Following is the first in a series of articles based on the assessment of the presidential manifestos by the Herald expert panel. ― Ed.
The main presidential candidates Park Geun-hye and Moon Jae-in have dedicated much of their time to economic pledges, but experts say that their plans fall far short of being viable solutions.
According to Herald Corp.’s manifesto review panel comprised of leading academics, the plans put forward by the Saenuri Party’s Park and the Democratic United Party’s Moon appear to be steeped in populism.
As the country’s household debt rises to nearly 1 quadrillion won ($928 billion), while the economic growth rate falls below 3 percent, both Park and Moon have put economic democratization and stimulation at the forefront of their campaigns.
To address rising household debt, frontrunner Park plans to set up a 18 trillion won fund to ease the burden on those unable to repay loans taken out from financial institutions. She hopes to achieve the fund by using 1.87 trillion won raised from state-run organizations such as the Korea Asset Management Corp.
“While issuing bonds doesn’t require investment from the government, it amounts to making future generations to repay the debt to fund today’s welfare benefits,” Daejeon University professor Kim Sun-geun said.
“It is a populist pledge aimed at today’s 3.22 million defaulters, but if this policy is put into practice, it will only create more defaulters.”
Other experts in the review panel voiced similar views saying that the plans are made to appear as though an injection of tax money will not be required. The panel also pointed out that including defaulters who have not made sufficient efforts to repay their debts goes against mainstream economic standards.
In addition to increasing the country’s fiscal debt, professor Jeong Seung-yeon of Inha University says that such measures could lead to moral hazard for those taking out loans.
Park’s plans for small- and medium-sized enterprises and for changing chaebol or family-owned conglomerates’ shareholding structures also appear to lack efficacy.
Both Park and Moon have pledged to address the problems caused by the circular shareholding structure prevalent along chaebol. However, the two differ in that Moon hopes to ban the practice and to give the concerned companies a probation period for dissolving circular shareholding already in practice, while Park plans to prohibit further transactions that would result in circular shareholding.
“It is doubtful whether banning only further circular investment will effectively change the corporate shareholding structure,” Jeong said.
Moon’s policies have been given relatively high ratings for giving comparatively larger weighting to reforming conglomerates’ shareholding structure and protecting small- and medium-sized enterprises.
These factors, however, were also the main weaknesses of the DUP candidate’s policies highlighted by the experts, who say that being skewed toward resolving social and economic polarization exposes the policies to the danger of moving toward populism.
Unlike Park, the priority in Moon’s plans for reducing household debt has been given to legislating and revising loan-related laws. Under the DUP candidate’s plans, the ceiling on the annual interest rate will be reduced to 25 percent, while funds raised from state-run organizations will be used to provide various financial benefits such as switching to lower-interest loans for people who are under large financial burdens.
However, experts say that his plans could cut off those who need new loans, pushing them to non-banking financial institutions and private money lenders.
“(Moon’s policies) can be given high marks for fairness and appealing to the public’s satisfaction. However, the feasibility of the plans has not been tested fully, and if sufficient funding is not secured, they could lead to worsening fiscal status,” Jeong said.
Moon’s employment pledges, however, received heavy criticism from the panel for lacking details.
Under Moon’s plans, the government will support the development of about 4,000 middling companies ― those that are larger and more stable than SMEs but fall short of being categorized as large companies ― and the rise of 10,000 venture firms led by young people.
In addition he plans to create about 400,000 new jobs, and reduce the number of irregular workers, starting in the public sector.
“Creating 4,000 mid-sized firms has little chance of being realized, and there are no plans to set up the measures for helping failed businesspeople to try again that are different from the previous administration,” Kim said.
In addition, as the public sector will play a major role in Moon’s employment plans, Jeong pointed out that the implementation of the measures could lead to a sudden rise in government deficits.
By Choi He-suk (cheesuk@heraldcorp.com)
The Herald panel consists of Kim Yong-chul from Pusan National University; Cho Young-key from Korea University; Suh Chang-jin from School of Business, Hanyang University; Park Young-june from National Security College, Korea National Defense University; Kim Sun-geun from Daejeon University; Hong Young-joon from Sangmyung University; Jeong Seung-yeon from Inha University; Lee Kwang-youn from Sungkyunkwan University Law School; Lee Suk-won from Seoul National University Graduate School of Public Administration; Lee Sang-youb from Konkuk University; Yang Dae-jong from Wonkwang University Institute of Mind Humanities; and Ahn Sung-soo from Changwon National University. ― Ed.
