The author is a columnist of the JoongAng Ilbo.
Public confidence hinges on the security of the national coffers. President Kim Dae-jung did not rush to fulfill his lifetime dream of pursuing détente with North Korea and to hold an inter-Korean summit when he finally became the president — and then he found out that his own country was teetering on the brink of bankruptcy. Accepting an international bailout in return for stringent economic restructuring, he devoted his first two years in office to getting the economy back in order. The dissident-turned-president defied protests from liberals and labor unions and carried out reforms in industry and among the chaebol that led to massive layoffs. Only after the country paid back international loans arranged by the International Monetary Fund in 1999 did he start to arrange the first postwar summit between the leaders of the two Koreas in June 2000. Kim did not try the public’s patience until the time was just right.
The country’s third liberal president, Moon Jae-in, has a similar dream of improving relations with North Korea. He is also very aware of how critical the public’s patience is having come to power after massive candlelight vigils led to the impeachment and removal of his predecessor for corruption and power abuse. He came into office with his approval rating at an unprecedentedly high level of 80 percent. A year has passed, and there are now more voices of concern than cheer. His progressive, pro-labor policies of raising the minimum wage by double digits for two years in a row and cutting the workweek to 52 hours have caused damage to an already fragile economy. His government has been spending like mad to make up for any damage done, but there is a limit to how far that can go. The public is beginning to worry about those state coffers. Moon’s approval rating slipped below 60 percent for the first time, a sign that the people are losing patience.
To regain public confidence, the president has shifted his economic focus to getting rid of red tape. His proposal to ease one strict banking regulation could be the start of something big. He found an appropriate target. It is neither too ambitious nor insignificant. Former President Lee Myung-bak’s pledge to get rid of red tape that gets in the way of industrial activity was too grand. President Park Geun-hye’s reform proposals were too modest. Lee’s was rhetorical, and Park’s could not get by grass-root regulations.
Easing the banking rule to allow more capital investment into internet banks won’t stoke as much resistance from the liberal camp as softening the government’s stance on for-profit hospitals. It is not as ambitious as former liberal President Roh Moo-hyun’s proposal to initiate a free trade agreement with the United States. The ruling and opposition parties have already agreed to pass the revised bill in a session in August. The move also sends a reconciliatory message. The liberal government has been toppling almost every policy of the past conservative governments on the pretext of correcting “past ills.” Internet banks were promoted by the former Park Geun-hye government. The government was so eager to push ahead with the plan that it issued licenses ahead of the passage of the bill to ease the banking regulation that was contested by the main opposition (now the ruling party). The Financial Services Commission chairman at the time, Lim Jong-ryong, said the online banks could not have started if they had to wait for the revision of the law.
Opposition still continues. Civic organizations protest that the president has broken his campaign pledge and commitment towards democratization of the economy. But the deregulation move for internet banks will offer consumers greater choice. Online banks are open for 24 hours and offer cheaper service rates than brick-and-mortar banks. Fees to wire money in foreign exchanges can be from one fifth to one tenth of the charges by traditional lenders. Progress in online banking can also advance the fintech industry and related technologies. These innovations and the popularity of online banks can motivate traditional lenders and bring progress in the overall financial industry. Internet start-ups do not yet pose a threat to traditional banks.
The two internet banks in business employ 5,000 and serve seven million customers. Their combined outstanding loans total 8 trillion won ($7.1 billion). One of the leading commercial banks, KB Kookmin Bank, has 30.94 million customers and outstanding loans of 246.7 trillion won. Its online banking service alone has 13.9 million customers. The two internet banks combined are no match for a single traditional bank.
The president’s proposal is limited to internet banks. The cap on traditional banks stays intact. The left wing claims once the gates open, the house can become vulnerable to thieves. The liberalization move for internet banks would test the government’s will on deregulation. If it fails, we cannot expect any headway in other reforms such as flexibility in the labor law in the face of strong unions. Moreover, jobs will become more scarce and the economy worse off. Then the president will have to abandon his greater dream. A president who has lost his dream cannot maintain the confidence of the public beyond his loyal fans. Is that what Moon’s so-called supporters want to see?
JoongAng Ilbo, Aug. 10, Page 30