SEOUL, Dec. 24 (UPI) -- Can South Korea find a new economic engine, rather than a decades-long growth-oriented drive? Yes, says Roh Moo-hyun, who won last week's presidential election on a government-led reform and welfare platform, which includes redistributionist tax and economic measures.
The president-elect, who favors pro-labor policies, says a fair distribution of wealth and consequent healthy growth will pave the way for the country to leap into a second era of economic development.
Under a growth-first policy, South Korea achieved averaged annual growth of 8 percent during the past four decades, transforming itself from a poor agricultural economy to the world's 14th biggest.
However, Roh says, it is high time for South Korea to seek a new path for the economy focused on the redistribution of wealth, which he says will bring the country into the ranks of the world's top-ten richest nations within the decade.
He notes that the country's decades-long growth-dominated scheme has led to widening gaps in income distribution that raised social tensions, hindering the economy's stable growth. He cites a report of the central Bank of Korea that the top 5 percent of society controlled some 40 percent of all financial assets of the country.
In a major policy address after being elected, Roh said his new administration would place a top economic policy priority on a fair distribution of wealth and tough reforms of big business conglomerates, in a departure from his growth-hungry predecessors.
Roh, 56, a champion of the underprivileged as a self-made man born to peasant farmers, and jailed in 1987 on charges of abetting striking workers, was elected president on Thursday. He defeated conservative opposition Lee Hoi-chang, a pro-business candidate who favored easing regulations on investment by conglomerates in other businesses.
Roh's victory is widely considered as a vote of confidence in outgoing President Kim Dae-jung's reform crusade aimed at overhauling debt-ridden corporate, financial and public sectors that led the economy to the brink of collapse in 1997.
The president-elect vows to launch a second round of the reform campaign to boost transparency and international confidence in the South Korean economy, saying his reform efforts will focus on the country's huge business conglomerates, or chaebol.
The family-controlled business empires have played a key role in achieving rapid economic growth for the past decades, capitalizing on the government's growth-oriented policy. But their reckless expansion with debt-splurging ways was widely blamed for exacerbating the financial crisis in 1997-98.
The president-elect says he will carry out deep surgery on the over-extended, indebted business conglomerates and downsize them. "If unreasonable chaebol and economic systems are not corrected, it will lower economic efficiency and could result in another economic crisis," he said.
In another wealth redistribution measure, Roh calls for reorienting the country's taxation system so as to impose more taxes on the rich -- especially wealthy business and property owners -- while reducing the tax burden on lower income households.
He wants to raise inheritance and gift taxes in order to discourage inherited wealth. The tax authorities will tighten its monitoring of tax evasion on such taxes and take harsher penalties against those who are found guilty of it.
Regarding fiscal policy, Roh will focus on allocating more money for women and the disabled, as well as old and poor people. He has vowed to raise the social welfare budget of the government from 10 percent to 13.5 percent of the country's gross domestic product.
Roh also says he will expand policies like employee share holdings and a systematic distribution of profits between managers and employees in order to improve benefits for the working class.
The president-elect pledges to introduce a five-day workweek "as soon as possible." He views that the introduction of shorter labor hours can no longer be delayed as the issue has been fully discussed between labor, management and the government.
Currently, most South Koreans work a half-day on Saturday. The country's banks and major financial institutions already have started a five-day workweek since July. Roh indicated he would expand government subsidies to small and medium-sized companies that employ the five-day workweek.
Roh has offered a cautious approach to the privatization of the government-owned banks and other public sector companies, including the electricity utility industry and the railway network, which could trigger mass layoffs of workers.
In another large-scale wealth redistribution plan, Roh has pledged to move the administrative capital out of Seoul despite the huge amounts of funding it requires, saying the capital relocation will greatly help resolve problems of excessive centralization in Seoul.
"The government needs to make the stabilization of ordinary citizens in all aspects a priority, as well as narrowing the gap between the rich and the poor," he told a news conference.
The president-elect says he is confident that South Korea can achieve an annual economic growth rate of around 7 percent over the next 10 years with inflation rates under 2 percent to 3 percent per year. "The redistribution of wealth is not the enemy of economic growth," Roh said.
But many economists and business leaders voiced concerns that Roh's pro-labor, anti-big business stance may hurt business activities and fuel opposition to foreign investment and wider market opening, which could undermine the country's growth momentum.
"If Roh's new administration lowers interest rates or boosts fiscal spending to boost the economy in the short-term, that could jeopardize the Korean economy," said Lee Sang-jae, an economist at Hyundai Securities.
Analysts also point out that Roh's growth rate target is well above the country's growth potential rate of 5.0-5.5 percent estimated by the government and private economic institutions.
"Roh's growth target is too ambitious and optimistic," said Ihm Jee-won, an economist at JP Morgan Chase & Co. in Seoul.
"An annual economic growth of 7 percent, as repeatedly promised by Roh, would be impossible without strengthening corporate competitiveness," SK Group Chairman Son Kil-seung said.
"Roh's new government is urged to give top priority to privatizing commercial banks and the troubled public sector in order to secure the independence of the financial sector from government intervention, while trying to keep growth momentum, " said Han Tae-joon, a Choong-Ang University professor.
