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JANUARY 21, 2000 VOL. 26 NO. 2
Kim Dae Jung's Dilemma
Angry voters are forcing his coalition to slow reforms
By JIN-KYU JOUNG
Jin-kyu Joung is East Asia analyst for Marvin Zonis & Associates, a political risk consultancy based in Chicago photo: Edwin Tuyay for Asiaweek |
But Kim is in for a tough electoral battle - voters are disillusioned with his government. In an effort to win seats, Kim is pork-barrel spending, which could blow a hole in the budget and increase inflationary pressure at a time when there is a growing risk that the economy will overheat. Moreover, if too many opposition and independent candidates win election, Kim's economic reforms will suffer.
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Second, Koreans suffer great anxiety from the massive social and economic changes. Gone are guaranteed lifetime employment and the seniority-based system. Uncertainty has surged as a cutthroat American-style capitalism seeps into the system. True, unemployment has declined considerably - from 8.6% last February to 4.6% in October. But the figures mask a new fear: job insecurity. While the number of workers on contracts of longer than a year fell slightly year on year in October, that of daily or temporary workers increased around 882,000. Good news for business, but it explains why many Koreans are nostalgic for the simpler life of the past.
The third source of discontent is widespread corruption in the government. One of Kim's campaign promises in 1997 was to clean up Korea's corrupt politics and firmly establish the rule of law. This resonated with voters fed up with the country's nontransparent "boss" politics. But Kim has failed to deliver. His administration has been plagued with corruption scandals involving members of his innermost circle.
Koreans also feel disenfranchised by the country's politics. While ordinary citizens struggle in the aftermath of the Crisis, the political parties have been preoccupied with promoting their myopic interests. Bickering and mudslinging abound. The parties have often boycotted parliamentary sessions, leaving 549 bills (including revisions) untouched. Polls show that the percentage of voters claiming no party affiliation rose from 19.2% in December 1997, to 37.8% in April 1998, to 52.4% last September. This suggests that Koreans are likely to cast protest votes against existing parties and elect independents.
This trend is particularly worrisome for the Kim government, which needs a parliamentary majority to continue its reforms. Recent elections revealed the startling extent of antigovernment sentiment. In November elections in Seoul, the ruling coalition lost all eight districts to the opposition Grand National Party (GNP) and independents. In December, the coalition again suffered humiliating defeats to the GNP in two parliamentary by-elections. The government is under tremendous pressure to build political support, and this threatens to derail economic reform.
The government is avoiding painful economic reform in favor of policies with short-term benefits. It recently announced big public-works projects in four major city areas. It also passed a bill to reduce debt burdens on farmers and fishermen by extending $26 billion in loans at 3% interest, rather than the current 5%. Facing fierce union resistance, the parliament suspended consideration of a bill to restructure and privatize Korea Electric Power Corp. - a major setback to public-sector reform. This policy favoritism will result in a growing budget deficit, higher taxes, and slower growth after the elections.
There is also a risk of the economy overheating. The government's main argument for re-election is its economic achievements. So it will spend and maintain low interest rates to keep the economy humming. But fears of inflation are rising. Korea is expected to have grown more than 10% in 1999. Private consumption has returned to pre-Crisis levels as has business investment. Last year, the stock market surged by more than 75%. The CPI grew by only 0.7% in the first eight months of 1999, but the speed of the recovery and costlier oil could trigger greater-than-expected price rises. Would interest rates be raised to pre-empt inflationary pressure? Highly unlikely, since the Bank of Korea (central bank) still looks to the executive for policy direction.
Korea is in an unenviable position between foreign investors, who urge faster reforms, and angry voters. How well will the government minimize the negative effects of electoral politics on the economy? Ominous clouds are gathering over Korea's economic reforms.
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