South Korea’s new finance minister, Hong Nam-Ki, faces a challenge that is different from those faced by most of his predecessors: overseeing a radical overhaul of the economy.
With President Moon Jae-In intent on addressing long-standing national problems such as income inequality, high unemployment, and the dominance of large conglomerates, Asia’s fourth-largest economy has been set on the road to change.
The new economic direction, which Moon believes will lead to innovative and income-driven growth, stands in stark contrast to the country’s export-led growth of recent decades that was spearheaded by the chaebols like Samsung, Hyundai, SK and LG.
One of Moon’s major initiatives was to drastically increase the minimum wage level to help low-income earners and boost domestic consumption. This year, Seoul plans to raise the minimum wage by 10.9% to W8,350 ($2.97) – on top of a 16.4% increase in 2018.
In the face of higher labour costs, however, small and medium-sized enterprises have been forced to cut jobs while large firms have taken a step back on investment.
The difficult task facing Hong is to maintain fiscal stability while planning a budget that supports increased spending on social welfare and job creation.
Former finance minister Kim Dong-Yeon was sacked in November, partly because he failed in that respect. In his budget, for example, Kim proposed to increase subsidies for SMEs to offset the impact of the wage hike but also a 10.2% increase in corporate tax, which in turn added to the operational costs of companies.
It is much too early to make a judgement on how Hong will perform given that he has been in his role for only a couple of months, which explains his middling-to-low ranking in our annual analysis of finance ministers performance across the Asia Pacific region. But it is clear that the country’s employment situation and the income gap among households will be key indicators of whether he lives up to his expectations as the top economic policymaker.
Hong Nam-Ki ranks above Malaysia's Lim Guan Eng, Thailand's Apisak Tantivorawong, Taiwan's Su Jain-rong, and Japan's Taro Aso.