Introduction

South Korea is now one of Asia’s more economically advanced, developed, and important nations,  whose industrial prowess is recognized everywhere around the world.  Who hasn’t heard of such manufacturing giants as Samsung, Hyundai, LG Electronics, and Kia Motors, to name just a few of the country’s powerhouse companies?

This timely “Special Report” provides a balanced, informed, detailed analysis of the nation’s critical, rapidly-approaching, presidential election.  It also spotlights South Korea’s emergence as a major Asian free-market economy and, incidentally, the striking parallels, issue-wise, between this fiercely-contested race and our own recent presidential sweepstakes.

In a very tight battle, a strong, committed, pro-business, conservative candidate, Park Geun-hye, who also happens to be the daughter of a former, legendary South Korean president, is pitted against one of South Korea’s leading progressives and social reformers, Moon Jae-in, a key player in South Korea’s transformation from authoritative to democratic rule over many decades.

The outcome of the election will have a major impact on the nation’s evolving economy and political identity as well as its crucial relations with the U.S., with other Asian powers, especially China, which also has new leadership, and, very significantly, with a nuclear-armed, repressive North Korea and any future efforts towards reunification.

Literally roadblocked from overland access to the rest of Asia, South Korea faces geographical and ideological barriers on its North Korean border, political pressure from Russia to the North and China to its West and economic rivalry with Japan to its East. 

Perhaps because of these many challenges, South Korea has developed a vibrant and export-driven economy and boasts a hard-working population of 40 million that has seen personal income rise many-fold in the past 40 years.   

Restless neighbors and global economic stagnation seem secondary issues for many South Koreans, who see the side-effects of economic growth straining the social fabric of an economy dominated by the chaebol, South Korea’s large family-run conglomerates. Just 10 chaebols make up more than half the total value of the 1,779 companies on the Korea Stock Exchange.

Amidst improved Republic of Korea (ROK) – U.S. relations and an increasingly global role for South Korea’s companies and diplomats, South Koreans find themselves at a crossroads as they prepare for the Dec. 19 presidential election.

The Expectations

This will be the sixth presidential election since establishment of the Republic in 1948. The South Korean voter will expect the new President to:

·         Overcome the by-products of past economic success: income disparities and unfair competition that many blame on the chaebol;

·         Weigh the costs of taking a hard line against North Korea or choosing a more accommodating stance;

·         Balance the greatly improved ROK – U.S. alliance with the challenges from its regional neighbors;

·         Define a new role for South Korea as an emerging global leader.

The Candidates

South Korean presidents are restricted to a single five-year term in office. Incumbent President Lee Myung-bak was elected in 2007 after a close race in which he narrowly defeated the current leading candidate, Park Geun-hye. Lee is credited with presiding over a period of economic growth, maintaining a hard line against North Korea and strengthening relations with the Obama Administration. But in addition to criticism over a lack of social safety nets and growing income disparities, the Lee administration faces corruption scandals in what has become a tradition in Korean presidential politics. 

When Lee Myung-bak steps down at the end of February, the new ROK President will preside over a populace that is proud to have the fourth largest economy in Asia – and uncertainty as to how their future will evolve. 

The two candidates are Ms. Park Geun-hye, from the conservative New Frontier (Saenuri) Party, and the liberal Democratic United Party candidate Mr. Moon Jae-in, a former human rights lawyer and the President’s chief of staff in the last liberal administration. 

Park Geun-hye is the daughter of President Park Chung-hee, the controversial leader who for 18 years (1961-1979) oversaw South Korea’s transformation into a global economy. Ms. Park Geun-hye’s 15 years in politics include being elected five times to parliament and leading her party twice. She adopts her party’s traditionally strong pro-U.S. position and has in the past taken a hard stance on North Korea issues. If elected she will be the first female President and part of a growing Asian phenomenon – women who inherit power after the death of a family member.

During the campaign, Park Geun-hye has had to contend with ghosts of her father’s legacy. Many, especially in the opposition, see him as a military strongman who seized power in a coup in 1961 and ruled with an iron hand until his intelligence chief assassinated him in 1979. Park Geun-hye is no stranger to life-threatening situations – she survived an attempt on her life by a knife-wielding attacker.  She came under pressure during the campaign and apologized in September for human rights violations committed during her father’s rule. 

The opposition candidate, Moon Jae-in, is a progressive who played a prominent role in South Korea’s transformation from authoritarian rule to democracy. He is closely associated the liberal administration of

Roh Moo-hyun, who left office in 2008 amidst a weak economy and who committed suicide in 2009. 

Moon Jae-in stresses more active engagement with North Korea on unification issues, and highlights social welfare and equal opportunity in his campaign speeches. He was jailed in the 1970s for protesting against Ms. Park’s father’s administration.

To many South Koreans, the presidential contest is a referendum pitting Park Chung-hee’s legacy of authoritarian rule that led to present-day disparities versus the democratic forces of social equality that seek to transform modern South Korea into a more equitable society. 

That referendum on the past was highlighted when what was developing into a three-way race narrowed down to two on November 23^rd when popular Independent candidate Ahn Cheol-soo, a medical doctor, university professor and software company entrepreneur, decided to exit the race. This improves the odds for Moon Jae-in. Pollsters believe that Ahn Cheol-soo’s remaining in the race would have helped Park Geun-hye by splitting the liberal vote.  

There is speculation about what role Ahn Cheol-soo, who is popular with young voters, will play after the election. Regardless of who wins, he stands to gain from either a conservative or liberal victory. He is credited with popularizing a platform of social reform, which both remaining candidates have increasingly adopted.  Both say they will retire if they lose, leaving open the question of what Ahn Cheol-soo will do to fill the vacuum.

 

Chaebol Legacy & “Economic Democratization”

Over the last forty years, South Korea has become one of the most prosperous nations in Asia. As living standards improved dramatically, South Korea hosted the Olympics, and with Japan, co-hosted a World Cup. This transformational legacy includes the rise of South Korea’s mighty chaebol and the subsequent social welfare issues that have been central to the election debates.

There is a deep concern about the role South Korea’s family-run giant conglomerates have over the economy. So much so that “Economic Democratization,” has become a campaign buzz phrase. This refers to voter discontent with income disparities and unfair competition that many blame on the chaebol. 

“To outsiders, it may seem like the economy is doing relatively well, but there are people stuck in the cracks of society where chaebol wealth was supposed to trickle down to,” said Kim Woo Chan, a finance professor at Korea University Business School in Seoul. 

As a result, both candidates have promised to boost social welfare spending, and to look into the role chaebol families play in running the economy. In a country where exports account for nearly half of the nation’s gross domestic product, and where most exports are associated with chaebol, the cry from small and medium sized business for equal opportunity remains a challenge for the candidates.  

U.S. Relations 

The challenges for Korea includes not only maintaining a prosperous and equitable society, but also a healthy relationship with the United States while balancing thorny relationships with its neighbors. According to the Council on Foreign Relations, the challenges for the new South Korean administration will include: 

1.  Re-negotiation of a U.S. – ROK bilateral nuclear cooperation agreement;

 2.  Review of Korean reunification issues and the ramifications for U.S.– ROK relations;

3.  Re-evaluation of the U.S. rebalancing policy in Asia.

Understanding these issues is important for putting the present presidential contest in a larger context. Present ROK – U.S. relations are said to have flourished under President Obama and President Lee Myung-bak.  Amid rifts in the Japan – U.S. relationship over military base relocation in that country and Japan’s faltering economic recovery, South Korea has taken a driver’s seat in the issues that concern the U. S. in the region. North Korean provocations and tensions in Sino-U.S. relations have brought the ties between South Korea and the U.S. even closer.

U.S. – ROK Bilateral Nuclear Cooperation Agreement

Denuclearization of North Korea is one of the main challenges facing the ROK and the U.S. North Korean provocations including rocket launches, the sinking of an ROK naval ship and nuclear testing have created a sense of urgency and have brought the U.S. and ROK security policies closer. This includes expanding

ROK-U.S. joint military exercises in the region and adding Japan as a participant.

Despite several rounds of Six Party Talks (North Korea, South Korea, China, the U.S., Russia and Japan), prospects for a solution to the denuclearization issue remain uncertain, and short of policy shifts or regime change in North Korea, diplomatic relations with its nearest neighbor will be a challenge for the next ROK administration.

Korean Reunification

The U.S. and South Korea adopted a common approach to Korean unification in the 2009 U.S.-ROK Joint Vision Statement. It calls for unification on a democratic and economic basis, a policy that directly conflicts with China’s support of an independent North Korea.  

The new South Korean administration will need to work with a new U.S. Secretary of State after the departure of Hillary Clinton, who along with the Lee Myung-bak Administration, has adopted a hard line toward the North, focusing on denuclearization within the Six Party framework as the basis for talks.

There are indications that both presidential candidates may seek a more conciliatory approach with Pyongyang compared with the more hard-line approach of the current administration. It remains to be seen if further provocations from North Korea will allow for this more conciliatory approach to take root.

 

U.S. Rebalancing Policy in Asia

Asia’s rising strategic importance means a closer relationship for South Korea and the U.S. The new South Korean administration will have three related issues to contend with:

1.  U.S. distribution of forces in the country and the region;

2.  Trilateral cooperation with Japan on security issues;

3.  Execution of the recently ratified ROK – U.S. free trade agreement – KORUS FTA. 

There is no doubt South Korea will play a growing role in the region and globally as the U.S. rebalances its priorities in Asia. The U.S. – ROK Joint Vision Statement sets the tone for greater ROK participation in a number of important global issues, including post-conflict stabilization, development, non-proliferation and counter-terrorism.

Conclusion: A More ‘Global’ South Korea?

Inevitably, with an economy 60% dependent on exports, largely from the strength and reach of the chaebol, South Korea is de facto a player in global peace and security issues.

 A critical question facing the electorate ahead of the Dec. 19 election is:

 Can an emerging global profile commensurate with growing economic and political clout become a reality in a country where social welfare issues prevail?

 (© 2012 The Dilenschneider Group Inc.)