appConfigEntityId

bodyType

customContents

entityId

entityUuid

isVideo

articlePageQuery

article

articleSchemaContent

content

hooksArticlePageAdvertisementConfigArticle

hooksArticlePageFloatingButtonConfigArticle

appConfig

filter

json

liveArticle

Lee Jong-Wha

In November 1997, South Korea faced a sudden withdrawal of foreign capital, coupled with its financial institutions’ inability to borrow from abroad, depleting the country’s international reserves.
The following month, Seoul turned to the International Monetary Fund, and launched painful structural reforms. Millions of jobs were lost and, in 1998, the economy contracted 5.5 per cent.
But government-led reforms made progress addressing structural weaknesses, so the economy weathered the 2008 global financial crisis better than most.
Today, however, South Korea is beset by rapid population ageing, labour market inefficiency, institutional weakness and low service sector productivity. As the labour force shrinks, the economy loses vitality.

Externally, South Korea is highly vulnerable to the North Korean nuclear threat. The United States is now attempting to pressure China to curb the threat. While China has agreed to enforce economic sanctions more actively, it doesn’t want the regime to collapse.
China calls for calm over North Korea as US flexes military muscle and clock ticks down to key congress
Moreover, China has called for the withdrawal of the US military’s missile defence system from South Korea, and used its economic might against the South. China accounts for 25 per cent of South Korea’s total exports, giving it substantial leverage.
Meanwhile, the Trump administration, concerned about its bilateral trade deficit, has threatened to renegotiate the free-trade agreement with the South.
South Korean President Moon Jae-in wants to employ “balancing sanctions and dialogue” with the North. But South Korea has not managed to improve relations with its ally, the US, never mind China. It has got nowhere in reviving inter-Korean talks.
20,000 South Koreans killed per day: the terrifying cost of a US war with North Korea
These failures have many Koreans scared. The South is now debating developing its own nuclear weapons or bring ing US tactical nuclear bombs back. Either approach would antagonise China.

In the 1990s, South Korea waited for matters to come to a head before responding. This time, it must nip the incipient crisis in the bud. That means accelerating domestic structural reforms to improve productivity, enhance labour-market efficiency, upgrade institutions and foster a business environment supporting modern service industries and innovative start-ups. It means strengthening both economic and diplomatic ties with major countries, the US and China in particular.
Neither agenda will be easy to pursue. But South Korea’s future prosperity, if not its very survival, depends on its leaders’ efforts on both fronts in the months and years ahead.
Lee Jong-Wha is professor of economics and director of the Asiatic Research Institute at Korea University. Copyright: Project Syndicate


South Korea has ‘pragmatic’ plan for phased denuclearisation. But will North bite?

Did North Korea’s missile launches target the Xi-Trump summit agenda?

Why Trump-Xi summit must put Korean peninsula back on the agenda

A new Trump-Kim summit would be a nightmare for everyone but Pyongyang

North Korea nuclear crisis

North Korean nuclear threat is not the only crisis on South Korea’s horizon

South Korean President Moon Jae-in (right) and Defence Minister Song Young-moo review the troops during a commemoration ceremony marking South Korea's Armed Forces Day, which falls on October 1. Photo: Reuters

Chinese Foreign Minister Wang Yi (R) and his South Korean counterpart Kang Kyung Wha shake hands in Manila on Aug. 6, 2017. Wang said during their meeting that South Korea's decision to install additional launchers for the Terminal High Altitude Area Defense system threw cold water on China-South Korea relations. (Kyodo) ==Kyodo

FILE - This undated file photo distributed on Sept. 3, 2017, by the North Korean government, shows North Korean leader Kim Jong Un, second from right, at an undisclosed location in North Korea. As North Korea steps up its nuclear weapons tests and threats, South Korea’s Unification Ministry faces an almost existential crisis. It wasn’t too long ago that the ministry was one of Seoul’s most powerful government departments. But the political sway is mostly gone after a decade that saw relations between the Koreas go from bad to worse. (Korean Central News Agency/Korea News Service via AP, File)

In a photo taken on May 27, 2016 an elderly woman walks past a poster at a health centre in Gunwi, some 200 kilometres south of Seoul. By 2030, a quarter of all South Koreans will be over 65 years old, and the overall population is expected to peak at around 52 million the same year before entering a period of steady decline. This so-called "silver tsunami" poses a major challenge for Asia's fourth-largest economy as the young, working-age population declines and the cost of caring for the elderly escalates. And in remote, rural communities like Gunwi, which lies some 200 kilometers southeast of Seoul, the trend is exacerbated by a youth exodus to the cities for work. / AFP PHOTO / Ed Jones / TO GO WITH AFP STORY SKOREA-SOCIETY-EDUCATION-POPULATION-AGING,FEATURE BY JUNG HA-WON

Angered by ‘suicidal’ Abe, North Korea warns of ‘nuclear clouds’ over Japan

The US Castle Bravo H-bomb explosion on March 1, 1954, above the Marshall Islands in the Pacific Ocean. Photo: US Department of Defence

Opinion

Lee Jong-Wha says Seoul should focus on more than just North Korea, given its domestic economic weaknesses and the need to strengthen relations with both the US and China


North Korea

South Korea

Korean peninsula