South Korea's Park vows to rebalance export-led economy

Anti-government protesters shout slogans and wave banners, some reading: "stop the crackdown on labour unions" as they take part in a rally in Seoul on Feb 25, 2014. South Korean President Park Geun Hye on Tuesday, Feb 25, 2014, unveiled a three
Anti-government protesters shout slogans and wave banners, some reading: "stop the crackdown on labour unions" as they take part in a rally in Seoul on Feb 25, 2014. South Korean President Park Geun Hye on Tuesday, Feb 25, 2014, unveiled a three-year plan to rebalance the export-reliant economy, investing US$3.7 billion (S$4.7 billion) in start-ups, boosting domestic spending and getting more young people and women in the workforce. -- PHOTO: AFP

SEOUL (AFP) - South Korean President Park Geun Hye on Tuesday unveiled a three-year plan to rebalance the export-reliant economy, investing US$3.7 billion (S$4.7 billion) in start-ups, boosting domestic spending and getting more young people and women in the workforce.

Ms Park said the plan - announced on the day she completed her first year in office - would deliver a potential economic growth rate of at least four per cent by 2017.

"Our past... way of growth that made us one of the world's 10 largest economies has now reached its limit," Ms Park said in a national televised speech.

Asia's fourth-largest economy faces a widening imbalance, with the export and manufacturing sector - led by all-powerful conglomerates - totally overshadowing the domestic consumer market and services industry, she said.

She also highlighted the dangers posed by what she described as South Korea's "silent, looming disaster" - its rapidly ageing population that threatens to slash the workforce and impose a heavy welfare cost.

"Unless we change the fundamentals of the economy and break from the trap of slow growth, there will be no future for us," she warned.

The economy grew 2.7 per cent in 2013.

According to the three-year plan, the government will spend four trillion won (S$4.7 billion) by 2017 to help small start-ups and increase spending on research and development to the equivalent of five per cent of GDP, from the current four per cent.

It will also ease an array of regulations on five key service industries - healthcare, education, finance, tourism and software.

In an attempt to spur domestic spending, the plan also aims to build more new homes and offer low-interest loans for families desperate to enter the property market.

South Koreans' household debt - mostly housing loans - amounts to nearly 140 per cent of their disposable income on average - one of the highest rates in the world.

"Solving the issue of housing debt... is the first priority to spur consumer spending," Ms Park said, promising to reduce the debt ratio by five percentage points by 2017.

While opinion polls have shown a healthy approval rating for Ms Park after her first year, she scores far higher marks for her foreign policy than her handling of the economy.

A series of surveys commissioned by leading newspapers have shown disapproval of her economic policy at around 50 per cent.

One of the largest-circulation dailies, the Dong-A Ilbo, compared her economic team to "a student who is full of motivation but knows little about how to study and ends up being an underachiever".

About 15,000 people took part on Tuesday in a union-led protest in central Seoul, slamming Ms Park for failing to keep her campaign pledges to reduce social imbalances thrown up by rapid economic development.

They also accused the president of protecting the interests of the giant family-run conglomerates, or "chaebol", that dominate the economy.

"President Park has favoured the chaebol, breaking with her promise to make people better off than before," the organisers said in a statement.

Ms Park, South Korea's first woman president, came to office vowing more gender equality. Her speech on Tuesday offered more childcare services for working mothers and incentives for companies that hire more women and young people.

"All aspects of our economy, including domestic spending and exports, manufacturing and services, big conglomerates and small and medium firms and the capital city and the rest of the country, should show balanced growth so that all South Koreans will be able to enjoy fruits of growth," Ms Park said.

The president's plan aims to improve the national employment rate to 70 per cent by 2017 from around 60 per cent now.

Ms Park also vowed to reform debt-ridden state firms long criticised for poor management, corruption and over-generous benefits for workers.

"Such long-running problems should no longer hamper our economic growth," she said, warning of heavier punishment for corruption and tighter requirements on state-run firms' financial health.

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