Economic impact of terrorist strikes

First published in The Korea Herald. The recent dastardly terrorist attacks in Paris shocked the world, with countries scampering to tighten security in preparation for any eventuality. Even countries like Korea that have had no terror attacks from Islamic jihadists have gone on high alert, and the administration is tightening measures to make sure that no untoward incident happens. While the nation’s security, human casualties and material losses are important aspects of these inhumane attacks, what should also be considered is the economic impact of a terrorist strike -- especially on countries like Korea, which are highly dependent on a few sectors. A study released last month by ratings agency Moody’s shows that terrorist attacks significantly weaken economic activity, with long-lasting...

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Take gov’t projections with truckloads of salt

First published in Korea Herald. A recent media statement issued by the Seoul Metropolitan Government that got wide coverage had me in splits. According to the note that was issued to mark the 10th anniversary of the Cheonggyecheon Stream Restoration Project -- which removed an elevated freeway and transformed it into a lush walkway through the heart of Seoul -- which was faithfully picked up by all of local media without any question, 190 million tourists annually visit the landmark. “Some 190 million Koreans and tourists are estimated to have visited the stream since its restoration by former President Lee Myung-bak on Oct. 1, 2005. The number is expected to exceed 200 million by early next year.” These figures were obviously cooked up by some government official and can be understandable...

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Does Korea benefit from FTA with EU?

First published in The Korea Herald.  July 1 marked the fourth anniversary of the EU-Korea free trade agreement, which entered into force in 2011. It was touted as the first of a new generation of FTAs, going further than any previous agreements in lifting trade barriers. Being also the EU’s first trade deal with an Asian country, Korea was expected to benefit immensely.The agreement eliminated duties for industrial and agricultural goods in a progressive, step-by-step approach. The majority of import duties were removed already when the FTA entered into force. On July 1, 2016, import duties will be eliminated on all products...

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Pros and cons of Korea’s minimum wage law

First published in The Korea Herald. The minimum wage in Korea has been set at 6,030 won ($5.30) for next year after weeks of debate, although the labor unions boycotted the government-led talks on the final day. Labor union representatives walked out of a meeting of the Minimum Wage Council ― a trilateral committee of employers, employees and labor market experts to set the minimum wage through discussion ― on Wednesday. They were upset with the suggestion that there should be a cap on the increase in the minimum wage. However, the council went ahead and finalized an increase on the following day. The Minimum Wage Act stipulates that at least one-third of all representatives on the council can decide on the rate if any party refuses to attend the negotiations more than...

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Impact of ARFP on Korea’s financial services

First published in The Korea Herald. A very important development in the first week of June that will bring huge benefits to the financial services industry in Korea has gone largely unnoticed here. Finance officials and regulators from six Asia Pacific Economic Cooperation members, including Korea, who are leading the development of the Asia Region Fund Passport concluded a week of meetings in Singapore to iron out the details of the proposal and announced that it was on track to be launched in 2016. The countries ― also including Australia, New Zealand, the Philippines, Singapore and Thailand ― aim to cut down on incompatible or overlapping financial regulations that may hinder the marketing of managed funds between participating economies. Six other APEC members ― Hong Kong, Indonesia,...

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Stock price limits and circuit breakers

First Published in The Korea Herald. Starting next month, the Korea Exchange will expand price limits and introduce market-wide circuit breakers that should provide some relief for stock traders and retail investors. Price limits and circuit breakers are used by many stock exchanges and regulators to counter severe price movements in financial markets, and Korea is no exception. Price limits are maximum percentages or values that a security or derivative contract can rise or fall in a trading day. Circuit breakers are trading halts triggered by sharp price movements, and can be imposed on either an individual financial instrument or the market as a whole. They were first adopted by the New York Stock Exchange and other U.S. exchanges in 1988.Circuit breakers had been recommended...

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Inadequate steps to boost foreign investment in Korea

First published in The Korea Herald. Last week, the Korean government announced plans to attract more foreign direct investment by more than 50 percent in three years by easing regulations and focusing support on five sectors, including cosmetics and pharmaceuticals. The Ministry of Trade, Industry and Energy said in a statement that industrial materials, petroleum products and food processing sectors would also be given strong support through regulatory changes. Korea received FDI pledges totaling $19 billion last year, up sharply from $14.5 billion in 2013, and now aims to increase the amount to $30 billion in 2017. Despite the sharp rise in pledges last year, South Korea still ranks low among high-income countries in the accumulated amount of FDI compared to the size of its economy. Moreover,...

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Korean workers’ tax burden not as bad as it seems

First published in The Korea Herald. Going by the recent debates on tax hikes in Korea and President Park Geun-hye’s firm resolve not to place “an additional burden on the public,” it would appear that the Koreans are being taxed heavily.Although it is true that economic growth is stagnant, and employment rates are not too rosy, a new report by the Organization of Economic Cooperation and Development has just shattered the myth that the tax burden in Korea is unusually high. The OECD report, Taxing Wages 2015, released on April 14, says the tax burden has increased in 23 member countries and fallen in 10 over the past five years. And guess which group Korea falls into?That’s right, from 2010 to 2014, the tax burden in Korea has declined, even as the middle class in most other developed...

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Labor reforms face hurdles in Korea

First published in The Korea Herald. The presidential office last week urged representatives of labor, management and the government to compromise on contentious reform measures aimed at providing greater flexibility in the labor market, a day after they failed to narrow their differences within the deadline. The Economic and Social Development Commission ― a consultative body comprising representatives of labor, management and the government ― had set March 31 as the deadline for concluding months of talks on overhauling Korea’s labor market. The discussions focused on the issue of the labor market’s dual structure ― the huge gap between full-time regular employees and nonregular workers ― pending topics like wages, working hours and retirement, the issue of partnership among tripartite...

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