South Korea enters emergency mode as Middle East crisis bites

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SEOUL - South Korea’s liberal administration shifted to emergency mode on March 25, undertaking pre-emptive measures as external uncertainties due to armed conflict in the Middle East have persisted for weeks.

With supply disruption of oil and gas stoking public concerns in the country heavily dependent on energy imports for industry, President Lee Jae Myung was to preside over an emergency meeting on economic monitoring, with chief of staff Kang Hoon-sik leading the situation room in the Blue House, which will be at the apex of South Korea’s transitory emergency economic response system.

Daily meetings for economic monitoring will be convened at the Blue House, and the presidential office plans to give briefings on meeting outcomes at least once a week, tentatively on Wednesdays.

The move stems from Seoul’s view that the Middle East uncertainties could last for months.

“The government is taking into considerations that (the Middle East crisis could persist) for at least three months, and for up to six months, as we are preparing for countermeasures based on various scenarios,” Mr Hong Ihk-pyo, senior presidential secretary for political affairs, told reporters.

Given complexities in the normalisation of the energy supply chain even after the conflict ends, Mr Hong said, “The impact on South Korea could linger on, and the damage from it will gradually swell.”

Under the body helmed by Mr Lee, the emergency economy headquarters will be chaired by Prime Minister Kim Min-seok, tasked with supporting the national control tower in the Blue House.

“South Korea has a history of overcoming economic crises through the unified strength of its people,” Mr Kim said in a briefing at the Government Complex Seoul, invoking the country’s past instances of weathering the 1997 Asian financial crisis and 2008 global financial crisis.

The headquarters will oversee five emergency entities within the government, all led by ministers of the government.

They will be dedicated to stabilising consumer prices, addressing the potential crude supply crunch, curbing financial market volatility, supporting marginalised groups and navigating external uncertainties through diplomatic coordination. The Blue House’s senior presidential secretaries will supervise their operations.

The government’s emergency economy headquarters will convene meetings twice a week for the time being. Mr Kim and Finance Minister Koo Yun-cheol will take turns holding the meeting.

Now is the time for South Korea to turn the crisis into an opportunity, Mr Kim said in the briefing.

“Using the response to the Middle East war as an opportunity, we will accelerate the implementation of mid-to-long-term tasks aimed at turning crises into opportunities, such as strengthening supply chain, improving the capital market fundamentals and transitioning the energy sector,” Mr Kim said.

Providing the public with accurate information in a timely manner will be key to operating the emergency response system, Mr Kim added.

The March 25 announcement is the latest after Mr Lee on Tuesday instructed the government to come up with contingency measures on the premise of the worst-case scenarios.

Before the announcement, South Korea adopted a fuel price cap earlier in March for the first time in about three decades and implemented a 100 trillion won (S$85.4 billion) market stabilisation programme to cushion the impact of the crisis on South Korea’s economy.

The country has also unveiled plans to pass a 25 trillion won extra budget Bill in the near future. Chief of staff Hong said the budget Bill is set to be tabled at the Cabinet meeting on March 31. THE KOREA HERALD/ASIA NEWS NETWORK