What to do to improve people’s livelihoods

Cho Min-geun

The author is business and industry news director of the JoongAng Ilbo.

“But whether the bill can pass the National Assembly is uncertain.” I used to habitually end an article with the sentence when I covered macroeconomy in 2016. At the time, the National Assembly also went under the opposition’s majority after the election. Every bill the government proposed was stuck or killed in the legislature. As a journalist, I had to prepare a safety mechanism. A lull fell on the government complex in Sejong City after the election. Ministers and their deputies hardly kept their seats as they were often demanded by lawmakers. Working officials could not dare to work on new policy outlines. I was reminded of the aftermath of Sejong eight years ago following the April 10 parliamentary elections, which also delivered a crushing defeat for the ruling power.

Market players have come to doubt the government’s stimulus policies on assets, as they could be hamstrung or upended by the legislature. On the stock market, shares that benefited from the government’s corporate value-up program tanked, with financial holding stocks falling nearly 5 percent just two days after the election.

The proposal to scrap the financial investment income tax and provide tax incentives for shareholder-friendly actions, such as increased dividends and treasury share cancellations, could be stopped by the majority opposition biased against favors for rich companies and investors. Construction stocks also weakened as the government’s plan to ease regulations on apartment redevelopments also can flop due to the legislative opposition. The same goes for nuclear reactor related stocks.

Conditions for new policies have sharply turned unfavorably against the government. On top of harsher political geography, external risks have escalated amid spikes in the U.S. dollar and oil prices due to the worsening Middle East crisis. The prospects of a delayed monetary shift in the U.S. and entrenched high interest rates due to renewed inflationary pressure feed market turbulence. Issues delayed by the election, such as delinquencies related to project financing and an inflationary run capped by government-led subsidies and controls, can spring forth to hurt the markets and economy.

The government could waste the remaining three years of the presidential term fighting with immediate fire and have little energy left to push structural reforms. But the expedient choice could cause a fixated slump for the economy.

President Yoon Suk Yeol vowed to reform his governance style and do his best to stabilize the economy and improve people’s lives after “humbly” accepting voters’ will through the election results. Although short and theoretic, the statement carries the direction for future governance, which indeed should be centered on the economy and public livelihoods. There should not be partisanship over the well-being of the people. The government must polish up the essential policies and persuade the public as well as the majority opposition. It must filter out what needs to be saved amid the flood of government promises ahead of the election. It cannot and should not try to act out all of them. The economy will benefit if some of the populist pork-barrel projects are cast away.

Some of the government policies could win the opposition’s support through persuasive efforts. The corporate value-up program comprised of tax incentives for aggressive shareholder returns is aimed to combat the so-called Korea Discount, or the undervaluation of Korean stocks. The opposition won’t reject a move that has the support of 14 million individual investors. The government’s goal is to galvanize corporate activities, while the opposition would be interested in improving the corporate ownership structure and retail shareholders’ rights. Since all the factors weigh down Korean shares, the rivaling fronts could find a middle ground for the policy mix. The same goes for support for semiconductors and other high-tech industries.

Another keyword mentioned in the presidential statement is governance reform. But that cannot be merely achieved through replacements of the presidential staff and cabinet ministers. The domineering and impromptu style of the president bluntly displayed through 24 town hall meetings before the election should be replaced with a communicative and persuasive tone. The presidential office bypassed not just the opposition but also the government offices in his policy proposals. Such a unilateral governing system can undermine consistency and confidence in public policies. The ban on short sales upon the president’s idea makes the exemplary case. The action made a fool out of the financial chief who said in the National Assembly that a full-scale ban on short sales can cause more harm than good. Tax cuts, including the scrapping of the financial investment income tax, were also pronounced before they were thoroughly studied by the government.

If he really means to devote his remaining term to helping the economy and public lives, the president must demonstrate vision as well as the actions to fulfill it.