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Economy

South Korea's new finance chief vows to support private sector

Hong Nam-ki must contend with sluggish growth, a weak labor market and the trade war

Hong Nam-ki, South Korea's new finance minister, speaks at his confirmation hearing at the National Assembly in Seoul last week. (Photo provided by South Korea's Ministry of Finance)

SEOUL -- South Korea's new finance minister on Monday vowed to implement policies to help the private sector, as Asia's fourth-largest economy faces challenges from sluggish growth to a weak job market and spillover from the trade war.

"I will make efforts to be known as the minister who has met the private sector the most," Hong Nam-ki told President Moon Jae-in at his appointment ceremony at the presidential Blue House. "I will communicate with them closely by having meetings with the self-employed, big conglomerates and labor unions."

Hong, 58, was picked last month by Moon as part of a shake-up of his economic team. He replaced Kim Dong-yeon, who had been criticized for failing to create enough jobs for young workers and hurting small businesses by bringing in rapid minimum- wage increases.

Hong plans to ease regulations to boost corporate innovation, according to a person close to the new finance chief.

The government in Seoul has been reluctant to open the way for new businesses and services such as car-sharing and fintech platforms. "He knows the issues very well and is willing to remove needless obstacles," said the person who asked not to be named.

His inauguration comes one week after the U.S. and China reached a 90-day truce over their trade war, but tensions remain over the arrest in Canada of the chief financial officer of Huawei Technologies, China's leading telecom facility company. Shipments out of South Korea's export-driven economy fell short of expectations in November as sales of memory chips slowed.

Economic growth in South Korea has also failed to meet expectations, with gross domestic product projected to grow 2.7% this year, down from 3.1% in 2017. The job market is also struggling, with only 96,000 new jobs created per month on average in 2018, down from 316,000 last year -- the worst performance since the global financial crisis.

Furthermore, economists say that political constraints are hindering South Korea's growth by limiting flexibility and holding back innovation. The Moon government faced protests from small business owners after raising the country's minimum wage for next year by 10.9% to 8,350 won ($7.4) per hour. This follows a 16.4% hike this year.

"While the current income-led growth model may deliver an immediate improvement in social welfare, we think longer-term growth will require more sustainable policies," said Park Chong-hoon, a senior economist at Standard Chartered Bank. "Against this backdrop, Hong will need to tackle political issues before working on economic policies."

A new blockbuster film titled "Default" is reflecting people's negative sentiment over the economy. The fictional movie is about the Asian financial crisis two decades ago, when South Korea received a bailout from the International Monetary Fund after failing to pay back short-term overseas loans.

The film, in which French actor Vincent Cassel played former IMF managing director Michel Camdessus topped the box office over the weekend, and has drawn more than 2.7 million moviegoers since its release on Nov. 28.

People say they feel a similar sense of crisis now, but in reality the situation is nowhere near as severe. The South Korean won is maintaining its value and the country is able to pay back its debts thanks to high level of foreign reserves.

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