Where has ambitious 747 Plan gone?

By Kim Tae-gyu

By now few seem to remember President Lee Myung-bak’s promise that the country could increase the gross national product (GDP) per capita to over $40,000 in the near future.

The so-called ``747 Plan’’ was grounded due to the global financial crisis, which took place around six months after Lee’s inauguration, and nobody appears to regard the pledge as plausible any more.

The plan was Lee’s political buzzword predicting that the nation would chalk up 7 percent growth in yearly output on average and achieve $40,000 GDP per capita while becoming the world’s seventh largest economy.

The domestic economy is not likely to grow 7 percent any year under the leadership of Lee and its GDP per head is just above $20,000 while failing to make it to the global top 10 list in terms of the size.

Negative effects

President Lee and his underlings might come up with excuses that the 747 Plan was devised without the knowledge of the unprecedented downturn, which hit the world midway through 2008.

They might claim that the international economic crisis was beyond their control and the main culprit in the failure of attaining the 747 growth.

Some experts point out that the government should come under criticism because it stuck to the 747 Plan to the end, not because it gave up on it early, with regard to the recent runaway inflation.

``The Lee administration’s primary goal has been to jack up growth rates as amply demonstrated by the 747 Plan. It has sought high growth at any costs with expansionary fiscal and monetary policies,’’ professor Lee Phil-sang at Korea University said.

``And we face their side effects of steep inflations this year. Without changing our focus from quantitative growth toward qualitative indicators such as employment or income gaps, the negative ramifications will keep getting bigger.’’

Korea has carried out various stimulus packages under the stewardship of Lee including the four-river refurbishment projects and the provision of rich liquidity via low borrowing charges.

Based on strong support for the construction firm CEO-turned-head of state, the government plans to channel a total of 22 trillion won ($19 billion) into dredging and restoring four major rivers ― the Han, Nakdong, Geum and Yeongsan.

Many of the mega-sized projects have already been completed despite doubts on their viability. They are estimated to cost up to 30 trillion won including all related works.

In addition, the central bank kept the benchmark interest rate at the historic low 2 percent for over a year and it is still only 3 percent, relatively low compared to the past.

Professor Kim Sang-jo at Hansung University concurs with Lee.

``It is all about priority. President Lee put growth first on his priority list while putting stability way down. Up until early 2011, that seemingly was the case for the president and his top economic bureaucrats,’’ Kim said.

``This year’s official targets of racking up a 5-percent growth while keeping the inflation rate below 3 percent is overly ambitious. Lee has to move up stability on his priority list at the expenses of growth rates.’’

Inflationary pressures

A set of indexes have shown that Korea’s price levels are rising fast. The Bank of Korea said Friday that producer prices shot up 7.3 percent in March from a year before, the highest elevation since November 2008.

The price pressures prompted the government to sweat as it started going all-out to curb the rising prices to little avail.

The Ministry of Land, Transport and Maritime Affairs twice announced measures aimed at stabilizing the high-rising rents but the upward trend does not easily tail off.

Top bureaucrats contended that telecom bills can be deflated by more than 20 percent, which is another campaign pledge of President Lee, but they have yet to find ways to do it.

There are tangible results in regards to fuels. Gasoline prices reached record highs this month in line with rising crude values, and even the president took issue with this. All four local refiners cut unleaded gasoline prices by 100 won per liter.

Yet, the authorities have come under fire for twisting the arms of private refiners to try and tame inflation.