Deputy Prime Minister Choi Kyung-hwan said in his New Year’s address that economic uncertainties are lingering in the form of interest rate hikes in the United States, a weak yen, and economic crises in oil-producing countries, while household debts are rising and the manufacturing sector’s competitiveness is declining at home. “With restructuring tasks piling up, we will focus our policy resources on addressing such issues as labor market inflexibility, inefficiency in the public sector, education systems separated from their fields, and self-protectionism in the financial sector,” he continued.
Bank of Korea Governor Lee Ju-yeol also said that the most important issue for 2015 is restructuring for stronger fundamentals and higher growth potentials. “Structural factors like excessive regulations, labor market rigidity, low birth rate, and rapid aging are acting negatively on the Korean economy,” he mentioned.
The business and political communities are considering this year as an opportunity for restructuring as well, because no national election is scheduled this year and the Park Geun-hye administration has passed the halfway point. One of the biggest challenges is labor market reform. The government is looking to increase the flexibility of the labor market by narrowing the gap between permanent and temporary positions. However, a great compromise between corporations, their labor unions, and the government itself is not an easy goal to achieve.
Meanwhile, financial reform revolving around the stimulation of competition is likely to be easier. The government is currently trying to lower the barriers between industry segments, while promoting the growth of new segments such as fintech, and the sector is responding positively and promptly to it.