SEOUL -- South Korea is under pressure to urgently reform its industrial structure, including chaebol --family-controlled conglomerates -- following a report projecting financial collapse due to a declining workforce.
In late January, the National Assembly was rocked by a shocking National Assembly Budget Office report that forecasts South Korea could go bankrupt in 2033.
The report said the country's aging population is pushing up social welfare costs. It said total spending could surpasses total revenue in 2021, sending the country into a budget deficit, and increasing the issuance of government bonds would result in South Korea being unable to repay debts in 2033.
The country's productive-age population -- those aged between 15 and 64 -- is expected to start declining in 2017, when the next presidential election is due.
In 2014, the nation's total fertility rate was 1.21. In 2060, people aged 65 or older will make up 40.1% of the population.
South Korea's household debt stands at more than 80% of gross domestic product. The country faces the difficult task of expanding medical and social welfare budgets while maintaining the health of the government's books.
Chaebol's political influence
Finance Minister Choi Kyung-hwan has repeatedly warned against South Korea following in the footsteps of Japan, which has had a prolonged period of little growth known as the ''lost two decades.''
But South Korea is close to getting caught in the same trap Japan has been in since the late 1990s of low growth caused by a reduced workforce.
South Korea progressed its economy by trying to catch up with Japan and other advanced countries. However, the strategy is reaching its limit as China and other emerging nations are enhancing their technological capabilities.
That has prompted South Korean President Park Geun-hye's plan to increase individual earnings power by advocating creative economic policies aimed at upgrading industries.
Though few people disagree with her policies, many question the way she implements them, for example, allowing chaebol to have a say in the policies.
The looming fiscal crisis is also attributable to chaebol, which are preventing smaller companies from developing in South Korea.
A problem lies in the fact that although South Korea has domestic demand from its population of 50 million, its industrial structure is similar to that of Japan, which has more than twice the population.