Our Finance Minister of the Year study passes its halfway stage. As befits a minister ranked in the top half of this list, today's entry has some big ideas for the future. But holding this newcomer back from a higher ranking are some looming economic problems.
RANKED 6TH: KIM DONG-YEON, SOUTH KOREA
Handpicked by President Moon Jae-In in May last year, Kim Dong-yeon is at the vanguard of Korea’s next phase of economic development – the fourth industrial revolution.
Korea has high hopes pinned on Kim, 60, who first joined the government in 1999 and, despite brief stints at the International Bank for Reconstruction and Development and Ajou University, spent most of his time with the Ministry of Strategy and Finance and the Ministry of Planning and Budget.
Compared with his predecessor Yoo Il-ho, whose brief time in officer earned him third spot in this list last year, Kim has benefited from a favourable economic climate. Korea’s heavy reliance on manufacturing, shipping, and logistics meant it was a major beneficiary as oil prices and global trade rebounded. So when he began as finance minister, the country had just recorded its fastest economic growth in seven years.
As opposed to Yoo, who spent most of his time dealing with external woes, Kim has domestic issues to tackle, including soaring household debt and worsening youth unemployment.
Korea’s annual household debt surpassed $1.3 trillion for the first time in September last year, according to Bank of Korea data, sparking speculation that the heavy debt burden could yet lead to a financial crisis. The snowballing debt is largely a legacy of the Park Geun-hye administration, when Koreans borrowed at record levels due to relaxed lending rules.
At the same time, the unemployment rate for Koreans aged between 15 and 29 struck a record high of 9.9% last year, nearly three times the overall rate and the worst among developed countries in Asia, according to the OECD.
In his first budget speech, Kim proposed increasing government expenditure on health, education, and welfare, supporting the government’s broader plan to increase household income and create new jobs. The expansionary budget went along with Moon Jae-In’s belief in a big government to reduce the impact of large conglomerates in the jobs market.
Seoul plans a record W429 trillion ($383 billion) in government expenditure this year, an increase of 7.1% from a year earlier, according to the Ministry of Strategy and Finance. The higher spending will be partly funded by a 4.9% increase in individual income tax and 10.2% increase in corporate tax. The budget has to be executed with caution.
“The budget may turn out plausible in its first year but could lead to fiscal imbalance in the following years,” said Lee Keun-tae, at LG Economic Research Institute.
Kim’s most pressing other task is coming up with a unified government response to cryptocurrency trading. Korea is one of the world’s most active cryptocurrency markets and all the more so since China officially banned trading of virtual currencies in the mid-2017.
In that regard, Kim faces a dilemma because of his dual role as minister of strategy and finance and deputy prime minister. As finance minister, Kim will need to give some leeway to the development of virtual currencies since it dovetails with Korean ambitions to drive economic growth with next-generation technologies. However, he also has to deal with the potential concomitant risks of money laundering and illegal money transfers.
The Korean government said late last year it would permanently prohibit trading of virtual currencies and shut down all domestic exchanges. But it made a dramatic U-turn a month later after thousands of Koreans took to the streets to object. What seems increasingly clear, though, is that Kim’s handling of cryptocurrency trading could yet determine how successful he eventually is seen to be.
He ranks above Australia's Scott Morrison, Thailand's Apisak Tantivorawong, Taro Aso of Japan, Paul Chan of Hong Kong, Malaysia's Najib Razak and Taiwan's Sheu Yu-jer.
TOMORROW: Gone already after a fair year in office
