- 2018-10-17
South Korea under multiple crises
When Park Geun-hye came to power four years ago, he vowed to reform South Korea’s large family businesses. Today, the president is accused of conspiring with others to extract huge sums of money from these companies, and the ever-widening scandal that has been triggered by this is paralyzing the Asian country.
Investigators raided the offices of many large companies, including Samsung and Lotte, and Park Geun-hye’s core staff have been prosecuted for alleged abuse of power.
Corruption is not new in Korea. Five of South Korea’s six directly elected presidents have been caught in scandals, and the executives of some of South Korea’s largest family business groups (or “chaebols”) are often taken away for questioning and often Facing trial. However, the severity of this scandal is different from the past.
South Korea is facing what experts call a "complex crisis." While economic growth has stagnated, geopolitical tensions have increased, and a series of high-profile corporate problems have erupted one after another, the country has found itself in a state of chaos without a leader. "South Korea is in a state of total crisis," said Moon Chung-in, a political science professor at Yonsei University in Seoul. "We are facing an intertwined political, geopolitical, and economic crisis... but none of them can clean up the mess. Or to promote the leaders of society."
Weak growth
South Korea is the 11th largest economy in the world. In the third quarter, South Korea’s economy grew by 2.7% year-on-year, which was lower than the 3.3% growth rate in the previous quarter. Analysts predict that as key industries such as shipbuilding undergo deep restructuring, the Korean economy will It's getting harder. South Korean exports in October fell 3.2% year-on-year, and September fell 5.9% year-on-year. Exports account for about 45% of South Korea's gross domestic product (GDP).
In 2012, when Park Geun-hye participated in the presidential election, his plan was to reform the economy by fostering an entrepreneurial culture and reforming chaebol giants (family businesses that dominate the economy).
In the eyes of South Korean leaders, chaebols are too big to fail, and they often resort to presidential pardons to keep the management of these companies intact. Park Geun-hye usually refrained from issuing such amnesties, but only implemented the few reforms she had promised.
By mid-2016, South Korea’s swelling household debt reached a record high of 1.15 trillion U.S. dollars—ranking 8th in the world.
Some of South Korea’s most well-known international brands have also suffered spectacular failures. Hanjin Shipping, South Korea's once largest shipping company, declared bankruptcy in August, causing global logistics congestion, highlighting the problems faced by this difficult industry. Other shipping companies in South Korea are laying off staff to avoid a similar fate.
Samsung Electronics, a technology company owned by South Korea’s largest chaebol, was also hit due to the explosion of the new Galaxy Note 7 product. The company stopped producing the phone, and the loss is estimated to reach US$5 billion.
"The Galaxy Note 7 incident has severely damaged the national brand image of Samsung and South Korea, but at least they publicly solved the problem," said Peter Lee, an analyst at NH Investment & Securities. "Current political issues may further hit South Korea's national image. "
Pressure from trade protection
South Korea's economy, which is dependent on exports, has been sluggish in recent years, and the escalating trade protectionism of its two largest trading partners-China and the United States-has further exacerbated the downturn. China and the United States account for about 40% of South Korea’s total exports.
Beijing is very angry at the South Korean government's plan to deploy the US ballistic missile defense system on the Korean Peninsula, and has made no secret of its discomfort. Soon after this deployment plan was announced, South Korean actors and singers discovered that they were no longer popular in China, and a series of propaganda activities were cancelled-what Professor Moon Jung-in called "subtle" sanctions. The share prices of several major entertainment groups in South Korea have plummeted, and the South Korean people are also worried that China may take further measures to restrict Sino-Korea trade, which has long been sluggish due to China's economic slowdown.
The election of Donald Trump as the next president of the United States may be a more important cause of concern for South Koreans. After Trump's victory, financial officials in Seoul asked banks to prepare for external shocks, and the Blue House held a National Security Council meeting.
Trump's election also brings other risks to South Korea. South Korea has nearly 30,000 US troops stationed to guard against provocations from North Korea. Trump has said that these troops may be withdrawn-a statement that shocked many South Koreans because South Korea has been deepening South Korea-US relations at a time when the regional situation is increasingly unstable. "Any discord with the Trump administration may trigger anti-American sentiment in South Korea," Kim Jiyoon said.
According to Hans Schattle, a professor at Yonsei University, the political crisis in Seoul has created a leadership vacuum, which will hurt South Korea’s international ambitions.
New beginning
For those South Koreans trying to find a silver lining, the usual rhetoric is that this country is no stranger to crises. South Korea, which was born in the ashes of war and has been in a state of preparation for war, faces a critical moment every nearly 20 years. The last time was the 1997 Asian financial crisis.
Kim Woo-chan, a professor at Korea University, said that after each crisis, the situation in South Korea will always improve. The government of 1961 brought transformation to this impoverished economy, and the assassination of Park Jong-hee in 1979 allowed South Korea to embark on a more market-focused development path. The 1997 Asian financial crisis prompted many South Korean chaebols to change their business methods and reduce their dependence on debt.
It is hoped that the current crisis will bring about a healthier democratic system and a strong leader who can implement economic, political and corporate reforms.
"We are very adaptable," Professor Kim Woo-chan said. "I am sure that if the Korean people continue to protest in the streets at their current scale and continue to demonstrate their power and influence, politicians (except for purging politics) will not No choice."