Choi Kyung-hwan: finance minister outperforms

He may be restricted by the country's powerful bureaucracy, but Korea's finance minister deserves credit for maintaining investor confidence.

For the second year running, FinanceAsia has ranked the finance ministers of the Asia-Pacific region’s 12 largest economies.

We're releasing the results day by day, from lowest to best. For the results so far, click here. For last year's results, click here.

FinanceAsia considers several factors when thinking about how to compare the performance of these men over the past 12 months. The role’s responsibilities and powers vary between countries but each minister contributes to fiscal policy and the budget, accesses capital markets, regulates financial institutions, and drives reform. Investor perceptions are one way to view how good a job they are doing, particularly when times are tough.

But the hardest criterion is independence. Most finance ministers serve at the pleasure of their prime ministers, presidents, or military dictators. Their ability to get things done requires political deftness, mastery of policy, sway over the bureaucracy, and the will to fight for the public interest.

Today's finance minister faces some familiar problems linked to a rigid bureaucracy, but has still managed to steer his country's economy clear of the problems that afflict its neighbours.

Ranked No3: Choi Kyung-hwan, Republic of Korea

The Korean system involves a stable and powerful bureaucracy that runs the Ministry of Finance and Strategy, and ephemeral ministers. Ministers are appointed by the president to achieve a political goal. Things get done when that goal meets the bureaucracy’s agenda. Very little is accomplished otherwise.

That makes it difficult to assess the performance of the minister of finance and strategy but Choi Kyung-hwan appears to have performed in line with the norm.

He came into office in 2014 and made a lot of noise about reforming the economy, with growth that year slowing to 3.6% in the first quarter from 3.9% a year earlier.

Choi pledged not to increase personal income taxes but to expand the national budget to meet the economic challenges – code for increased borrowing and spending. He also promised to ease financial and housing regulations to make life easier for small businesses and homeowners.

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Choi got off to a promising start, with a $40 billion stimulus package to compensate for a decline in private spending. It did not address structural reforms, such as ending subsidies to zombie companies in industries such as shipbuilding, helping families to reduce debt, or getting companies to pay higher wages. But for a time, equity and currency markets responded positively.

By late 2015, it didn’t look like Choi’s spending bill was achieving much, with GDP growth slipping below 3%, export volumes continuing to decline, household debt rising, and employment barely budging.

Yet none of that may matter. Korea’s performance isn’t stellar but it’s better than that of its neighbours. Households are in debt but Korea in aggregate enjoys a current account surplus. Domestic demand remains steady even as China’s slowdown crimps exporters. Wages haven’t risen but employment is still robust. The government also has ample room for more fiscal stimulus if required. 

Investors have confidence in Korea, whose markets have been relatively stable. On Choi’s watch, Standard & Poor’s upgraded Korea’s credit rating to AA-.

In short, Choi scored some political points; the bureaucracy continues to guard the nation’s position; investors are happy; and compared with most other countries, regionally and globally, Korea is performing well and better able to withstand market volatility.

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