When South Korean President Park Geun Hye in a recent address to the country said the economy needed a "major surgery", she was not overstating the case. Growth is slowing for the region's fourth-largest economy as competition has become keener, particularly from its two giant neighbours - China with its lower costs and Japan with its high technology.
China's economic slowdown has not helped, given that South Korea's economy is highly reliant on the Chinese market, its largest export market. With the yuan devaluations, there is also stiffer competition from China in traditional industries such as shipbuilding and steelmaking. Chinese tech firms are also posing a threat to Korean ones. Huawei Technologies is snapping at the heels of Samsung Electronics worldwide and has pulled ahead of the Korean mobile-phone maker in China in terms of market share. Likewise, the lower Japanese yen has also meant fiercer competition from Japanese tech products for Korean brands.
With domestic consumption dampened by the outbreak of Mers earlier this year, the economic situation is bad indeed. Not surprisingly, South Korea's trade contracted 4.9 per cent in the first seven months of this year. Its economy has grown less than 1 per cent in each of the past five quarters.
However, South Korea's economic challenges go deeper. It has a shrinking workforce and a fast-ageing population because of a low fertility rate. Its economic competitiveness is further hampered by the presence of chaebol, or family-run conglomerates. These are inefficient, stifle upward mobility of small and medium-sized firms because of their domination of the Korean private sector, and are riven by family feuding that hurts the wider Korean economy. Ms Park came to power in 2013 on the back of various promises, including the reduction of the influence of the chaebol. But that is not happening. Last month, she pardoned 6,500 convicts, who included chaebol leaders, so that they could help boost the economy.
Still, she promised other reforms in her speech last month, including further deregulating the financial sector and restructuring the public sector to reduce waste and improve efficiency. Her government is also expected to unveil a comprehensive plan this month to address the low birth rate and rapidly ageing population - issues that are faced by many economies in the region, including Singapore. Thus, it's not just the Koreans but also their neighbours who will be looking out for her measures to boost employment, housing and education reforms. All eyes will also be on the support for newly-weds and dual-income families. To be credible, Ms Park's government needs to demonstrate a strong effort to reform the labour market, encourage births and stimulate consumption after the Mers crisis.