A battle over fiscal control
The author is economic and industry news director at JoongAng Ilbo.
“This country does not belong to the Ministry of Finance and Economy,” Prime Minister Chung Sye-kyun fumed when the ministry dragged its feet on legislating the subsidization of losses for the self-employed and small merchants as a result of government-enforced social distancing measures to mitigate the coronavirus spread. Lee Jae-myung, Gyeonggi Province Gov. and a presidential aspirant from the ruling Democratic Party (DP), joined the attack on the finance ministry and its head Hong Nam-ki. “The ministry’s dominance over budgeting has caused various problems and the extent has gotten worse to vex the prime minister,” Lee complained.
Appearing on a broadcast show, Lee Nak-yon, chairman of the ruling DP and former prime minister, publicly disapproved of the attacks on the finance minister from Chung and Lee. “There is no use in nagging the gatekeeper of state coffers,” he said.
Hong served as Lee Nak-yon’s deputy when he was the prime minister. Still, the fact that the finance ministry has become a target of reproach underscores the pitiful state of the once mighty government office in charge of drawing up government budgets for whatever administration.
Jeju Gov. Won Hee-ryong, also from the conservative opposition, also joined the chorus by attacking the Gyeonggi governor and prime minister for “threatening” the finance minister.
It is regrettable that the finance ministry has become a target for political bashing. I covered the ministry and economic affairs for a long time. But never have I seen the office become so devalued. It has become more or less good-for-nothing. Once the first choice among new government recruits, the finance ministry has become the last due to an avalanche of pressures from above.
Some blame the wishy-washy character of Finance Minister Hong, who also serves as the vice prime minister for economic affairs. Moon chose the gentle Hong after watching repeated clashes between two stubborn policymakers — Finance Minister Kim Dong-yeon and President Moon’s policy chief Chang Ha-sung — after the liberal administration took off. As a result, the Blue House picked Hong to replace Kim as finance minister, and Hong met the president’s expectations.
However, even with a strong character, a finance minister would not be able to fight off the oversized legislature controlled by the DP occupying nearly two-thirds of the 300 seats and the mighty Blue House. The Financial Services Commission (FSC) also came under heavy fire for its plan to resume short selling for foreign investors. DP Rep. Park Yong-jin accused the FSC for disrespecting the National Assembly and prime minister.
The finance ministry has been proud of its nickname — guard of the national coffers — for years. In the past, the director general of the budget department in the ministry had Chief Financial Officer of the Republic of Korea on his name card.
Gatekeeping has loosened up significantly. Korea’s debt-to-GDP ratio has exceeded 40 percent. Instead of saving the budget, the finance ministry these days is advised to spend in sufficient sum when necessary. Times have changed.
But there are not many areas for good spending. After budget bulged under the liberal Moon administration, it has become hard to find promising projects. So, money is mostly wasted on areas that require immediate attention. The government lacks farsightedness to use the money to reduce the excessive share of the self-employed in our economy and upgrade small and mid-sized enterprises.
There is no wrong for the country to be under the finance ministry’s management. I would be happier when government budget is in safe hands.
Hong will become the longest-serving minister of finance on April 1 if he can break the previous record of 842 days of service. Whether he can finish his role well is more important than whether he breaks the record or not.
In his farewell letter to ministry officials, Yoon Jeung-hyun, who retired in 2010 as the longest-serving finance minister, advised, “A good policy that prevails can only be made with farsightedness and a long breath.” Hong and the finance ministry must stand tough against any political pressure and intimidation for the sake of national integrity and the future.