We warned you in a past video here on VisualPolitik: South Korea's new president, the conservative
Yoon Seok-yeol is turning out to be a political earthquake:
Since he took over the presidency, not a week goes by without Yoon announcing some major
change in the country.
Of course, given the track record of South Korean presidents when it comes to keeping
their promises, we will have to keep a close eye on what is finally done and not done.
After all, in the history of South Korean democracy, presidents fulfill on average around
30 percent of their election pledges.
Because yes, in South Korea these things are counted.
Former President Moon, for example, met just 17%, according to provisional data.
Of course, we are talking about statistics and that doesn't always work in politics.
Not all commitments carry the same weight.
Be that as it may, the fact that President Yoon does not come from professional Korean
politics may make his statistics much better.
For now, if there is one thing we can say it is that the guy looks like he's got the
drive.
For the time being, the vision of South Korea that the new president seems to want to create
is quite different from the one left by former President Moon.
Now, do you want to know exactly what the first steps are that Yoon is taking to revive
South Korea?
Could they be the gateway to a new economic take-off?
What does this president's promised shift to the right consist of in practice?
Well, in this video we will answer these and other questions.
That said....
Let's get started!
We warned you in a past video here on VisualPolitik: South Korea's new president, the conservative
Yoon Seok-yeol is turning out to be a political earthquake:
Since he took over the presidency, not a week goes by without Yoon announcing some major
change in the country.
Of course, given the track record of South Korean presidents when it comes to keeping
their promises, we will have to keep a close eye on what is finally done and not done.
After all, in the history of South Korean democracy, presidents fulfill on average around
30 percent of their election pledges.
Because yes, in South Korea these things are counted.
Former President Moon, for example, met just 17%, according to provisional data.
Of course, we are talking about statistics and that doesn't always work in politics.
Not all commitments carry the same weight.
Be that as it may, the fact that President Yoon does not come from professional Korean
politics may make his statistics much better.
For now, if there is one thing we can say it is that the guy looks like he's got the
drive.
For the time being, the vision of South Korea that the new president seems to want to create
is quite different from the one left by former President Moon.
Now, do you want to know exactly what the first steps are that Yoon is taking to revive
South Korea?
Could they be the gateway to a new economic take-off?
What does this president's promised shift to the right consist of in practice?
Well, in this video we will answer these and other questions.
But before that .... Have you heard about our exclusive bulletin for patrons?
Have you heard about Latampolitik or the exclusive products that are not for sale anywhere else?
Well, if you like what we do and you want to contribute to keep this community growing
and improving, you can find all this and more on our Patreon page, in the VisualPolitik
Patreon community.
We’ll leave you the link in the description.
And of course a million thanks to all of you who already support us].
That said....
Let's get started!
This means that for at least 2 of the 5 years of his mandate, the president may be tied
hand and foot if he does not get the support of the opposition in the National Assembly.
Or that, during this time he decides to govern more or less by presidential decree, which
is exactly what seems to be going to happen.
In South Korea, the legislative chamber is not required to approve each and every presidential
decree, which gives the president broad powers, basically allowing him to introduce major
changes without the need to reach a large consensus.
And although in the long run these measures can be easily reversed, they can have important
consequences on the political, economic and social life of the country.
For the time being, the first proposals and the first changes are already here.
Judge for yourselves!
T1 (MORE MARKET AND LESS STATE?)
As we already mentioned in the last video about the turnaround in South Korea, if there
is one thing that characterizes Yoon it is that he does not like anything, absolutely
anything that carries the slightest whiff of left-wing politics.
Neither socially nor economically.
[Or so he says].
Be that as it may, it is in the economic area where most changes are expected to take place
in the coming years.
And they are so important, what do you want me to say?
We are obliged to tell you about them on VisualPolitik.
Well, first of all, the new president has already announced the central measures of
his five-year economic plan.
They are already public, so we are not talking about promises or imaginings but about firm
intentions.
And among them, reducing regulations on business activity and lowering taxes are the clear
protagonists.
C1 ("Regulations and schemes that undermine business competitiveness and discourage entrepreneurship
will be drastically improved.
[...] The current economic circumstances inside and outside the country are very serious.
[...] In times of crisis, we need to make changes to be more market-oriented and have
the private sector drive the entire economy."
– Yoon Seok-yeol)
In fact, both Finance Minister Choo Kyung-ho and other ministers have made it very clear
in a statement that the core of the Yoon government's economic plan will be deregulation above all
else.
The new economic plan commits the government to minimizing state intervention in the market
and to promoting a change in the economic model towards one in which the private sector
and companies are the dominant players.
Likewise, the plan also includes reducing the top corporate tax rate from 25% to 22%,
the same level as it was in 2018, thus reversing the increases led by Moon Jae-in.
Also, and importantly, a revision of the tax system is proposed to introduce a tax exemption
for profits repatriated to South Korea.
The aim is to resolve once and for all the problem of double taxation on the activities
of South Korean companies abroad.
And that's not the end of it.
Yoon – naturally – also wants more entrepreneurship and start-ups to be created in South Korea.
So in order to achieve this, his idea is to grant greater tax credits.
For example, by extending exemptions for stock options, a form of employee compensation that
consists of the delivery of shares in the company's own stock.
From the current threshold of 50 million won, the new government wants to quadruple the
tax exemption to 200 million won, about $154,000.
In other words, if you are compensated in shares up to that amount, you would not be
taxed.
With this, the government hopes to attract more highly qualified workers to the start-ups,
and that they will be able to be paid a good chunk of their salary in shares instead of
cash.
The company wins, the workers win, and the government wins if it increases the number
of start-ups.
And don't forget that we are talking about South Korea.
In this country, people dream of working in large conglomerates thanks to the high salaries,
which allows the large companies to behave as a kind of talent vacuum cleaner that damages
the competitiveness of small companies that are generally underdeveloped.
We have already told you about the enormous problem of duality that South Korea has in
this area.
They are almost two different countries.
Then, another of the economic measures announced is the modification of the inheritance tax.
And take note because this is not a minor issue.
Those of you who have been following us for a while on VisualPolitik may have already
seen this video ((((point to top corner and insert thumbnail)))), but for those of you
who haven't...
I think these headlines say quite a lot.
N1 (An Inheritance Tax Bill You 'Can't Fathom': $10.8 Billion
The Samsung family in South Korea will also donate billions of dollars' worth of art,
including Picasso and Monet.
– The New York Times)
N2 (High inheritance tax hampering entrepreneurship – The Korea Times)
And, VisualPolitik fans, although South Korea has one of the lowest fiscal pressures in
the OECD, dying, on the other hand, can be very, very expensive.
Provided, that is, that you have money, because according to the Korean National Tax Service,
only 2.9% of the heirs of deceased persons had to pay this tax in 2020.
But we are talking about a tax that in South Korea can be up to 50%, even between parents
and children, following a progressive scale with deductions, in the best income tax style.
Now do you now understand why the heirs of Lee Kun-hee, the former chairman of Samsung
Group, which is the country's largest business conglomerate, have to face such a hefty bill?
Well, although this tax mainly affects people who have a lot of money [whether you think
it is fair or not is up to you], it is true that its impact on the economy can be considerable.
You see, since major business conglomerates in South Korea are family-owned and therefore
inherited, when someone passes away the bill can be so high that it can end up affecting
the company itself when it comes to undertaking new investments or hiring workers.
For example, the heirs may end up going into debt to pay the tax by pledging company resources
as collateral.
And above all, this encourages many people to take money out of the country and start
businesses abroad.
Well, whether you like it or not, this is something that Yoon wants to change.
But even he doesn't seem to know exactly how he's going to do it.
Apart from the measure just mentioned, Yoon's plan also includes other very important tax
measures, such as the abolition of capital gains tax for all investors whose profits
do not exceed $15,500 per year.
In return, the idea is to apply a small tax on those holding more than $7.7 million in
shares.
It would also allow the postponement of gift tax payments in the case of receiving a business
from a family member, and tax incentives for investments in strategic technologies such
as semiconductors will be extended.
Well, this is how Yoon wants to make the South Korean economy much more competitive and possibly
able to weather the crisis that seems to be looming.
But wait a minute, because the tax measures are far from the only changes Yoon wants to
push through.
There is much more to his flagship plan to restore South Korea to its former momentum.
Listen up.
T2 (THE 180-DEGREE TURN)
VisualPolitik fans, the change Yoon has in mind is not just about lowering four taxes
and leaving it at that.
Nothing could be further from the truth.
The new president wants to make a U-turn on some of the most controversial and sensitive
matters, such as energy policy and pensions.
For example, Yoon seems ready to fulfill one of his big promises, one of the star proposals
of his campaign: to bet heavily on nuclear energy.
In fact, the prime minister has already announced a preview of the plan that seeks to meet the
carbon neutrality target by 2050, but instead of doing so with renewables as the main source,
he wants nuclear power to be the main player and renewables to be the back-up.
N3 (Yoon calls for 'rational' energy mix – The Korea Herald)
What he means by rational above all is that Moon's former plan for decarbonization seems
anything but realistic.
The previous government's model combined the progressive closure of nuclear plants with
a wild commitment to renewables.
The problem is that in order to carry it out, the weight of renewables had to increase to
between 61 and 71% of the energy mix, something that most experts consider simply not feasible.
On the other hand, the new government has already announced that it will resume construction
of the two nuclear reactors canceled by the previous government of Moon Jae-in, and that
it will also extend the useful life of those that are nearing their limit.
And that's not all.
It also plans to launch the construction of several new nuclear reactors to increase the
share of nuclear energy in electricity production from 27.4 to 34 percent in the medium term.
It will also seek to introduce small modular reactors, or SMRs, which are emerging as major
players in the future of nuclear power, into the country.
The government will continue to support the deployment of renewable energies, however.
The ultimate goal is to eliminate gas and coal-fired power generation, which currently
account for 66% of South Korea's energy mix, by 2050.
Then on the issue of housing, the economic plan envisages reducing taxes on landlords
so that they can reduce the price of rents and jeonse, the peculiar South Korean rental
system based on a gigantic rental deposit but without a monthly fee.
C2 ("As short-term risks remain in the lease market, the government seeks to make pre-emptive
responses by extending tax and financial benefits, and boosting supplies."
– Choo Kyung-ho, Finance Minister)
On this last matter, on the supply side, the government has pledged to soon unveil a plan
to build 2.5 million new homes in the country.
We shall see.
But perhaps the most delicate reform of all is precisely that of pensions:
You see, South Korea is the country with the most accelerated demographic aging in the
OECD, and its current pension model, based on a funded system through a public pension
fund, is not expected to be able to cope with the number of pensioners in the near future.
President Yoon himself has clearly stated that in his opinion the current model is a
burden for future generations.
Therefore, among other measures, he wants to increase the minimum retirement age from
60 to 65, or even eliminate the retirement age, or grant benefits to companies to rehire
retirees, what is known as active retirement.
And take note, because this is no joke.
According to the South Korean statistics office, the working-age population will shrink by
more than 35% over the next three decades.
A phenomenon that threatens to sink production while public spending could skyrocket, not
only in pensions, but also in health and social services.
But this topic is so significant that we will dedicate an upcoming video specifically to
it.
But that does not mean that we are absolutely finished.
I have already told you that this new president has come in with a vengeance.
C3 ("Public institution reform is a task that cannot be delayed any further.
[...] Public institution evaluations must be conducted strictly.
[...] Finances must be used only where they are needed, and financial resources must be
spent kindly and generously on the truly socially weak who desperately need government support".
– Yoon Seok-yeol)
We will see how it all turns out.
For the time being, what has also changed radically has been the foreign policy.
Now much closer to the United States and Japan, and more belligerent towards China and North
Korea, which has meant abandoning the equidistance of the previous Moon government on major foreign
policy issues.
Take a look at this.
N4 (Biden, Yoon mull more military exercises amid N Korea tensions – Al Jazeera)
N5 (South Korea's Alignment With US at Odds With China, Analysts Say.
As a new South Korean government deepens the nation's economic and security ties with the
United States, experts are warning that Seoul's long-standing relationship with China is likely
to suffer.
– VOA)
C4 ("As soon as possible, we have to go back to the best days of Korea and Japan.
[...] Unless we achieve that, even though we talk about the future of Asia, I don't
think it's realistic."
– Yun Duk-min, new South Korean ambassador to Japan)
Well, I think that with all that we have told you, the question is clear: do you think that,
if all these measures are really implemented, South Korea could once again experience a
new economic take-off?
Do you think these measures are enough to restore the country's competitiveness at home
and abroad?
Leave us your answers below and now if you found this video interesting don't forget
to like it and subscribe to Visualpolitik to keep up to date with all our news.
Once again, thank you for being there.
All the best, and see you next time.