South Korea needs well-crafted economic roadmap
Sean O'Malley
On July 3, the Yoon Suk Yeol administration released the “Dynamic Economy Roadmap” to outline the government’s long-term policy priorities and goals for the future growth of South Korea. There is much to digest in the document, though arguably, there is not much new here. For the most part, the document is a reflection of the rhetoric and policy goals the Yoon administration has been touting since day one, though now, they are neatly organized.
As I see it, there are three major shortcomings in this roadmap. First, it is a government-initiated document and seemingly reflects little negotiation or consensus with the opposition party that controls the legislature. Secondly, it does not discuss pension system and medical system reforms, perhaps Korea’s most pressing needs considering its demographic challenges. Lastly, it contains a number of unrealistic priorities that reflect the hyperbolic nature of many policy pronouncements regularly made by Korean politicians.
The first two shortcomings are fairly self-explanatory, but the third provides a lens through which we can consider the probability of policy fruition in greater detail. Therefore, I have selected a few policy priorities and goals and arranged them into three categories: unlikely; maybe and head-scratchers. Here we go.
It is unlikely the government will decrease the elderly poverty rate from 40.4 percent in 2023 to 20 percent or lower by 2035 unless natural attrition is the reason. That is more than a 50 percent decrease and will take significant policy coordination with the opposition party. There are too many other pressing priorities needing attention.
It is also unlikely that Yongsan Business District will become the third largest hub for the Asia-Pacific headquarters of multinational businesses. Korean politicians love the word “hub” and yet such visionary hubs rarely materialize. Korea seemingly lacks the necessary English-speaking human resources or regulatory environment for such grand plans, and a number of foreign banks leaving the country over the past few years is a glaring indicator of potential problems with this goal.
It is also unlikely that small and medium-sized enterprises (SMEs) will raise their labor productivity from the current 32.7 percent of the productivity level of large enterprises to the OECD average by 2035. In 2021, the OECD average was about 50 percent. This would be nearly a 53 percent increase for Korean SMEs by 2035, yet SMEs struggle immensely in a country where conglomerates dominate and foreign laborers are insufficient in number.
Additionally, it is unlikely Korea will attract 150,000 foreign professionals by 2035. Over the preceding 11 years Korea increased the number of foreign professionals from approximately 50,000 to 72,000, a growth rate of 44 percent. The government would like to increase that growth rate to an aggregate of 108 percent in the next 11 years. That growth itself is difficult, but currently, all major economies are vying for these same professionals, making this goal a stretch.
Lastly, it is unlikely Korea will have the third most companies on the list of top 100 global unicorn enterprises by 2035. It has one on the list now, and Britain is in third place with seven companies. This seems close, but as the era of AI and platform companies evolves, other nations with more friendly regulatory systems are likely to dominate this category.
Maybe Korea can move from number 23 to number 10 in corporate social responsibility, based on the IMD World Competitiveness Ranking. This will, of course, depend more on corporations than the government for implementation, so I am not sure that the government should be angling for credit on this metric.
And maybe Korea can move from sixth to third in the global digital competition rankings by 2035. The government admits that the digital transformation of Korean companies is in its early stages, but it hopes the fusion of technologies like semiconductors, AI, quantum computing and biohealth, will propel Korea forward. Of course, in the A.I. era, every other developed country is thinking the same thing.
This leaves two policy goals that left me scratching my head. The first is to become the most globally networked country by the number of free trade agreements signed. This would move Korea up one slot to overtake Singapore. Beyond some perceived political benefit of saying “we are number one,” I am not quite sure why this matters. The quality not quantity of FTAs is important.
The second head-scratcher is for Korea to have 10 “glocal” universities in the top 100 of the QS World University Rankings by 2035. Currently, five Korean universities rank in the top 100, but only one, POSTECH, has been designated a glocal university by the government. I believe the structural problems of tertiary education in Korea are far too grave to catapult an additional five universities into the top 100, so why limit the list to the government’s newly-designated glocal universities? Besides, any substantive changes to the university system will need support from the opposition party, parents and schools, making it highly doubtful the needed changes will come.
Overall, I found the “Dynamic Economy Roadmap” to be an uninspiring laundry list of indicators and metrics. For Korea to weather both its demographic challenges and the evolving technological competition among states, policymakers must not waste time on goals of dubious value or that are secondary in nature. I would prefer three bipartisan, well-crafted initiatives over this roadmap. Unfortunately, I don't believe the government or the opposition party is willing to be so innovative.
Sean O’Malley (seanmo@dongseo.ac.kr) is a tenured professor of international studies at Dongseo University, where he teaches classes on free trade, U.S.-Korea relations and technology in international relations.