South Korean President Stresses Need for Economic Reform

August 8, 2015South Koreaby EW News Desk Team

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South Korean President Park Geun-Hye said the economy is in need of "major surgery," according to Reuters. The president's approval rating dropped below 40 percent, a far cry from a 61-percent rating when she was elected in 2013.

When the president stated that the country needs an operation, she was referring to the lack of long-term structural measures that could lead to job growth and economic expansion. Since her election, critics note her failure to live up to numerous campaign promises, such as reducing the nation's reliance on exports and large conglomerates. However, her five-year term still gives her some time to tackle the many issues ahead.

The world economy has much to do with South Korea's shortfalls, including the sinking of a ferry that left over 300 people dead, and a recent MERS outbreak that damaged the tourist industry. The aforementioned events are beyond the government's control, but critics highlight that the Park administration could do more to improve the economy, such as taking advantage of a record account surplus to stimulate the economy. Many also accuse the administration of being overly optimistic about economic circumstances, leading to a slow response to the downturn.

The nation is shackled with high household debt, with youth unemployment standing at an all-time high, and officials must worry about the elderly population. According to a survey, 70 percent of people in their fifties are not prepared to retire, and poverty among the elderly is among the highest when compared to other Organization of Economic Cooperation and Development (OECD) nations.

The economy suffers from lethal combinations of lagging exports, slowdowns in corporate spending and problems in the labor market. South Korea also faces long-term problems, as the country's working population will begin contracting in 2017. To make matters worse, the southern portion of Korea contends with waning demand from international markets, not to mention stronger competition from China and Japan. With a fledgling labor market, experts question whether South Korea can remain competitive in the future.

South Korea has a rigid labor system that makes it harder for graduates to enter a stable career path. One example is a system based on seniority rather than individual performance, preventing younger workers from getting ahead. South Korea has invested heavily in education, but the government is seeing little return.

As part of the structural reform process, Park called for a merit system within the workplace, along with capping worker salaries. The president is especially focused on youth unemployment, referring to the situation as a "make or break moment" for South Korea, notes AFP. She stated that her plan could create as much as 8,000 jobs for young people within a year if all public companies adopted the changes. However, with the president's drop in popularity, the administration's attempt at making serious reform efforts will be difficult.

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