Summits with North Korea
Latest media reports indicate that the CIA director Mike Pompeo met with Kim Jong Un in Pyongyang over the Easter weekend. In a meeting with Prime Minister Abe on April 17, President Trump stated that the two Koreas are discussing the possibility of formally declaring the end of the Korean War. The Blue House responded that it was hoping to end all hostilities between the two Koreas during the summit on April 27. Chung Eui-yong and John Bolton also held a meeting to discuss the possibility of a trilateral summit involving the US and the two Koreas after the bilateral summits in April and June.
In general, the South Korean public supports the signing of a peace treaty with North Korea. According to a public poll, 78.7% of South Koreans are in favor of a peace treaty while 14.5% are opposed. The conservatives have warned against shifting the framing of the North Korean issue from denuclearization to peace agreement. There is also some concern about the possibility that North Korea may request the withdrawal of the US Forces Korea (USFK).
North Korea Announcement
On April 21, North Korea announced that it would halt all nuclear and missile tests as well as stop operations at the Punggye-ri nuclear test site. Kim Jong Un stated that the country has completed all nuclear and missile development. Many critics have pointed out that this is a declaration that North Korea is a nuclear state. Kim added also that his primary focus will be on economic development.
The response in South Korea is split along party lines. The progressives (i.e. TDP, Democratic Peace Party and Justice Party) have stated that the announcement is a significant move ahead of the inter-Korean summit. The conservatives (i.e. LKP and Bareun), on the other hand, have argued that the announcement does not indicate a significant break from the past. Critics have observed that the North Korean talking point is shifting away from “denuclearization” and more towards “suspension” and “peace.”
A power blogger nicknamed “Druking” allegedly meddled with public opinion during the 2017 presidential election. Druking is alleged to have managed an online organization called ‘Kyunginsun’ to encourage his members to post comments supporting then-candidate Moon Jae-in on various websites.The organization also appears to have been behind an attempt to boost negative public sentiment towards Ahn Cheol-soo when he surpassed Moon Jae-in in the polls. Ahn claims he raised this issue during the election, but no investigation has taken place.
Kim Kyung-soo, a member of the Together Democratic Party (TDP), is also under investigation for a possible connection to Druking. Although Kim denies any direct involvement, the investigators have confirmed that there is evidence that the two sides exchanged numerous messages with one another. The Liberty Korea Party (LKP) and Bareun Mirae Party criticized the TDP and called for a special investigation into the case. The Blue House issued a formal statement that it hoped for a full and fair investigation. President Moon’s support remains high at 70%.
On April 6, Samsung Securities mistakenly paid out KRW 112 trillion worth of cash dividends instead of the planned KRW 2.8 billion. Samsung’s explanation is human error but this incident has resulted in an 11% drop in Samsung Securities share value. The public has expressed outrage over the incident and the South Korean financial regulators have launched a special investigation as of April 9. People in South Korea believe the incident is tantamount to market manipulation and are petitioning for a ban on all short sales of Samsung Securities stock.
The Financial Services Commission (FSC) stated on April 16 that it will reduce the amount of long-term fixed rate mortgages (i.e. conforming loans) by as much as KRW 1 trillion (USD 933mn). The government will also impose a KRW 900mn (USD 839,700) limit on long-term mortgages while low-interest housing loans will have a ceiling of KRW 500mn (USD 466,500). The recently announced change is part of a broader effort to address the vulnerabilities in the Korean economy associated with the ballooning national household debt (~KRW 1,450.9 trillion). There are signs of a promising turnaround as the FSC’s own data revealed that South Korea’s household debt increased by KRW 108.4 trillion in 2017, which is KRW 31 trillion lower than in 2016.
The FSC also made additional announcements about short-term credit, which will take effect as of Q2. Second tier financial institutions such as savings banks and credit card companies are likely to be impacted as the announcement includes applying the debt-service ratio valuation standards for the non-banking sector.
Table 1. Debt, Banking v Nonbanking Sector in KRW trillions,
Source: Bank of Korea
The FSC will raise the rent-to-interest rate by 17.4%, making additional lending conditionality more stringent.
Finance Minister Kim Dong-yeon called for an expedited approval of the supplementary budget in order to sustain the government’s policy on youth employment, SMEs, and growth in innovation. Minister Kim further explained that revisions to minimum wage have not had as much impact due to higher than expected inflationary pressures.
Worker Rights and Korean Air
The Bareun Party submitted a proposal for amendments to the Act on Aviation Business following another corporate scandal involving Korean Air and workplace labor rights. The proposed amendment seeks to prevent executives who violate aviation safety law to assume another executive position for five years after being sentenced. The proposed amendment has been proposed on the rationale that this type of restriction should apply to airline industry if similar penalties are also applied to the financial sector.
Korean Statistical Service and the National Human Rights Commission of Korea confirmed on Apr 20 that they will collaborate to produce an annual statistical review of human rights in South Korea. The first review will mirror studies conducted by the Office of the UN High Commissioner for Human Rights (OHCHR). One of the more contentious quantifications is expected to be “discrimination” due to its broad scope (e.g., discriminatory hiring practices based on educational pedigree or discrimination at the workplace).
Legislative Bills in South Korea
|Name*||Motion||Status**||Purpose||Likelihood to Pass***|
|Act on Employment Support for the Unemployed||2018Apr 17||Deliberation of Competent Committee(s), 2018 Apr 18||This act proposes employment support programs for unemployed or low-income (defined as less than 60% of the standard median income), short-term employees who may be restricted from receiving employment insurance. The individuals who participate in this program shall receive an employment promotion allowance over an implementation period of six months. The program involves job counseling, vocational training, and start-up support.||N/A|
|Act on the Protection of Online Businesses, Financial Institutions, and Users||2018Apr 13||Proposed to the 359th National Assembly (Extraordinary Session)||Korea’s peer-to-peer (P2P) lending system provides investors with opportunities to invest in loans through an online platform. The benefits include (1) the use of big data solutions in finance, (2) more investment opportunities, and (3) greater financial inclusion for those who are restricted from brick-and-mortar financial institutions. Much of this activity takes place through the Korea P2P Financial Association with approximately KRW 1.5trn (USD 1.4bn), which currently lends to over 58 companies. As P2P debt financing grow, the need for P2P lending management and protection becomes more important. While the FSC released guidelines on such lending, they remain outdated in relation to the state of technological advancement and there is no administrative guidance. This Act seeks to create new financial regulation which caters directly to the P2P finance rather than attempting to apply existing financial regulation to it.||Medium|
|Act on the Promotion of Earthquake Resistance in Existing Structures||2018Apr 12||Deliberation of Competent Committee(s),2018 Apr 13||This act seeks to provide support necessary to improve the earthquake resistance of existing buildings through diagnosis and repair.||Medium|
|Act on a Hydrogen Economy||2018Apr 10||Deliberation of Competent Committee(s),2018 Apr 11||This act supports the hydrogen industry by increasing hydrogen fuel electric vehicles, fuel cell power generation facilities, and preemptively implementing the transition to a hydrogen economy society through related technology development and business operations.||Medium|
Significant Updates in Status of Legislative Bills
|Act on the Regulation of Hate Speech||2018Feb 13||Withdrawn (2018 Feb 28)||Vol. 3No. 4|
|Act on Consumer Class Action||2018Jan 19||Withdrawn (2018 Jan 31)||Vol. 3No. 2|
|Act on the National Assembly Research Institute for the Future||2017Nov 23||Promulgated (2017 Dec 12)||Vol. 2No. 25|
*Unofficial translations **As of the date of publication
***Likelihood to pass based on news and analytical coverage by major outlets
|Insufficient coverage to make an assessment||Coverage generally tends to be negative||Coverage generally tends to be split between negative, affirmative, or neutral||Coverage generally tends to be in the affirmative|
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Contributing Staff: Kim Seonkyung, Lee Soo-hyun
Editor: J. James Kim