[New Year Special Interview] Former Deputy Prime Minister Jin Nyeom: "60th Anniversary of Economic Development Plan Launch... We Must Establish a New 'Sipnyeondae-gye'"

'Ignoring US, Relying on China Economically' Is Not Desirable
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Labor, Finance, and Other Pressing Issues Must Be Tackled with 'Bold Challenges'
Presidential Candidates' Virtue Is 'Will for Reform'... National Debt Review Needed
Surplus Budget Is Not Necessarily Good... Welfare Without Growth Is an Illusion

Former Deputy Prime Minister Jin Nyeom is having a New Year's interview with Asia Economy. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Joo Sang-don] Jin Nyeom, former Deputy Prime Minister and Minister of Finance and Economy who led the recovery efforts after the 1997 International Monetary Fund (IMF) foreign exchange crisis, advised in a New Year's interview with Asia Economy that it is time to establish a long-term national development strategy spanning over 10 years. This year marks the 60th anniversary since South Korea officially launched its industrialization with the 1962 Five-Year Economic Development Plan. Former Deputy Prime Minister Jin emphasized that the importance of a long-term development strategy looking toward the future is greater than ever. Especially since this year includes the presidential election that will determine the next five years, Jin believes it is the right time to push forward a long-term economic development plan. He said that such a long-term strategy could serve as an opportunity to rekindle the fading flames of the nation's growth engine.

Jin described the numerous reform tasks related to labor, finance, and others as a 'bold challenge' and explained that these are essential issues that must be resolved for South Korea to take a step forward. He stressed the need to reexamine the roles of the government and the market and actively foster an innovation ecosystem. Regarding the presidential candidates from both ruling and opposition parties, he criticized that they lack concrete pledges and visions and do not seem to have considered how to lead the country, saying he does not see a 'basic plan for national management.'

Below is a Q&A with former Deputy Prime Minister Jin.

- What are the external threats currently facing the Korean economy?

△ The domestic and international economic situations are very severe. Externally, the global economic growth rate is declining. Moreover, the G2 hegemony competition between the United States and China is not limited to trade but extends to technology and culture. Additionally, with the advent of the Fourth Industrial Revolution era, technological competition has become extremely intense. The global supply chain is undergoing significant risks due to the G2 competition. Supply chain disruptions can occur at any time in the future. The key is diplomatic power. It is crucial how we survive in the 'G2 hegemony war.' Relying on the US for security and China for the economy is not desirable. We must think about this painfully. However, cooperation among South Korea, the US, and Japan is necessary. It is the basic measure to minimize the ripple effects that may arise from China-related economic issues. Through the South Korea-US-Japan relationship, we need to coordinate and improve security and economic aspects and establish a foundation to counter sanctions that may come from China. We must pursue smart diplomatic policies.

- How do you evaluate the domestic situation?

△ The most important growth engine is fading. The 'entrepreneurial mindset' is significantly decreasing. Also, young people are struggling due to job issues. As of November last year, there were 789,000 job seekers. Especially, the so-called 'public service exam takers' are overflowing. Such a country finds it difficult to develop. Although COVID-19 has had an impact, income inequality has not improved. Recent improvements in income redistribution are due to government disaster relief funds. Considering the domestic and international conditions facing the Korean economy, the priority task is to think about how to implement 'bold reforms.'

- The presidential election is approaching. How do you evaluate the candidates?

△ I do not agree with the saying that 'politics reflects the level of the people.' Our political behavior is far behind the people's level. While it is natural to criticize opponents to gain power during the presidential election process, candidates should still present policy alternatives that give people hope on a larger scale. There is no will to carry out bold reforms. Companies say they have no plans to invest or increase employment this year. There must be a cold, realistic diagnosis of 'how to overcome these situations' and 'what the problems are if they do.' However, presidential candidate camps have yet to present prescriptions or countermeasures, which is frustrating. Especially, presidential candidates must show a 'basic plan for national management.' The most important element of national management is who does what. But so far, the cabinet has been virtually invisible in our politics, and authority is concentrated in the ruling party and the president. This is unacceptable.

- What virtues must presidential candidates have?

△ The will for reform. Looking at Germany in the past, former Chancellor Gerhard Schr?der, whose support base was laborers, expanded labor flexibility and reduced labor welfare through the Hartz reforms, part of 'Agenda 2010.' Although he eventually handed power to former Chancellor Angela Merkel, Germany succeeded in economic revival. Schr?der was a politician who failed to gather votes but was a reformer who designed Germany's future. Unfortunately, in Korea, we have not seen politicians who worry about and design the future of the nation and people. Instead, there are many 'politicians' who chase votes or positions. We must establish a system that grants authority and holds ministers accountable, including the prime minister. This is a kind of governance. When selecting ministers, it is essential to clarify 'what the ministry should do in this era' and select the person best suited for the job regardless of ideology or faction, then grant authority. This is the foundation of national management. After the IMF crisis, President Kim Dae-jung appointed Lee Kyu-sung (Minister of Finance and Economy) and Lee Hun-jae (Deputy Prime Minister), who were unrelated to his election, to key ministries. This was a 'masterstroke.' Ultimately, the important thing is to utilize people.

- The national debt burden that the next government must bear is large.

△ Fiscal deficits are certainly a cause for concern. This year's budget exceeds 600 trillion won. Over the past five years, central government debt has reached 1,000 trillion won. Since the current government took office, debt has increased by 400 trillion won in four and a half years, the fastest among OECD member countries. Especially compared to other countries, we must not overlook the enormous debt of public enterprises such as Korea Electric Power Corporation (KEPCO). Public enterprise debt amounts to about 500 trillion won. Considering this, the level is by no means low. We must have a clear awareness of this reality. However, a more important issue is 'what the debt was used for' even if national debt increases. If KEPCO's debt increased for power plant construction, it cannot be considered pure debt because it will generate revenue once operational. But current national and public enterprise debts are far from debts that increase additional productivity. They are 'handout-type.' A review of national debt is necessary.

- Is tax increase necessary?

△ A surplus budget is not necessarily 'good.' When the economy is difficult and especially when there are citizens suffering due to COVID-19, the government must take responsibility for their basic living. The problem is not supporting through a large-scale plan but spending tens of trillions of won here and there as a favor. Instead of discussing basic income policies, it is rational to review and supplement existing systems, such as the National Basic Livelihood Security Act, if insufficient. We have seen cases like Venezuela and Greece where the economy collapsed due to fiscal ruin.

Tax increases may be necessary depending on the case. However, before that, the government must tell the people, 'We will eliminate all waste through fiscal reform' and make painful efforts. Education should be directed toward nurturing future capabilities. If money is spent on such areas, increasing fiscal investment is acceptable. Regarding welfare, the concept of 'productive welfare' must be clear. The direction should be clear that 'if I am capable, it is natural to receive education and get a job.' 'Growth without welfare' is unsustainable, but 'welfare without growth' is also an illusion. Actively evaluating and supporting companies that create jobs is the right direction.

- Do you think our people are ready to accept bold reforms?

△ This year marks 60 years since South Korea, one of the poorest countries with a per capita income of $80, launched the Five-Year Economic Development Plan with the determination to 'live well.' Over these 60 years, the people have worked hard with the will of 'we can do it' to build today's Korea. In 2019, Korea became the 7th country in the 30-50 club (per capita GDP over $30,000 and population over 50 million). Advanced industries that once depended solely on Japan have now surpassed Japan in many sectors. This is the strength and vitality of our people. We have global pride such as BTS. When former President Kim Dae-jung opened culture and arts, many opposed, saying Korea would become a 'Japanese vassal,' but now Korea is far ahead of Japan. The question is 'how long will this continue?' Whether Korea will establish itself as an advanced country and cultural powerhouse respected worldwide in the next 10 years depends on how we decide and act.

Interview by Choi Il-kwon, Economic Chief, Summary by Reporter Joo Sang-don

This content was produced with the assistance of AI translation services.