South Korea’s Moon Has Only Begun

South Korea’s new President faces more than just a nuclear North.

Moon Jae-in, a 64-year old liberal politican and leader of the Democratic Party, has been decisively elected President of South Korea, in a victory set to have wide repercussions in the region. Moon was elected following the impeachment of former President Park Geun-hye in early March, on charges of corruption. Moon won 41 per cent of the vote, leading Hong Jun-Pyo of the ousted Liberty Party and tech mogul Ahn Cheol-soo. Moon is the son of North Korean refugees, and a former student activist, human rights lawyer and Presidential advisor.

The Korean peninsula has become the subject of intense international focus in recent months, following increased intensions between North Korea and the US. Pyongyang’s parading of its missile testing and development programs has been met by brinksmanship from the Trump Administration, going so far as to threaten military action. South Korea is a long-time US ally, and this is unlikely to change, with 28,000 US troops still stationed south of the 38th parallel. Moon is an advocate for the “sunshine policy”, which aims to engage North Korea, establish diplomatic and economic ties, and revive the dormant Kaesong cross-border industrial park. However, any change in foreign policy would be pursued gradually, especially given that both North Korea’s nuclear capabilities and hostility have increased under the leadership of Kim Jong-un. Moon has also promised to review the deployment of the US’s THAAD Missile system, a move which would please China, but would be anathema to his US allies.

While the eyes of the world fixate on North-South tensions, for many South Koreans the most important issue considered during the elections was the economy. South Korea’s economy grew at 2.8 per cent in 2016, which is forecast to slow slightly to 2.7 per cent in 2017. Besides this, a myriad of economic problems await Moon. Youth unemployment sits at close to 10 per cent, despite young South Koreans being a highly-educated lot. Mr Moon attracted a significant share of the youth vote, and will be expected to address these concerns. Consumer confidence is low, with the recent political scandals leaving South Koreans wary of the prospects of an unstable market. Household debt in the country sits at a record 1.34 trillion won (USD$1.1 billion) and rising. Mr Moon has pledged to create 800,000 public sector jobs, and an additional 500,000 jobs per year. His Democratic Party policy paper outlines that, this will come from a focus on the super-wealthy and corporate tax earners, but is vague on further details.

Mr Moon’s election was only possible because his predecessor, Park, stands accused of taking $52 million in bribes from major companies, including Samsung. Moon plans to address corruption by reigning in the chaebols, like Samsung and LG. The chaebols wield significant influence in the country and on its politics, and have been a target of public anger for a litany of scandals. Their size and concentration of economic power has restricted the growth of SMEs in the country, and has possibly contributed to sluggish growth. Their reform is one of Moon’s great challenges.

South Korean trade also faces obstacles. South Korea has a trade surplus of $90 billion, and exported nearly $500 billion in 2016. It’s largest trading partner, China, has expressed fears over the deployment of the THAAD missile system, and has responded with economic reprisals, including pressuring major Chinese companies to reduce commercial activity with South Korea. The country has not escaped the protectionist rhetoric of the Trump Administration, with the President promising to review what he described as a “horrible” free trade deal between the two nations. Korea exported around $140 billion to both countries in 2016.

On all these major issues Moon walks a tightrope, and he dare not wobble in a region where the landing is likely to hurt more than most.

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