ED Reform or relapse: time for action

Kumho Petrochemical's Ulsan Synthetic Rubber Plant / Korea Times file

President Lee Jae Myung recently outlined a broad and ambitious policy agenda aimed at addressing several of Korea’s long-neglected structural problems: industrial restructuring, public sector reform and energy price normalization. These are issues no government can ignore indefinitely — but nearly all have, choosing political convenience over economic necessity.

Now, as the economic costs of delay mount and international competitiveness erodes, the president’s sudden urgency is understandable. Yet declarations, however well-intentioned, are no substitute for determined execution. Without concrete, measurable action, these long-overdue reforms risk being derailed once again by political inertia.

The petrochemical industry illustrates the cost of inaction most clearly. Once a cornerstone of Korea’s export-led growth, the sector now teeters on the brink of collapse. Global demand is weakening, input costs are rising and a wave of low-cost Chinese petrochemicals has flooded the international market. In major industrial complexes like Yeosu, Ulsan and Daesan, factories are running well below capacity. According to the Korea Petrochemical Industry Association, up to 50 percent of domestic firms in the sector may disappear within the next three years unless drastic steps are taken.

The government has correctly identified the need for facility consolidation, technological upgrades and industrywide restructuring. The Ministry of Trade, Industry and Energy has pledged to deliver a road map within the month. But this urgency is reactive, not proactive. Experts have long warned that Korea’s petrochemical sector was becoming outdated and overreliant on low-margin products. Yet successive governments deferred action, fearing labor unrest and regional political fallout. That avoidance is no longer an option. A managed transition — supported by retraining programs, fiscal support for high-value product development and incentives for green conversion — is now critical.

The public sector faces a different but equally dangerous form of complacency. Korea now has 331 public institutions, many created with little long-term oversight. In just the past four years, their collective debt has ballooned by over 200 trillion won ($143.8 billion). The problem isn’t only fiscal — it’s structural. Many of these agencies overlap in function, lack performance evaluations and operate with bloated payrolls. Some institutions even exist more as vehicles for political patronage than as engines of public service.

Lee’s candid admission that the number of agencies is too high to even keep track of may resonate with a frustrated public, but without immediate follow-through, these remarks are empty. Real reform means tackling the deep roots of this inefficiency: union resistance to restructuring, bureaucratic inertia and the routine politicization of public appointments. The Korean Public Service and Transport Workers’ Union has already signaled it will oppose any large-scale job cuts. If the administration fails to engage constructively while holding its ground, reform will again be diluted into symbolic gestures.

The country’s energy pricing dilemma follows the same pattern. As global prices surged and domestic electricity generation costs rose, Korea chose to keep power prices artificially low, an unsustainable decision that left the Korea Electric Power Corporation (KEPCO) saddled with over 200 trillion won in debt. In 2022 alone, KEPCO reported an operating loss of more than 30 trillion won. It now pays billions in daily interest while unable to fund critical infrastructure investments. Even as Lee signals support for a price correction, his government remains tentative, fearing a voter backlash amid inflation and economic uncertainty.

This pattern of acknowledging hard truths but failing to act has become a defining flaw in Korean governance. It is not exclusive to any one administration. It is systemic. Reform, by nature, is unpopular. It threatens vested interests, demands political courage and inflicts short-term discomfort. But delay only magnifies long-term costs.

Lee has correctly diagnosed the problems. The nation now waits to see whether he has the will and political stamina to solve them. Rhetoric alone will no longer suffice. Either this government becomes the one that turns declarations into transformative action, or it will be remembered as yet another administration that blinked when it mattered most.