Crossing the line when needed
Published: 25 Jun. 2024, 20:01
Updated: 25 Jun. 2024, 21:57
Suh Kyoung-ho
The author is an editorial writer of the JoongAng Ilbo.
The Minister of Agriculture, Food and Rural Affairs personally responded to a report from the Bank of Korea (BOK) last week, in spite of risking a policy clash or causing confusion within the administration.
According to the BOK report, Koreans bear higher living expenses for food, clothing and housing compared to the Organization for Economic Cooperation and Development (OECD) average and have relatively lower rates for public utilities and transport fares. As of 2023, food prices hovered 1.5 times above the OECD average and utility rates 0.7 times. The BOK report pointed out that prices of fresh food, including fruit, are expensive due to farmers’ lacking productivity and the country’s low level of market opening on top of its inefficient distribution system. Clothing is pricier thanks to the industry’s high-cost retail structure depending on the brand. The BOK matter-of-factly pointed to the government’s over-protection of the agricultural industry and consumers’ love of luxury brands, which cause higher prices at home.
Korea is among the bottom group in OECD — 27th — in agricultural productivity. It is at the top in purchasing luxury brands, spending $325 per person in 2022. In contrast, Americans spend $280 per person, and the Chinese spend $55. The price elasticity of demand — the percentage change in the consumption of a product in relation to its price — for luxury clothing and brands is low, as these products are bought no matter how expensive they are. It is why some foreign luxury brands tend to charge their goods higher in Korea. The BOK could be advising more competitiveness in the agriculture market through opening it more and encouraging reasonable consumer spending to offset the limitations in curbing inflation through monetary actions.
Agricultural Minister Song Mi-ryung pointed to the “exceptional” features of the agriculture sector and questioned the central bank’s ways of compiling data and market opening. She explained that quarantine issues make it difficult to increase import countries for fruit and other fresh food. This issue would require a scientific examination based on the principle of reciprocity. As its ministerial title suggests, the government office is responsible for farming and rural households, but it should be thinking of consumers as much as producers.
The BOK in March issued a report which proposed the employment of foreign migrant workers based on a lower minimum wage to address the worsening supply deficiency in care services. The union sector staged protest rallies in front of the BOK headquarters calling the idea “inhumane.”
Many regard the central bank as a “troublemaker” as it stokes unnecessary debates. But BOK Gov. Rhee Chang-yong doesn’t mind. He said the central bank can present solutions to economic problems in neutral and long-term perspectives thanks to its independent role and authority. Under Rhee, the central bank is deserting its past genteel identity to raise a greater voice on unpopular issues.
Financial Supervisory Service (FSS) Gov. Lee Bok-hyun also invited controversy after expressing his views on the need to revise the Commerce Act to expand the compliance duty of board directors to shareholders and scrap the crime of a breach of trust. Any changes to the Commerce Act and Criminal Law fall under the jurisdiction of the Justice Minister. Then there is the deputy prime minister for economic affairs who oversees state affairs of the economy. Although the affairs are irrelevant to the FSS’s role, Lee — a former prosecutor who indicted many entrepreneurs, including Samsung Group Chairman Lee Jae-yong, for breach of trust — took a drastic turn due to the broad and ambiguous category.
The presidential office, however, should be discreet in expressing its views. Sung Tae-yoon, President Yoon Suk Yeol’s policy chief, suggested that the comprehensive property ownership tax should be abolished and the maximum rate on inheritance tax be halved to 30 percent. Upon controversy, he backtracked, saying these suggestions were some of the options being studied. The policy chief could have proposed these measures to counter the opposition party’s crusade for tax cuts. But the presidential office differs from the BOK or the FSS, as its primary role is to coordinate policy affairs. What’s the use of the Ministry of Economy and Finance, which is working hard on revisions to the tax code, if the presidential office pre-emptively releases specific targets for tax cuts? The presidential office must back the administration so that government ministers can successfully do their job, rather than meddling in their affairs.
with the Korea JoongAng Daily
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