By Andy Jackson
The election of Lee Myung-bak (assuming it survives the ongoing BBK investigation) is break from the ideologically-driven politics of Korea's past. His campaign has explicitly said that ``economic considerations must receive higher priority than political considerations.''
Lee's pragmatism is a marked departure from the Roh Moo-hyun administration, which tended to see challenges facing Korea as moral questions.
That difference will show itself on a range of policy shifts once Lee takes office. The net effect of those changes will be the rise of pragmatic politics over ideological consistency.
While Lee's election represents a defeat of progressive policies, it is also a final break among mainstream conservatives from their past support of authoritarian anti-communism. In future elections, claims that the campaign being one between pro and anti-democratic forces will ring as hallow as claims that it is a contest is between pro and anti-communist forces.
The biggest changes will be in Korea's economic policy, which Lee has stressed since he began his campaign for president over a year ago.
Lee calls his economic package the ``Korea 747 Vision.'' The name represents his claim that the plan can create an annual economic growth rate of seven percent, which would result in an average per-capita income of $40,000 and make Korea the world's 7th largest economy. It is currently the 11th or 12th largest, depending on the measurement.
Lee's package combines attempting to stimulate the economy through government-backed projects while making Korea more business and investor-friendly.
The proposal that has gotten the most attention is his plan to construct two inland waterways, one between Seoul and Busan by way of a canal connecting the Han and Nakdong rivers, and another connecting Daejeon with the southwestern Jeolla region.
While Lee has not said exactly how he would pay for the proposed canals, one idea mentioned would be a build-operate-transfer system, in which a private company builds them, operates them for a fixed period to make a return on its investment, then transfers them to the government.
Such a financing plan would alleviate public fears that the canal plan would be a huge boondoggle, but would cause concern about possible collusion between government officials and inland waterway operators.
Lee will likely end some of the `balanced regional development' policies put in place by the Kim Dae-jung and Roh Moo-hyun administrations. Those policies directed development funds toward Kim's political base in the southwest and the politically important Chungcheong provinces.
The centerpiece of the Roh administration's plan was the relocation of the Korean capital from Seoul to South Chungcheong Province. Roh later scaled the plan down to the creation of an ``administrative city'' when the capital move ran into political and constitutional challenges.
As mayor of Seoul, Lee strongly opposed the proposed capital move. He has since eased off of that opposition but wants to redirect resources towards creating an ``International Science and Business City'' (ISBC) in the same area.
The proposed ISBC would eventually incorporate ongoing science and technology development projects in the nearby towns of Osong and Ochang into a much larger development framework. Lee plans for the city to eventually have 500,000 residents, which would be a large enough population to man research, production and support facilities.
While Lee compares his proposal to Silicon Valley in California, it more closely resembles the Research Triangle Park, a joint venture between government, university and business leaders in the eastern United States.
A major difference between Lee and outgoing President Roh is their view on free enterprise. While Roh saw it as something to be restrained, Lee believes that government is most effective when it works with the market rather than against it.
To that end, Lee will lift restrictions on business and development.
While serving as mayor of Seoul, he revised regulations that he believed discouraged investment and pledges to carry out investment-friendly policies as president. He has pledged to cut the corporate tax rate from 25 percent to 20 percent and to facilitate direct foreign investment.
He will also slim the government by slashing some of the roughly 60,000 new government positions that were created during the Roh administration.
Lee also plans to ``apply the rule of law'' to labor relations, a code for cracking down on unions that take illegal labor actions.
Lee's campaign says that he will also apply the rule of law to government and business. Combined with his pledge for deregulation, the net effect of his policies would be fewer but more strictly enforced rules.
Lee's opponents in the campaign cast doubt on his claims and believe that the former Hyundai Engineering and Construction executive is too cozy with Korea's chaebol, the large conglomerates that dominate the Korean economy.
Chung Dong-young said that Lee's plan to remove regulations on bank ownership was a throwback to the pre-1997 financial crisis conglomerate-oriented economic system and famously likened Lee's policies to ``jungle capitalism.''
While Lee promotes his economic package as good for all of Korea, the greater capital area (the cities of Seoul and Incheon, along with surrounding Gyeonggi Province) stands to gain the most from his economic deregulation.
A clear example of this is housing.
The Roh administration had attempted to do the economically impossible in Seoul; restricting the supply of new housing in a growing city while preventing real estate prices from rising during the resulting housing shortage.
The effect is a real estate bubble that has barely been contained by increased property taxes and other emergency anti-speculation measures.
While Roh attempted to restrain housing prices by dampening demand, Lee will focus more on increasing supply by removing restrictions on development in the capital area.
The new policy will eventually deflate the housing bubble, but it may take up to a decade after the lifting of restrictions on development in Seoul for housing to become more affordable. Housing prices might even spike temporarily as development companies buy more properties.
The net effect of Lee's policies will be a more robust but less predictable economy. Korea will likely see increased economic development in the short and medium term.
The easing of restrictions on construction in the capital will eventually result in lower housing costs, which may balance some of the inflationary pressures brought on by his development plans.
The major question is Lee's commitment to transparency in economic regulation. If he is not as committed to the rule of law as he claims, his 747 plan could give Korea a rerun of the corporate collusion and boom-and-bust cycles that eventually resulted in the 1997 financial crisis.
The writer teaches American government in the Lakeland College bridge program at Ansan College, Gyeonggi Province. He can be reached at andyinrok@yahoo.com.