Park’s key economic initiatives sink with impeachment

The National Assembly’s impeachment Friday was the death knell for many of the key economic policies endorsed by the Park Geun-hye administration encircled under the theme of the “creative economy."

Upon inauguration, Park vowed to restructure the public, education, finance and labor sectors. Reform of regulations and improving labor market polarization have been key tasks for the government.

Some of the initiatives are directly intertwined in the presidential scandal, but many economic experts have noted that some of them are apolitical or imperative for the nation’s flagging economy.

Nonetheless, most are expected to flounder or simply disappear in the ensuing political upheaval.

Even prior to the impeachment motion, many of Park’s flagship economic initiatives failed to pass the legislative step. One such example is the Basic Act on the Development of the Service Industry, which would provide a legal basis for financial support and deregulation in the service sector.

The bill has failed to pass through the parliamentary committee for the past four years since it was submitted, due to discord with the opposition, which claimed it also applies to fields that have largely remained on a public level, such as medicine and education. They say the bill would pave the way for the privatization of medical services, which would result in a surge in medical costs. The government has refused to budge.

While the bill remained in gridlock, the government had announced in July comprehensive five-year development measures for the service economy that aimed to create some 250,000 additional jobs by creating an environment for capital to flow into the sector.

It has vowed to expand financial support for the industry by 15 trillion won while doubling its ratio of research and development investment, easing regulations and improving tax benefits for the fields of medical services, tourism, entertainment content, education, financial services, software development and logistics driven by new technologies.

The government’s push to reform the system of year-end tax settlement and health insurance payment system has also been shelved, as the ruling Saenuri Party feared negative public sentiment.

Without doubt, the hardest-hit project is Park’s creative economy, which aims to foster startups and innovative businesses and to transform the manufacturing-heavy economy into a services-oriented one.

Seventeen creative economy and innovation centers have opened nationwide over the past two years. But the centers found themselves at the center of the presidential scandal by being allegedly connected to Choi Soon-sil, Park’s secret confidante. The prosecution is currently investigating whether Cha Eun-taek, a close associate of Choi and former head of the creative economy promotion team, was involved in the establishment and operation of the centers.

There are also rising calls for the restructuring of the Ministry of Science, ICT and Future Planning, that has been in charge of the creative economy policies.

The Minjoo Party of Korea’s Rep. Mun Mi-ock, a physicist turned politician and member of the parliamentary science committee, said, “Due to the ministry focusing on short-term policies related to ICT and venture startups, the fields of basic science and scientific technology have been ignored.” She added that it was necessary to separate ICT that requires short-term and aggressive measures from science that needs long-term investment.

Another of Park’s flagship policies of promoting Hallyu through “cultural enrichment” is also headed downhill. Cha was a member of the presidential committee of cultural enrichment.

The National Assembly has this month slashed hefty portions of the government’s budget of some 174.9 billion won ($150 million) set aside for these projects.

Labor reform is also expected to remain on the back burner. The Assembly’s labor committee last month decided to forgo discussion on major bills on labor reform.

The bills are, according to the government, designed to encourage companies to employ more young people by making the labor market more flexible.

They include ways to expand types of businesses that can hire dispatched workers, reduce working hours, widen the recognition of industrial accidents, such as those occurring while commuting, and change the employment insurance system to raise unemployment benefits with stronger qualification criteria. The latter three had been agreed upon by both ruling and opposition parties, but the first had been hotly debated for allegedly favoring business owners. 

(khnews@heraldcorp.com">khnews@heraldcorp.com)