Analysis: Park's promise of second South Korea miracle risks ringing hollow

Wed Nov 6, 2013 4:08pm EST
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By Christine Kim

SEOUL (Reuters) - South Korean President Park Geun-hye took office in February pledging a "Second Miracle on the Han River", a reference to her father's rapid 1970s industrialization, but nine months into office little has materialized.

On the face of it, there is little wrong with what is one of Asia's industrial powerhouses, but longer term the lack of a viable domestic economy based on services means the world's fastest ageing country could face a major collapse in growth.

In October, South Korean companies exported a record amount in dollar terms of cars, smartphones and computer chips abroad and economic growth overall this year has been 1.9 percent compared to the same period in 2012.

While Korea long ago escaped the "middle income trap" for developing economies, its service sector had shrunk to 58 percent of value-added gross domestic product by 2011 from 61 percent in 2008, according to World Bank data.

That ranking puts it closer to developing middle income economies like Malaysia with 49 percent in services than advanced economies like Germany with 71 percent, even though Germany is still an industrial powerhouse.

Park clearly recognized the problem, but unless she delivers changes needed to redress the lopsided economy and she could end up sharing the fate of most Korean presidents, who become lame ducks half way through their mandatory single five-year term.

So far, the tangible change Park has to show is the creation of a new ministry charged with guiding Korea's transformation.

But critics say the ponderously named "Ministry of Science, Information and Communications Technology and Future Planning" lacks focus. Its mission statement contains 29 items, and its actions so far have yet to yield substantive change.   Continued...

South Korea's President Park Geun-hye speaks at the ASEAN Plus Three Summit in Bandar Seri Begawan, October 10, 2013. REUTERS/Ahim Rani