(Policy Interview) S. Korea committed to pursuing goal of inclusive growth
(Editor's Note: This is the first installment in a series of Yonhap interviews with key officials on South Korea's major policies)
By Kim Kwang-tae
SEOUL, May 6 (Yonhap) -- The head of President Moon Jae-in's blue-ribbon commission has said South Korea is fully committed to pursuing a policy of innovative and inclusive growth despite some challenges it is facing at present.
Jung Hae-gu, who leads the Presidential Commission on Policy Planning, stressed Moon's signature initiatives are a step in the right direction that could allow the benefits of economic growth to be distributed across society much more evenly, including to underprivileged people.
This, he said, is the answer to the growing divide between the haves and have-nots that can undermine the country's ability to maintain sustainable growth.
For decades, many South Koreans thought strong performances of Samsung Electronics Co. -- the maker of Galaxy smartphones -- Hyundai Motor Co. and other conglomerates would benefit smaller businesses and ordinary people down the line, and thus generate growth for the country as a whole.
Jung made his case for inclusive growth that focuses on income-led growth and other policies as being better able to accommodate the needs of the general populous. He pointed out that the so-called trickle-down effect is disappearing and Asia's fourth-largest economy has been plagued by growing polarization.
"I am not sure whether our economy and society can be sustainable unless we pursue the policy of building an innovative, inclusive nation," Jung said Friday in an interview with Yonhap News Agency at his office near the presidential office.
He acknowledged that the new policy could take time to generate results but made clear that this is the way to add vigor to the economy and address deepening social woes of people being left behind.
Jung described the current situation as "a quarrel between the past and the present. He noted that if South Korea were to stick to what it had been doing, it may be OK in the short run even though it would not be sustainable over the long haul.
South Korea has raised the monthly basic pension for the elderly and subsidies for those with disabilities while expanding health insurance coverage and child care allowances to all children under the age of 6 regardless of income level.
A recent Gallup Korea poll showed that 51 percent of 1,004 adults are in favor of the government's welfare policy, while 33 percent have a negative view of such efforts.
Jung said the government should consider raising taxes in the mid to long term to strengthen welfare. He said any moves in regards to taxes must receive social consensus since it is a tricky topic.
The commission chief came to the defense of Moon's trademark economic policy of "income-led growth" that envisions a virtuous economic cycle, in which hikes in the minimum wages of low-income people could lead to increased spending that in turn could boost economic growth.
South Korea raised its minimum wage to 7,530 won (US$6) per hour in 2018, up 16.4 percent from 2017. The minimum wage has been raised by 10.9 percent on-year to 8,350 won per hour in 2019.
Critics claim the minimum wage hikes have increased the burdens on businesses, especially microbusiness owners and the self-employed.
Standard & Poor's, a global rating appraiser, said last month that South Korea should rethink its stance on minimum wages if needed, though there are positive aspects of minimum wage hikes and shortened working hours in terms of people's quality of life.
Park Young-sun, the minister for SMEs and startups, said in a parliamentary confirmation hearing in March that it is possible to set a minimum wage in a way that is close to a freeze. The ruling Democratic Party voiced its concerns by saying South Korea is not in a situation, in which it can drastically raise the minimum wage.
"I don't think there is a need to raise the minimum wage so much in the next year," Jung said, noting drastic hikes could have side effects on the economy.
The Bank of Korea has said that the country's gross domestic product is estimated to have contracted 0.3 percent in the first three months of the year from the previous quarter, marking the worst performance in almost a decade.
The weak data has emboldened skeptics of income-led growth and called into question whether Seoul can meet its goal of achieving an economic growth between 2.6 percent and 2.7 percent this year. The economy expanded 2.7 percent in 2018, down from a solid 3.1 percent the previous year.
Jung conceded that income-led growth is taking flak in the face of tougher economic conditions. He, however, said the attacks are "excessive" and unsubstantiated.
The policy advisory chief claimed that polarization would have actually deepened if the government had not embraced an income-led growth policy.
"I disagree with the argument that income-led growth is to blame for the economic slowdown," Jung said, citing a low growth cycle, downward pressure and a slowing global economy as reasons behind South Korea's economic slowdown.
Jung, a professor of political science at Sungkonghoe University, an Anglican institution in Seoul, said he would give South Korea's economic policy a B.
He said the presidential commission is working on a blueprint that outlines South Korea's 2045 vision that calls for adherence to the building of an inclusive nation.
The year 2045 marks the centennial anniversary of Korea's independence from Japan's 1910-45 colonial rule following Tokyo's surrender in World War II.
The Korean Peninsula was later divided into the capitalist South and the communist North. The 1950-53 Korean War ended with a cease-fire agreement, not a peace treaty, leaving the two Koreas technically still at war.
Jung said potential inter-Korean economic cooperation could give a big boost to the South Korean economy. He said greater cooperation hinges upon a resolution of North Korea's nuclear ambitions.
North Korean leader Kim Jong-un has met with Moon three times and U.S. President Donald Trump twice, though no significant progress has been made due to sanctions imposed on Pyongyang to punish its nuclear tests and its long-range rocket launches.
Pyongyang has repeatedly called for the lifting of sanctions, but the U.S. has maintained that present restrictions will remain in place until the North fully gives up its nuclear weapons programs.
On Saturday, North Korea fired short-range projectiles off its east coast in an apparent sign of displeasure against the U.S. amid a nuclear standoff.
Still, Trump expressed confidence that Kim will keep his promise on denuclearization.
"I believe that Kim Jong-un fully realizes the great economic potential of North Korea, & will do nothing to interfere or end it," Trump tweeted. "He also knows that I am with him & does not want to break his promise to me. Deal will happen!"
Jung said that from Kim's perspective, the country cannot afford to easily give away its nuclear negotiating card as it does not have a lot of additional leverage.
"North Korea appears to be in a situation, in which it has to win what it wants with its nuclear card through a 'salami tactic,'" Jung said.
The policy adviser said that Kim's regime "can be sustainable if he wins support of North Koreans through economic development."
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