By Dr. Jeffrey I. Kim
Currently more than 17,000 foreign-invested companies operate businesses in Korea. The major proportion of the foreign firms is producing high-tech products, parts and equipment. Many of them are business partners of Korean firms. They engage in long-term investment and they are very keen on changes in government policy related to FDI.
In public addresses including his inaugural speech, President Moon stated that there should be a drastic paradigm shift in policy. The nation's growth strategy should shift from corporation-led growth to people-led growth. He made numerous striking remarks which drew much of the people's attention. Some of them quoted here, "I will become a president of all people … I will build the strongest nation by being a humble man of power … I want the people to feel that their country is fair and just … I will take the lead in chaebol reform … I will ensure the politics-business collusion will disappear."
His statements made during his election campaign are reflected in his J-nomics. "J-nomics" is the combination of the first letter "J" of his given name "Jae-in" and "nomics" from economics. J-nomics began to be known during his presidential campaign period and its full content has been completed since. J-nomics can be summarized as one word, "people-oriented."
The new government focuses on three objectives: (1) generating enough quality jobs, (2) improving the social safety net, and (3) reforming family-controlled big businesses. Deputy Prime Minister and Minister of Strategy and Finance Kim Dong-yeon said, "To shift the paradigm, the future economic policy will focus on four directions: income-led growth, a jobs-focused economy, innovation, and fairness." Some critics argue that income-led growth policy is a short-term demand-side stabilization policy and is not appropriate as a long-term growth strategy. The debate over the pertinence of income-driven policy was partly due to some misunderstanding of J-nomics on the part of the critics.
To avoid potential sources of confusion and to correctly publicize the spirit of J-nomics and its focus on policy measures, Dr. Lee Yong-sup, vice chairman of the Presidential Committee on Job Creation has made special efforts recently. He paraphrased J-nomics as a four-wheel-drive vehicle. This vehicle dashes forward towards the goal of overcoming persistent low growth and income polarization. To achieve this task, the government assigns a special role to each wheel. The front wheel on the left is to move forward with the force of income-led growth. The rear wheel on the left is to move with the force of continuous job-creation. The two wheels on the left are generating a demand-augmenting force.
The front wheel on the right is to move forward with the force of innovation-led growth. The rear wheel on the right is to move forward with the force of justice and fairness. Increasing justice and fairness certainly helps strengthening social cohesion. There is no doubt that social cohesion keeps labor productivity increasing. The two wheels on the right side are generating a supply-expanding force which makes the vehicle keep on driving a long distance.
It is true that there are some concerns about chaebol reform. There have always been pros and cons about reforming these conglomerates. Since the global financial crisis of 2008, however, there has been a consensus reached among international financial organizations including the IMF. That is, no country should be held hostage because of the unethical business legacy of "Too big to fail." This is as bad as the chaebol's circular shareholding with no clear holding company. Much of this practice has been corrected but bullying practices by larger companies have not been completely eradicated.
The new government does not intend to blindly bash the chaebol. The government and ordinary people want the chaebol to adopt global standards so that they become globally competitive by being transparent and honest on a long-term basis. If they use the global supply chain, they can be much more successful. In the global supply chain, they will have to take SMEs as a mutually reliable business partners. When the chaebol are fully reformed, they can make many stakeholders pleased. Business partners, consumers, producers, foreign investors and the government will all be happier. J-nomics is friendly to FDI.
Dr. Jeffrey I. Kim (ickim@skku.ac.kr) is a foreign investment ombudsman, a state-appointed troubleshooter for investors and entrepreneurs from overseas. He earned a Ph.D. in economics from the University of Chicago and taught at the University of Colorado, Boulder, and at Sungkyunkwan University.
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In public addresses including his inaugural speech, President Moon stated that there should be a drastic paradigm shift in policy. The nation's growth strategy should shift from corporation-led growth to people-led growth. He made numerous striking remarks which drew much of the people's attention. Some of them quoted here, "I will become a president of all people … I will build the strongest nation by being a humble man of power … I want the people to feel that their country is fair and just … I will take the lead in chaebol reform … I will ensure the politics-business collusion will disappear."
His statements made during his election campaign are reflected in his J-nomics. "J-nomics" is the combination of the first letter "J" of his given name "Jae-in" and "nomics" from economics. J-nomics began to be known during his presidential campaign period and its full content has been completed since. J-nomics can be summarized as one word, "people-oriented."
The new government focuses on three objectives: (1) generating enough quality jobs, (2) improving the social safety net, and (3) reforming family-controlled big businesses. Deputy Prime Minister and Minister of Strategy and Finance Kim Dong-yeon said, "To shift the paradigm, the future economic policy will focus on four directions: income-led growth, a jobs-focused economy, innovation, and fairness." Some critics argue that income-led growth policy is a short-term demand-side stabilization policy and is not appropriate as a long-term growth strategy. The debate over the pertinence of income-driven policy was partly due to some misunderstanding of J-nomics on the part of the critics.
To avoid potential sources of confusion and to correctly publicize the spirit of J-nomics and its focus on policy measures, Dr. Lee Yong-sup, vice chairman of the Presidential Committee on Job Creation has made special efforts recently. He paraphrased J-nomics as a four-wheel-drive vehicle. This vehicle dashes forward towards the goal of overcoming persistent low growth and income polarization. To achieve this task, the government assigns a special role to each wheel. The front wheel on the left is to move forward with the force of income-led growth. The rear wheel on the left is to move with the force of continuous job-creation. The two wheels on the left are generating a demand-augmenting force.
The front wheel on the right is to move forward with the force of innovation-led growth. The rear wheel on the right is to move forward with the force of justice and fairness. Increasing justice and fairness certainly helps strengthening social cohesion. There is no doubt that social cohesion keeps labor productivity increasing. The two wheels on the right side are generating a supply-expanding force which makes the vehicle keep on driving a long distance.
It is true that there are some concerns about chaebol reform. There have always been pros and cons about reforming these conglomerates. Since the global financial crisis of 2008, however, there has been a consensus reached among international financial organizations including the IMF. That is, no country should be held hostage because of the unethical business legacy of "Too big to fail." This is as bad as the chaebol's circular shareholding with no clear holding company. Much of this practice has been corrected but bullying practices by larger companies have not been completely eradicated.
The new government does not intend to blindly bash the chaebol. The government and ordinary people want the chaebol to adopt global standards so that they become globally competitive by being transparent and honest on a long-term basis. If they use the global supply chain, they can be much more successful. In the global supply chain, they will have to take SMEs as a mutually reliable business partners. When the chaebol are fully reformed, they can make many stakeholders pleased. Business partners, consumers, producers, foreign investors and the government will all be happier. J-nomics is friendly to FDI.
Dr. Jeffrey I. Kim (ickim@skku.ac.kr) is a foreign investment ombudsman, a state-appointed troubleshooter for investors and entrepreneurs from overseas. He earned a Ph.D. in economics from the University of Chicago and taught at the University of Colorado, Boulder, and at Sungkyunkwan University.
