Ruling camp shifts focus to sluggish economy

President Moon Jae-in, left, smiles after experiencing mobile payments system using a QR code reader developed by Paycoq, a local fintech company, on the sidelines of his participation in a special meeting to discuss government deregulation in the banking sector held in the Seoul Metropolitan Government, downtown Seoul, Tuesday. Yonhap

By Kim Yoo-chul

Cheong Wa Dae and the ruling party joined forces Tuesday to push key economic issues to keep President Moon Jae-in's “income-led” growth strategy alive.

The presidential office and the Democratic Party of Korea (DPK) are rethinking their once-soured relations with the country's top conglomerates as they look for ways to boost employment.

DPK Chairwoman Choo Mi-ae said the party will ask senior economic advisers at Cheong Wa Dae to improve communication with the conglomerates to diversify the country's growth engines.

“To some degree, the Moon administration needs the backing of local businesses. In improving relations with North Korea and eradicating old legacies, we paid little attention to economic issues since Moon took office last year. But we have to actively take on economic issues,” Choo said at a job event in Daejeon.

Choo didn't specify the names of conglomerates the ruling party wants to strengthen communication with, however, she said the government still aims to enhance the dynamism of small- and medium-enterprises (SMEs) with constructive backing from larger groups. The remarks coincide with a commitment by Economy Minister Kim Dong-yeon to deregulate the biotechnology sector following a request by Samsung Electronics Vice Chairman Lee Jae-yong.

A few hours after Choo's remarks, President Moon asked financial regulators to relax rules in the financial sector to help boost capital and technology-centric products.

“Rules could boost the value of new businesses and vice versa. I've been saying speed and timing always matter for deregulations to keep innovation-led growth alive. We can become a leader in the Fourth Industrial Revolution once we see progress in regulation reform,” Moon told a meeting of 150 government and other officials including the heads of the financial regulators and CEOs from Korea's internet-only banks.

Korea is a frontrunner in internet-only banking with K-Bank and Kakao Bank seeing a steep rise in customers. But their growth has stalled as the government strictly limits the ownership of a financial firm by a non-financial firm to 4 percent.

“Stiff regulation creates barriers to new promising markets that have growth potential. The government will ease regulations at least for internet-only banks to encourage them to develop innovative products,” the President said.

Moon has thus far distanced himself from powerful business conglomerates, which he branded as “deep-rooted evils.” It remains to be seen whether a series of business-friendly gestures by the President and senior government officials means a change of heart toward big business.

President Moon and the ruling party's support base are people angry with the long-standing “hidden ties” between politician and businesses. Therefore, some are saying that the shift could cause a backlash from these supporters.

But high household debt and youth unemployment continue to limit private consumption. Higher oil prices have pushed inflation toward the 2 percent target. Meanwhile, the government's “income-led” growth strategy has been hit by rising unemployment and the hike in the minimum wage that has hit SMEs.