May 26, 2016 / 6:07 AM / 2 years ago

South Korea's Park facing last chance to push through reforms, boost growth

SEOUL (Reuters) - Thwarted in the last parliament, South Korean President Park Geun-hye may be facing her last chance to push through a series of bills aimed at bolstering a flagging economy despite a legislature that will soon be in opposition control.

South Korean President Park Geun-Hye is seen during a welcome ceremony at the National Palace in Mexico City, April 4, 2016. REUTERS/Edgard Garrido

Park, in the fourth year of a single five-year term, faces an uphill battle to pass legislation to loosen the notoriously rigid labor market, boost the services industry, and ease regulations to create jobs and growth in Asia’s fourth-largest economy.

These changes are crucial because growth in Asia’s fourth-largest economy halved between January and March from the previous quarter, while the unemployment rate for South Korea’s youth hit a record 12.5 percent in February.

Despite a parliamentary majority, Park’s conservative Saenuri Party chose not to force through legislation to make the labor market more flexible, fearing public backlash over worries about job security.

But the makeup of the new parliament, and tweaks to the legislation, may help improve its chances.

When South Korea’s new parliament first sits on Monday, Park’s conservative Saenuri Party will hold only 122 of 300 seats, the opposition Minjoo Party will hold 123 and the People’s Party, led by independent Ahn Cheol-soo, will hold 38.

Park may yet find the reform path made easier by the smaller People’s Party if it forces the two main parties to compromise.

“The People’s Party has come to be more than just a swing vote,” said independent political commentator Yu Chang-seon. “It is a power that can strongly influence the biggest and second biggest party, a force that eclipses the 38 seats it holds.”

Leader Ahn, a former software entrepreneur and 2012 presidential candidate, said his People’s Party was in principle receptive to the government’s labor reforms.

“Politics is all about solving problems, and parliament has to stand at the center of that,” he told reporters on Tuesday.

Ahn’s stance could force the Minjoo Party to be more amenable to compromise with the government. Kookmin University political scientist Hong Sung-gul said the Minjoo Party would want to avoid being blamed for the kind of gridlock that made the previous four-year parliament one of the least productive ever.

With the proposed changes to labor laws, the president wants to make it easier for companies to fire underperformers, base wages on merit, shorten work hours, ease outsourcing rules and expand unemployment insurance.

An official at the finance ministry, speaking on condition of anonymity, told Reuters that a review of the bills before resubmitting them to parliament will be underway soon.

“There may be changes that would likely be to reflect the recent shift in parliament,” the official said.

“We may have a situation that is more conducive to compromises compared to the time parliament was more or less divided two ways,” said Kookmin University’s Hong.

Reporting by Jack Kim and Christine Kim; Editing by Tony Munroe and Eric Meijer

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