On May 9, South Korea voted to elect a new president, Mr. Moon Jae-In. Exit polls and early vote counting indicated a sweeping victory for Mr. Moon. With voter turnout surpassing 77%, Mr. Moon won nearly 41.4% of the votes – more than 18 percentage points over his closest rival, Mr. Hong Joon-pyo.
The snap-election came following the impeachment of Park Geun-hye and amidst heightened tensions on the Korean peninsula. Given the unusual nature of the election, Mr. Moon will assume the presidency immediately rather than after the normal 60-day transition period. This will place additional pressure on Moon to move quickly and the early task of appointing a Prime Minister will be a good indicator of the challenges he may face working with a National Assembly that is not controlled by his party.
Several major issues shaped the campaign, and will be critical for the new President in maintaining support.
North Korea: The relationship with the North was a major point of contention between the candidates, as Mr. Moon’s support for the “Sunshine Policy” – pledges to reopen inter-Korean exchanges, resume economic cooperation with the North (including restarting production at the jointly operated Kaesong Industrial Complex), and redouble diplomatic efforts – is starkly different from the more hardline approaches favored by other candidates. This ‘softening’ on North Korea diverges from the past nine years of conservative leadership, and is at odds with efforts by the United States, Japan, and the rest of the international community to curb North Korea’s nuclear program through increased economic sanctions. However, given the North’s increasing provocations, many believe Mr. Moon’s policy space here has been reduced.
THAAD: U.S. deployment of the Terminal High Altitude Area Defense (THAAD) system in Korea was another hot button issue. China’s economic retaliation against Korea for deploying the THAAD, as well as President Trump’s Twitter musings that South Korea should pay some or all of the $1 billion price tag (contrary to the existing agreement), propelled the issue to the top of the agenda. Although Mr. Moon did not publically oppose THAAD, he repeatedly criticized former President Park’s decision-making and insisted that the next president have the ability to review the decision.
Economic Policy: Mr. Moon comes to power at a delicate time in Korea’s economic recovery. The export-driven economy still relies heavily on trade with the United States and China – neither of which can be taken for granted these days. As mentioned, China has demonstrated its willingness to retaliate economically against Korea for perceived infringements on national security interests. Compounding matters is the uncertainty over what the Trump administration may seek to do with the U.S.-Korea FTA (KORUS) given its tough rhetoric on trade deficits generally, and KORUS in particular. To the latter point, it is expected that Moon will send a senior delegation as early as possible to Washington to address any grievances related to the agreement.
Domestically, Mr. Moon’s economic policy agenda has focused on social spending, chaebol reform, and wealth redistribution. He has said he wants to hire more firefighters, teachers and policemen, but the 389-page manifesto from Moon’s Democratic Party is short on details. Only four pages outline how the new administration would finance these new jobs and other social welfare projects, as there are only vague descriptions to “strengthening taxation for the rich” and “higher fines for unfair practices.”
It is not entirely clear from the limited detail how Mr. Moon will proceed on fiscal and economic policy. It seems unlikely that he will pursue radical changes in policies followed by previous conservative governments, as he is not likely to interfere in Korea’s fragile economic recovery too much. Further, Moon’s top adviser for economic policy is Kim Kwang-doo, a conservative economist who served as the economic advisor for Park Geun-hye’s 2012 campaign and was responsible for the promises of tax cuts and a relaxation of corporate regulations. Mr. Kim’s name has been floated as a possible candidate for Prime Minister, or other senior Cabinet positions.
Youth unemployment remains around 10 percent, adding to the challenges of rising household debt and a rapidly aging population. Tackling the challenge has been a major focus of the campaign, and Mr. Moon has stressed government action as the solution, specifically through increasing public-sector employment by 810,000 jobs. Mr. Moon’s plan diverged from other candidates in its approach, as Ahn Cheol-soo, for example, advocated for a private-sector led job growth fueled by government-aided small- and medium-sized enterprises.
Calls for chaebol reform are nothing new, but Mr. Moon has pledged to give labor a bigger voice in management, and restrict abuse of the chaebols through corporate governance reforms like boosting the roll of the shareholders. But the scandal involving the chaebols and former President Park has led to more scrutiny and urgency for reform, so public expectations about meaningful action to make the chaebols more responsive to economic concerns of the population – like youth unemployment – and less reliant on political favors is as high as ever.
Constitutional Revision: In April, a special parliamentary panel on the possible revision of Korea’s constitution was held. Although not widely reported in the press, the implications could be vast. Mr. Moon – who was invited by the panel along with fellow presidential contenders to discuss the current presidential structure – called for changing the term limits from the current single-term, five-year presidency, to a renewable four-year one. He argued that this would help to ensure consistent policy implementation, and suggested that the next presidential election be held in 2022, concurrent with local gubernatorial and mayoral elections. Further, he called for a decentralization of authority to provincial governments.
Don’t forget the National Assembly: Although Mr. Moon’s Democratic Party comes to power holding the most seats of any in the National Assembly, it does not have an outright majority. This presents a challenge for Mr. Moon and prospects for a viable coalition partner are dim. Coupled with the security and economic challenges, Moon’s pathway to push significant change is not an easy one.
This is uncharted territory for South Korea. The USKBC will report on new political and policy developments regularly. In the meantime, do not hesitate to contact us with questions.