level office to support start-ups and venture companies and launched a committee to back a transition to the so-called fourth industrial revolution. But what they are in charge of and where there are headed remains murky. The chief administrative office in charge of our industries — the Ministry of Trade, Industry and Energy — is engrossed with Moon’s nuclear energy phase-out. The Ministry of Science and ICT is preoccupied with Moon’s campaign promise to cut phone bills. The financial authority is primarily focused on cutting credit card commission fees and containing household debt. There is no talk about developing the financial industry.
These worries may be premature since the government is still in its early stage. But there is scant hope for improvement given the people in charge of the policies. The market can fathom policy directions from the people in charge. But more are being disappointed.
Paik Un-kyu, Minister of Trade, Industry and Energy, has been recruited for his expertise in nuclear power phasing-out. He has little knowledge of industry. When business leaders ask for the government’s support against protectionist barriers on the trade front, he tells them to cooperate with the government’s campaign to increase hiring. Park Seong-jin has been nominated to head the newly created Ministry of SMEs and Startups, but cannot start due to lingering doubts about his eligibility. Both were recruited because they helped Moon’s election campaign.
The financial industry is grumbling about incoming head of the Financial Supervisory Service. Moon is said to be considering Kim Jo-won, who spent his entire career at the Board of Audit and Inspection. The veteran state auditor with little experience in financial policy-making and regulatory affairs was also in Moon’s campaign. A heavyweight former state auditor with affiliation with the president placed as head of the financial regulator could clash with the policymaking Financial Supervisory Commission and cause confusion in policies.
Unlike welfare policy, which takes time to yield results, industrial and financial policies can produce fast results without requiring public spending. When the government presents a feasible vision and strategy and carries out deregulatory follow-up actions, capital and investment come naturally. The market smells money. It is important to communicate with the market in order to come up with a productive policy.
What the incumbent government does is to scorn the stakeholders for past misdeeds and commands them to oblige with its ways. The president has done poorly with the economy. The business community has fallen silent. Does the Moon administration have any will to incubate new industries? Does it care about the economy at all?
JoongAng Ilbo, Sept. 1, Page 28
*The author is the head of the Economic Research Institute of the JoongAng Ilbo.