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(News Focus) Constitutional revision may spark debate on paradigm shift in economic policy

All Headlines 17:24 October 24, 2016

By Kim Boram

SEJONG, Oct. 24 (Yonhap) -- As President Park Geun-hye on Monday brought up a proposal for a constitutional revision, a decades-long controversial issue in South Korean politics, local economists and business circles are paying attention to whether it will eventually lead to a paradigm shift in the government's long-term economic policy planning.

At her parliamentary speech, the president said she will push forward with revising the Constitution during her remaining year in office, saying that the 1987-amended version has discouraged the government to go on with consistent and sustainable policy goals. Her five-year term will end in February 2018, with the presidential election to be held in December next year.

(News Focus) Constitutional revision may spark debate on paradigm shift in economic policy - 1

"The single, five-year presidential term under the Constitution, which has been in force for the last there decades since its last amendment in 1987, might have been suited for the past democratization period, but it has now become clothes that no longer fit our body," said Park.

"With a political system in which we cannot move a step forward due to confrontation and division, we cannot expect a bright future for the country."

Along with a huge swirl in politics, analysts said that the constitutional issue will likely have a significant impact on the economy.

President Park Geun-hye speaks at an event on the creative economy in Seoul in August 2016. (Yonhap file photo)

Under the current five-year single-term presidency, each government has announced its own economic policy plan on a five-year basis. The short-lived economic policy mottos have thus blocked economic policy planners from mapping out consistent and long-term growth strategies.

The Park Geun-hye administration has pursued its economic policy goal under the motto of "creative economy," replacing her predecessor Lee Myung-bak's "green economy" scheme.

Her midterm economic policy, announced in February 2014, called for stimulus measures over a three-year period, prompting critics to say that the creative economy policy needs continued support from her successors.

Lee Myung-bak, the predecessor of President Park, speaks at an event of green growth in Seoul in October 2012. (Yonhap file photo)

Now, many of the critics and economists are worried that Park's slogan will be disposed of a year later by her successor, and the South Korean economy will be set at a brand new starting line in the beginning of 2018.

Indeed, all government organizations and bodies related to former President Lee's green growth strategy have now virtually disappeared or been reduced to nominal status under the Park administration.

Experts noted that economic players, who are keen about a change in the government's economic and financial policies, have to alter their business and even household budget plans every five years in accordance with the new administration's programs. They are even easily swayed by the election pledges of heavyweight presidential hopefuls from major parties.

As a result, public confidence in the government's economic policy has remained low, dragging down private consumption and investment in the long term.

A public debate on the Roh Moo-hyun government's economic policy in Seoul in June 2005. (Yonhap file photo)

"We expect that a constitutional revision will help the country seek a new growth engine in the new era," said Bae Sang-keun, a senior researcher at the Korea Economic Research Institute. "Under the five-year term presidency system, every matter, including economic issues, has been linked closely with presidential elections. Further debate on a constitutional revision should contain this aspect."

Asia's fourth-largest economy has been facing strong headwinds at home and abroad, struggling with flaccid consumption and investment and faltering exports.

Coupled with a rapidly aging population and low birth rate, South Korea is feared to have entered a low growth cycle, losing growth potential, as its growth rate has been hovering in the 3 percent range for years after touching 6.5 percent in 2010. It expanded 2.2 percent in 2015 and is expected to grow less than 3 percent this year.


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