On Aug 24, US President Donald Trump canceled US Secretary of State Mike Pompeo’s fourth visit to Pyongyang via Twitter. The tweet came shortly after the top North Korean official Kim Yong-Chol sent a secret letter to President Trump. On Aug 28, US Defense Secretary James Mattis also stated that the US will resume joint US-ROK military exercises.
Experts argue that the cancellation could limit South Korea’s ability to deepen economic cooperation with North Korea. Others point out that South Korea was uninformed about the cancellation prior to the announcement, which raises questions about coordination between the US and ROK.
On Aug 23, the US-led United Nations Command refused to permit South Korean trains from crossing the DMZ. The plan was to have the South Korean trains check the railway to Kaesong and Shinuiju.
Many observers in South Korea suspect that the recent decision by the UN Command illustrates US preference to have South Korea move more deliberately on various projects involving North Korea. Other observers also question whether the railway project constitutes UN sanctions violation.
President Moon announced his first cabinet reshuffle on Aug 30. The newly appointed officials all have extensive experience in the bureaucracy. Missing from the group are politicians and academics.
|Song Young- moo||Jeong Kyeong-doo||Defense|
|Kim Young-Joo||Lee Jae -gap||Employment and Labor|
|Paik Un-gyu||Song Yun-mo||Trade, Industry and Energy|
|Kim Sang-kon||Yoo Eun-hae||Education|
|Chung Hyun-back||Jin Sun-mee||Gender Equality and Family|
South Korean Envoys Visit Pyongyang
South Korean envoys visited North Korea on Sept 5. The visiting team included Chung Eui-yong (Blue House’s National Security Advisor), Seo Hoon (Chief of the National Intelligence Service), Chon Hae-sung (Vice Minister of Unification), Kim Sang-gyun (Deputy Chief of NIS) and Yun Kun-young (Secretary for State Affairs).
The envoys delivered President Moon’s letter to the North Korean leader Kim Jong Un. The envoys proposed that North Korea submit a thorough accounting of its nuclear program in exchange for the end of war declaration.
The two sides agreed to 1) proceed with the third inter-Korean summit on Sept 18~20 in Pyongyang; 2) discuss ways to reduce military tension, and; 3) open up the Kaesong liaison office before the upcoming inter-Korean summit. Kim reaffirmed his desire for complete denuclearization of the Korean Peninsula.
The overall assessment of the latest visit is mixed. Some believe that latest visit gave Moon more momentum for the upcoming summit while others remain skeptical of North Korea’s willingness to denuclearize.
President Moon’s Approval
President Moon’s approval fell below 50% for the first time since his inauguration. Altogether, President Moon’s support declined by 30% over the past 3 months. 41% of those who disapprove of President Moon cited his handling of the economy as the main reason.
President Moon’s Approval
Outlook on the Economy
The government announced the budget for 2019 on Aug 28. The total budget is 470.5 trillion won, which is a 9.7% increase from 2018. Notable increases from this year’s budget include welfare [by 12.1% (162.2 trillion won)], education [by 10.5% (70.9 trillion won)], defense [by 8.2% (46.7 trillion won)], and employment [by 22.1% (23.5 trillion won)].
The review in the National Assembly is expected to be contentious. The opposition parties criticized the government for drafting a ‘tax addicted budget’ while ignoring the potential shock to employment, polarization, and price. The National Assembly will deliberate and vote on the budget by Dec 2.
Housing Price Surge and Real Estate Measures
To combat the rising price of real estate in Seoul, the government announced additional measures including the designation of more speculation zones.
The Ministry of Land, Infrastructure, and Transport blamed the combination of a supply shortage, rise in speculative investments for the Seoul metropolitan area, and neighborhood development planning. In response, the government sought to monitor speculative investment and expand housing supply. Both progressive and conservative observers criticized the government’s policy as being either too weak or strong for best addressing the challenges of rising housing price.
On Aug 31, the Bank of Korea (BOK) announced that it would maintain the base interest rate of 1.5% in the short term and forecasted that the domestic economy will continue to grow in line with July’s outlook. Despite sluggish growth in employment and continued adjustments in construction, consumption and exports appeared to perform modestly well. The Gross Domestic Product (GDP) expanded 0.6% in the second quarter of this year, down from an initial reading of 0.7%.
Income-Led Growth Special Committee
The Income-Led Growth Special Committee under the Presidential Commission on Policy Planning was launched on Sept 6. The 28-member committee is tasked with the duty to formulate the government’s economic policy and present a mid/long-term roadmap. The committee will strive to push ahead with income-led growth policies under three main pillars: increasing household income, reducing national expenditure, and expanding safety nets and welfare policies.
Kang Shin-wook was appointed as the new Commission of Korea Statistics (KOSTAT) on Aug 28, replacing Hwang Soo Kyeong. The ruling party accused KOSTAT of poor sampling in its earlier report on household income disparity. The recent personnel change was criticized by the opposition as a move by the ruling party and the government to manipulate the national statistics for their political ends.
On Sep 3, the Ministry of Trade, Industry, and Energy released a document on the results of the past negotiations on the amendment of the Korea-US Free Trade Agreement (FTA), which highlighted concessions on the investor-state disputes (ISD) and automobiles.
On Sep 6, US President Donald Trump stated that he will officially sign the amended FTA during the United Nations General Assembly. This is in light of Bob Woodward’s new book Fear that shared an account of former White House economic advisor Gary Cohn preventing the formal withdrawal from the FTA by keeping the letter away from the president’s desk.
The amendment would go into effect by early next year after ratification by the National Assembly.
 “”폼페이오 방북 취소, 평양 방문 앞둔 문 대통령 고립””’, 중앙일보, 2018년 8월 25일.
 “[사설] 미국의 對北 정책 기조 급변, 신중히 흐름 파악해야”, 조선일보, 2018년 8월 30일.
 “[사설] 북한의 억지로 다시 파탄 기로에 선 북·미 관계”, 중앙일보, 2018년 8월 30일.
 “[사설] 미국의 對北 정책 기조 급변, 신중히 흐름 파악해야”, 조선일보, 2018년 8월 30일.
 “[단독] 남북 철도 공동점검, 유엔사가 불허…‘주권 침해’ 논란”, 한겨레, 2018년 8월 30일.
 “韓美 엇박자? 유엔사 불허로 남북 철도 시범운행 무산”, 동아일보, 2018년 8월 30일.
 Ministry of Unification, [Available at: http://unitv.unikorea.go.kr/web/unitv_vod.html?m=2 ]
 “일자리 참사〮혁신성장 실종… 정통관료에 뒷수습 맡긴다”, 매일경제, 2018년 8월 31일.
 “文, 교수출신 한계 절감… 현장 실무형 전지배치”, 매일경제, 2018년 8월 31일.
 “대북특사단, 문 대통령 친서 들고 평양행”, 경향신문, 2018년 9월 5일.
 “[NEWS&VIEW] 김정은, 비핵화시한 내밀며 ‘종전’ 요구”, 조선일보, 2018년 9월 7일.
 “특사단 방북 결과 발표문”, 통일부, 2018년 9월 6일. [available at: http://www.unikorea.go.kr/unikorea/news/live/?boardId=bbs_0000000000000003&mode=view&cntId=54613]
 “[사설] ‘김정은 면담’ 이뤄낸 특사단, 이젠 미국 설득할 때다”, 한겨레, 2018년 9월 5일.
 “[사설] 김정은 “비핵화” 말만 전하는 대북 특사단”, 조선일보, 2018년 9월 7일.
 “[한국갤럽] 文대통령 지지도 급락 40%대 진입”, 조선일보, 2018년 9월 7일.
 Gallup Korea, Date: Sept 4-6; sample size: 1,000; margin of error: +3.1 at the 95% confidence level.
 “내년 예산안 470조 확정…복지·교육이 ‘절반”, 한국경제, 2018년 8월 28일.
 “내년 나라살림 470조…올해보다 9.7% 늘어,” 동아일보, 2018년 8월 28일; “내년 국방예산안, 8.2% 늘어난 46조7000억원…2008년 이후 최고 증가율”, 중앙일보, 2018년 8월 28일.
“판문점선언 비준ㆍ슈퍼예산 심사… 정기국회 첫날부터 충돌,” 한국일보, 2018년 9월 3일.
 “野 ‘정책실패를 세금으로 메우려…’장하성 예산안’ 못 받는다,’” 조선일보, 2018년 8월 28일.
 Housing prices rose more than 0.5% in August.
 [8·27 부동산 대책] 서울 동작·동대문·종로·중구 4개구 투기지역으로 지정,” 중앙일보, 2018년 8월 27일.
 “8.27 부동산 대책’ 10개 언론사 사설 통해 봤더니,” 한겨레, 2018년 8월 28일.
 “7월 전망경로와 대체로 부합…통화완화 정도 추가 조정 여부 신중 판단,” 매일경제, 2018년 8월 31일.
 “2분기 GDP 성장률 0.6% 그쳐…잠정치보다 0.1%p 낮아져,” 조선비즈, 2018년 9월 4일.
 “‘소득성장 특위’ 출범…’국민 체감 새 정책 발굴,’” 한겨레, 2018년 9월 6일.
“강신욱 ‘통계표본 문제 있어 재검토’ 야당 ‘정권 맞춤형 통계 누가 믿겠나,’” 중앙일보, 2018년 8월 28일.
 “‘ISD 중복제소 금지’ 명시… 소송 남발 막을 장치 구체화,” 동아일보, 2018년 9월 4일.
 “트럼프 ‘유엔총회 기간에 한미FTA 개정안 서명 이뤄질 것,’” 한겨레, 2018년 9월 6일.
Contributing Staff (in alphabetical order): Eileen Block and Kim Seonkyung
Editor: J. James Kim