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[Economic Opinion] Next, an Innovation Revolution!

Most polls show that South Korean President Moon Jae-in’s administration has been scoring an unprecedented high approval rating since the president’s inauguration last May. Occasionally, the approval rating dropped to below 70 percent, but mostly maintained its place well above 75 percent throughout the past 12 months. Of course, this was mainly due to the administration’s peace-promoting efforts with North Korea. The Korean people seem to attach soaring expectations to President Moon’s long-standing commitment toward peaceful reunification with the North. Indeed, President Moon’s soft and friendly approach toward North Korean leader Kim Jong-un seemed to pay off in the conclusion of a successful summit talk in April. Never ever has there been such high hopes of a peaceful and friendly inter-Korean relationship, not to mention that of reunification, and the results so far have been entirely due to President Moon’s leadership.

However, his extraordinarily high approval rating baffles some, as the economic statistics have not been looking so great one year after he took office, although the GDP growth rate of 3.1 percent in 2017 may be an accomplishment that his administration could boast about. Besides that, there are not many other economic achievements for the Moon administration to be proud of. Perhaps a year is too short of a period to accurately evaluate the effects of ongoing policies, or the gridlock that has been taking place at the National Assembly may be to blame.

Recently, on May 17, 2018, the president attended and delivered remarks at the 2018 People’s Forum for Innovation-led Growth. There, he emphasized the speed of innovation. As it has been known from the launch of his government, the president’s philosophy of economics, or the socalled “J-nomics,” is comprised of four major pillars, namely, income-led growth, job-creation, fairness and innovation. Although very different on the exterior, those four pillars are actually the integral parts of innovation. Only innovation makes income-led growth possible, only innovation creates jobs, and innovation can only grow under a fair economic environment. In this respect, President Moon is right when he emphasizes the importance of carrying out speedy implementa- tion of innovation.

The government agency directing innovation-led growth announced its eight core projects at the forum: future cars, hyper-connected AI, smart factories, smart farms, smart cities, FinTech, new energy industries and drones. In these strategic areas, the government committed to provide financial support as well as legal and administrative assistance throughout the president’s term in office. In particular, the government pledged to invest 34 trillion won in the development of future cars for the coming five years. The agency also plans to create thousands of new demands for the public use of drones. In addition, the government vowed to deregulate the industries, introduce new core projects, and build social infrastructure and platforms.

Notably, President Moon’s criticism at the forum of the sluggishness in innovation seems to strike a point. It has been too slow. As he mentioned, competing nations are in a rush but Korea is taking its time. Additionally, one industry analyst brought up the idea that innovation under the 4th Industrial Revolution does not have to necessarily sprout in a particular pre-ordained industry. It could evolve in any industry through creative ideas and technology. In other words, he implied that innovation could come about in areas other than the eight core projects that the government pointed out. Furthermore, other specialists emphasized the need to introduce a special legislative act that legitimizes drastic and preemptive deregulation efforts.

Nobody disagrees on the concept that innovation flourishes in a regulation-free environment. Even the government officials agree. Still, however, government measures remain too regulatory in nature in terms of labor policies, business practices and on what happened in the last administration. If one is to catch a rabbit, then one must focus on chasing just one, not two or even three. Between innovation and wage regulation, the authorities must decide on which “rabbit” to focus on catching first. To many, it is now time to catch innovation first. The quicker, the better. Just as the candlelight revolution in late 2016 so quickly engulfed the nation, it is dearly hoped that the innovation revolution in the private sector inflames the economy with jobs and growth. This should be the main task pursued by the Moon administration in its second year in office.

By Professor Se Don Shin
Dean, Sookmyung Women’s University

The above article does not necessarily reflect the views or position of KOTRA.

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