By Cho Jin-seo
Staff Reporter
A president’s close associate? Or an opposition academic? Both are possible answers to the question of who will succeed outgoing Bank of Korea (BOK) Governor Lee Seong-tae.
The new governor of South Korea’s central bank will be nominated on March 23, and will lead the country’s monetary policies for the next four years.
The appointment of the next BOK chief will be all the more important for President Lee Myung-bak, who is now in the critical third year of a five-year term. He will be inclined to seek a person who can provide him with strong support, in order to boost economic growth and help Lee avoid becoming a lame-duck president in his remaining time at Cheong Wa Dae.
Several names have been circulating as the potential candidates, though the presidential office has yet to confirm any reports. But the media, high-ranking government officials, and bond market traders and analysts believe that Euh Yoon-dae, a former Korea University president and a top advisor to Lee, is at the top of the pack.
Euh has emerged as a top candidate due to his proximity to the President, as well as his international exposure. Supporting this theory is that the National Assembly failed to pass a law late last month, which could have required the nominee to undergo a hearing by lawmakers. Euh was believed to have only a slim chance of attaining the post if he had gone through such a hearing.
One lawmaker, who was present at the sub-committee meeting on Feb. 24, suspects that some of the committee members disrupted the process on purpose. ``They had made no opinions and no complaints before. But on the final day of the committee they suddenly made objections, so it was physically impossible for us to make an agreement and pass the bill to the next stage,” the lawmaker said. “I suspect that they already had someone in mind.”
Though not confirmed, there were rumors that Euh failed to win a nomination for the education minister’s position before, because there were some irregularities in the way he got his wealth.
These rumors led some in the financial market to believe that President Lee wouldn’t gamble his reputation by appointing a governor with flaws in ethics, considering the BOK job requires high ethical standards.
Another person close to Lee on the candidate list was Kang Man-soo, the former finance minister. But his widespread unpopularity in the financial market as well as among ordinary citizens has almost all but ruled him out.
Meanwhile, a non-government organization said the financial academics prefer a totally different person. Kim Jong-in, a 70-year-old economist and former lawmaker of the opposition Democratic Party, won the survey with a big margin over eight other candidates.
The 72 economic professors who participated in the survey by Citizens' Coalition for Economic Justice said that Kim has both the experience and capability to handle the position and create a long-term vision for the country’s economy. He also had good marks on being independent from the government. He is known to have a critical view on the current government’s economic policies, and for being an informal advisor to Park Geun-hye, the president’s political rival.
Euh and Kang were ranked fifth and eighth among the nine candidates, respectively.
Another candidate is Kim Jong-chang, the current governor of the Financial Supervisory Service, which is the country’s financial regulator. He is often seen as a gentle and rational bureaucrat type. His strength is that he has held various key posts in the government as well as in the private sector: He was the CEO of the Industrial Bank of Korea.
Kim Choong-soo, South Korea's ambassador to the OECD, follows close behind. He was the head of the Korea Development Institute and was the economic adviser to President Lee in 2008. Park Chul, former vice governor of BOK, is also thought to be the only candidate with roots in the central bank. Except for Euh, the three candidates all have post-graduate degrees in economics.
President Lee has indicated that he wants the central bank to cooperate more closely with the government in setting monetary policies. In most developed countries, the independence of central banks has been considered an important factor, in order to effectively control inflation.
Though there are empirical studies showing the inverse correlation between the independence of central banks and inflation, some economists also point out that the long-term growth of an economy has little to do with their independence and the inflation rate.