South Korea


Key Challenges

Public expectations very high. Improvements in social, economic conditions likely
At the domestic level, the biggest challenge for the incoming Moon administration will be to deliver on the candidate’s numerous campaign promises, particularly at a point when Moon’s party lacks a parliamentary majority. While Moon remains extremely popular, and at the time of writing had proven relatively successful in filling positions and implementing a few of his promises, it will be difficult for his administration to fully satisfy the public expectations built up during the last years of frustration under the Park Geun-hye government. Many of President Moon’s proposals are likely to improve social and economic conditions in South Korea. For example, he has promised to reform oligopolistic and paternalistic structures in the corporate sector, strengthen the small and medium-sized enterprise (SME) sector, increase the minimum wage, and transform irregular employment contracts into permanent ones. He has also promised to pay more attention to the environment, a badly needed policy change after previous administrations’ focus on growth, support for business and car-oriented infrastructure planning.
Power to be decentralized, made less corrupt
From an institutional perspective, Moon has promised to make the country’s political system more democratic, more decentralized and less corrupt. In particular, he has proposed to decentralize the power of the president; strengthen the cabinet, parliament and regional governments; and enhance opportunities for citizen participation. He has additionally proposed a constitutional change transforming the one-time five-year presidential term into a four-year term with a second term possible. In combination, such reforms would make South Korea more democratic, while at the same time increasing strategic-planning capacities by reducing the lame-duck period. In general, it is expected that civil- and human-rights conditions will improve substantially under President Moon, who is a former human-rights lawyer.
Economy vulnerable to external events. Rise in inequality undermining social cohesion
Economically South Korea is doing well, but the country remains vulnerable to global economic volatility and external political conflicts due to its dependence on exports. The tide of global trade protectionism is additionally becoming a significant challenge to the South Korean economy. Domestically, the biggest economic challenge is to enhance social mobility and improve job conditions for irregular workers and the younger generation. In addition, household debts related to a real-estate bubble and high education costs are also major challenges. The historically low-tax country also faces a major challenge in further expanding the welfare state so as to prepare for inevitably lower growth rates and an increasingly aging society. Moreover, the rise in social inequality in what was previously a relatively equitable society has undermined social cohesion. Several long-term tasks, including restructuring the country’s dominant business conglomerates and strengthening SMEs and startups, are becoming increasingly critical. The economy must also move away from its current dependence on the construction sector, and instead place greater focus on innovation. The ongoing restructuring of the shipping and shipbuilding industries, in particular, will be very costly and is expected to lead to substantial unemployment. South Korea is also behind the curve in shifting to a sustainable and low-carbon economy based on renewable energy.
North Korea remains threat to stability.
U.S., Japan policies
a difficult factor
North Korea continues to be a major threat to stability on the Korean peninsula and within the East Asian region as a whole. More than 60 years after the end of Korean War, there is still no peace treaty that would formally end the Korean War. The unpredictable and confrontational behavior of the North Korean regime, particularly with regard to nuclear and missile tests, has led to further deterioration in North-South relations. Maintaining peace and achieving the demilitarization of the Korean peninsula is an urgent and critical task for the South Korean government. The Moon administration has promised to abandon the failed hard-line policies toward the North and combine deterrence and strength with engagement and negotiations. However, the election of U.S. President Donald Trump and the re-election of Prime Minister Shinzō Abe in Japan have made the situation even more difficult, as each of these figures has followed a hard-line strategy. While war on the Korean peninsula remains unlikely for now, the further deterioration of relations with the North and the prospect of an escalating arms race in East Asia are grave dangers that will undermine stability in East Asia in the medium and long term. In addition, amid these mounting tensions, there always remains the possibility that error, accident or sudden unintended escalation could produce unpredictable consequences .
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