Economy drifting amid leadership vacuum

Gov’t helpless in coping with looming end of low-rate era

By Nam Hyun-woo

The government’s key economic and financial arms are losing their grip on state policies, as President Park Geun-hye’s recent hasty cabinet reshuffle faces deadlock amid an unprecedented political influence-peddling scandal rocking the country.

The Financial Services Commission (FSC) Chairman Yim Jong-yong, who was nominated as strategy and finance minister on Nov. 2, is “not preparing for his appointment hearing at the National Assembly,” according to an FSC official.

Another official said the ministry stopped reporting to Yim last week and a team set up to prepare for Yim’s hearing was “virtually” disbanded.

After the abrupt nomination, Yim has been handing over his tasks to the FSC vice chairman, poised to assume the ministry post. The ministry’s chain of command was also shifting, with officials reporting to either Yim or outgoing Minister Yoo Il-ho.

As the National Assembly is engrossed in whether to make beleaguered President Park step down, however, her bid toward the cabinet reshuffle has been drifting, placing Minister Yoo back in control.

This placed both the FSC and the ministry under a leadership vacuum. Though Yoo pledged for “a firm and thorough grip on economic matters,” pundits say his economic drives will lack power because his job is not secure. The ministry’s officials are also having a hard time working for two different leaders.

“In the circumstances in which we don’t know what will happen to our leadership, it is true we are cautious and hesitant in doing our duties,” said an official at the FSC. “Especially, in executing budgets, all work has virtually stopped.”

Escalating fears over the leadership vacuum, economic indexes are showing the country’s economy is ailing. Also, a big shift in the global economy is coming after Donald Trump’s upset win in the U.S. presidential election, heralding an end to low interest rates.

In the global financial market, market rates are rising over expectations over the Trump administration’s economic boost, forcing Korea to also come up with policies to embrace change because a widened gap between the U.S. key rate and that of Korea may trigger a massive capital flight out of the country.

The Bank of Korea, however, is cautious in changing its rate because it will affect the household mortgage rate and the nation’s household debt, which is hovering around 1,300 trillion won. Also, there are calls for the central bank to cut its rate to boost the economy.

Against this backdrop, however, the government finds itself drifting in establishing next year’s economic policy direction, which is set to be announced next month. Setting up the year’s economic policy direction is led by the ministry and orchestrated by other government financial arms.

“In order to set up policies, there has to be a big picture in political direction,” said a government official asking not to be named. “However, there is a huge vacuum in leadership which should set the direction.”