Opinion - The Korea Times

New president's economic challenges

By John BurtonIt is regrettable that the main candidates in the just-concluded presidential election did not spend more time talking about the structural challenges facing the Korean economy, such as low productivity rates, the high level of household debt or the impact the aging population will have on future government spending. But with a new team now set to enter the Blue House, here is a checklist of the difficult economic issues the incoming administration must deal with over the next five years:― Rapidly aging population: The single greatest challenge that Korea faces is the fact that in the next 20 years it will become one of the world’s most rapidly aging populations, which will place huge demands on medical and other social services.― Government spending: Promises by both the ruling and opposition parties to expand the social welfare system will considerably increase government spending if the proposals are implemented. But left unmentioned during the campaign was whether Korea can afford the wide-ranging improvements. On paper, state finances are strong with the

Dec 19, 2012By John Burton

John Burton

Korea's 'soft power' quest

By John BurtonThe recent success of Psy and K-pop groups has boosted talk that Korea has gained the benefits of “soft power” in raising its international stature. But is hallyu, or the Korean wave, the best way to achieve this goal and does Korea want to be identified overseas mainly by its pop culture?In many respects, hallyu has been beneficial in changing foreign perceptions of South Korea, which previously has been viewed as a grimy industrial powerhouse or whose achievements have been overshadowed by the bizarre doings of North Korea. In addition, South Korea is often ignored as a rising Asian power when most attention paid by foreigners to the region is focused on China or Japan.This can create a distorted picture. There are a lot more North Korea experts in Washington D.C., for example, than experts on South Korea despite the latter’s economic success. A greater percentage of reporting by the international media is also devoted to North Korea than South Korea. Kim Jong-il or even Kim Jong-un has more name recognition overseas than Lee Myung-bak. There are cle

Dec 5, 2012By John Burton

John Burton

Korea’s weak currency strategy

By John Burton The value of the Korean won continues to fall and is soon likely to breach the threshold of 1,200 to the U.S. dollar. Hail to the almighty weak won. Countries once took great pride in having strong currencies. It was seen as a symbol of national vigor. That is no longer the case. Now many nations prefer to see their currencies decline as a means to boost economic growth. A weaker currency usually means bigger sales of their products overseas and more jobs at home. In this regard, Korea has been no different than from most of its Asian neighbors, such as China. Despite its public denials, the Korean central bank has frequently intervened in the foreign exchange markets to keep the value of the won low. Seoul’s currency policy has been an important reason why companies like Samsung Electronics and Hyundai Motor have taken business away from Sony and Toyota since these Japanese companies are burdened by the high value of the yen. The recent fall of the won has been due to other factors as well. Foreign institutional investors who have invested in the Korea

Jun 6, 2012By John Burton

John Burton

Tackling problems in property market

By John Burton While the property markets in Hong Kong and Singapore are reaching eye-watering heights, Seoul has the opposite problem: housing prices have stagnated over the last two years, according to Kookmin Bank’s Seoul Price Index. So what happened to the property boom of 10 years ago, when prices were spiraling upward at an annual rate of 25 percent? Or five years ago, when house inflation in the capital was powering along at a 20 percent per annum rate after a sharp drop in the interim? The short answer is government intervention. In response to public complaints about “unaffordable” housing, the populist government of Roh Moo-hyun sought to tame the beast by introducing tough regulatory measures, such as applying a 50 percent loan-to-value ratio on mortgages from banks. It was mission accomplished ― at least when it came to the Seoul area (national property prices overall continue to rise by around 6 percent per year). But the measures have had several unintended consequences. One is that people who did want to buy homes were forced to take on bigger amounts of

May 23, 2012By John Burton

John Burton

Shadow banking

By John Burton In 2007, Paul McCulley, then a managing director at PIMCO, a large U.S. investment firm, coined the term “shadow banking” in a speech at the famed annual U.S. Federal Reserve summer symposium in Jackson Hole, Wyo. He defined shadow banking as the “whole alphabet soup of levered-up non-bank investment conduits, vehicles and structures.” In other words, financial institutions and products that fell mainly outside normal regulatory supervision by central bankers and other government authorities. McCulley’s introduction of the term was timely since a year later the U.S. shadow banking system ― such as the hidden and opaque trading of derivatives ― was largely blamed for triggering the global financial crisis. Potential problems still persist since it is estimated that shadow banking now accounts for up to half of the global financial sector. But shadow banking is nothing new for Korea. It and the rest of Asia had already been grappling with the concept of shadow banking and its dire consequences for years. And it once again looks set to be the most important fi

May 9, 2012By John Burton

John Burton

North Korea‘s choice

By John Burton There seems to be a general consensus that North Korea’s new “First Secretary” Kim Jong-un utterly botched his first big test of leadership by going ahead with the launch of a new rocket despite international condemnation, only to see the missile disintegrate less than two minutes into its flight. The price has been heavy. Not only did the North waste millions of dollars on what amounted to a dud fireworks display, but the U.S. immediately withdrew its offer to provide 240,000 tons in food aid as part of a nuclear-and-missile freeze pledge by Pyongyang. But seen in another light, recent events may be grounds for cautious optimism in that things may actually be changing in North Korea ever since the Swiss-educated Kim Jong-un took over the reins after the sudden death of his father, Kim Jong-il, in December. One subtle sign was Kim Jong-un’s decision to deliver a 20-minute speech broadcast live to the nation during the mass celebrations for the 100th anniversary of the birth of his grandfather, Kim Il-sung, North Korea’s founder. It was a display of self-

Apr 25, 2012By John Burton

John Burton

Smooth path for Korean economy

By John Burton A veteran Hong Kong-based regional economist I know recently made his annual research trip to Korea and declared that he now found the country to be “boring.” He wasn’t referring to the cultural scene or the nightlife, which he continues to enjoy. Rather it is the economic sphere that lacks excitement. “Watching Korea used to be interesting, but it is just no fun these days. For an economist, Korea used to be the place in Asia that kept on giving, delivering financial sector blow-ups and massive currency and equity swings as regular as clockwork. But no more!,” my friend sighed as he drowned his sorrows with a bottle of soju. His comments were surprising since he has a something of a reputation within the financial industry as a permabear: an analyst who is normally pessimistic about the future direction of the markets and economy. But for Korea, he sees a relatively smooth path ahead despite the always looming presence in the background of eye-watering debt levels held by households and small businesses. So what are the grounds for his optimism, I ask

Apr 2, 2012By John Burton

John Burton

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New president's economic challenges

Korea's 'soft power' quest

Korea’s weak currency strategy

Tackling problems in property market

Shadow banking

North Korea‘s choice

Smooth path for Korean economy

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