HOW MOON CAN RECHARGE KOREA’S BATTERIES
Less than two months after his inauguration, it is impossible to say how successful Moon Jae-in will be in revitalising South Korea. But the president’s gutsy decision to scrap nuclear reactors should give investors hope that Asia’s fourth largest economy may be about to surprise us.
Korea Inc abhors Moon’s halt on construction of new atomic plants and his plan to phase out old ones. And while it may increase power bills for households in the short run — and chop profits for nuclear cheerleaders — there are two reasons to applaud Moon for making good on this campaign pledge. One, it makes for a safer Korea. Two, it could unleash the next boom industry in a country struggling to find its niche between low-cost China and hightech Japan.
The first issue has Kim Jong-un’s fingerprints all over it. Earthquakes are a concern given Japan’s meltdown in 2011. So are North Korea’s missiles as they improve in range and accuracy. As Kim’s desperation intensifies, might he fire a couple of his weapons at Moon’s 50 million-plus population?
The risk cannot be ignored as Donald Trump’s White House ratchets up the antiKim rhetoric and boosts America’s military presence in the North Asian seas. Reactors are ideal dirty-bomb targets, particularly facilities near US military sites (Korea is home to 29,000 American troops).
The anti-nuclear movement really took off after the Fukushima disaster in Japan. All radiation leaks are global incidents and the worst meltdown since Chernobyl happening in a nearby country captured the attention of Koreans.
The fear factor increased further when investigations found that some of South Korea’s own reactors had faked safety certificates. And if rules-obsessed Japan cannot safely manage reactors, how well might a government do in a country where the corruption-perceptions score is 32 places worse than in Japan?
South Korea’s denuclearisation is also an economic opportunity. In 2007, Samsung chairman Lee Kun-hee warned that his country was “sandwiched” uncomfortably between an economy that Korea had long emulated — Japan — and one whose disruptive potential was an existential threat.
Ten years on, China is indeed making inroads into key Korean industries — cars, smartphones, shipbuilding. Can the day be far off when China produces a Hyundai-calibre car — or self-driving ones — at two-thirds the price? China’s success at creating iTunes-like ecosystems — Tencent’s WeChat and Alibaba’s Alipay — also are ominous signs for Korea Inc.
Moon’s economy, in other words, does not just need to boost competitiveness, but to reinvent itself to thrive amid the rise of China, India, Indonesia and other Asian powerhouses. The answer is to pour resources and innovative spirit into research on green growth. What China and India lack is a business model that enables them to grow at 6% or 7% a year without their 2.6 billion combined population suffocating.
The challenges facing Moon are daunting: stagnant wages, chronic youth unemployment, a bubble in household debt, the endemic corruption that put his predecessor Park Geun-hye in handcuffs and figuring out whether Kim or Trump is the greater threat to regional peace.
The lack of employment opportunities during Park’s tenure, which began in 2013, had millennials saying they live in “Hell Chosun”. It is a reference both to the country’s last dynasty and a nagging sense that theirs is a feudal existence.
The lords in this feudal society are the giant family-owned conglomerates such as Samsung, Hyundai, LG and Daewoo. Moon’s main economic task is changing monopolistic behaviour that impedes the vibrant startup scene needed to create new jobs, wealth and innovative energy.
Why not incentivise young would-be Elon Musks with tax benefits, research grants, reduced red tape, publicly funded safety nets and even subsidised venture-capital schemes? Despite Samsung’s battery-related scandals last year, Korea’s biggest conglomerate has made a sizeable shift into the lithium-ion market to diversify profit streams. LG Chem is looking to become a global leader in batteries for residential and industrial use. Moon could prod Samsung, LG and other chaebol to act as incubators for entrepreneurs in the renewable field.
Seoul also should deregulate access to national power grids to catalyse the private sector, particularly scrappy new players, to transform Korea into a new-energy powerhouse. This could be Japan’s future, too, if it would only take off its nuclear-power blinders.
SoftBank chief Masayoshi Son, for example, wants to invest billions in a massive wind-power network running through Mongolia and much of North Asia. Tokyo’s response: We will take your request for power-grid access and consider it. That is code for: “the force of Japan’s ‘nuclear village’ of reactor enthusiasts is very strong”.
Still, Moon needs to think bigger — much bigger. When announcing Seoul’s about-face on nuclear energy, he set goal of 20% of electricity coming from renewables by 2030. Why not target 70% or more, also phasing out the coal that clouds the skies around Seoul, to remake Korea as a key innovation laboratory? As these advances come online, Moon’s government could use surplus power as an olive branch to tame North Korea.
The longer Seoul clings to the idea that its future is making cars and re-engineering phones and televisions invented elsewhere amid China’s rise and Japan’s head start, the more living standards will slide. With his bold decision on nuclear, Moon suggested he may indeed be the leader to address Korea’s sandwich problem. He just needs to put more meat on his economic strategy.
The longer Seoul clings to the idea that its future is making cars and re-engineering phones and televisions invented elsewhere amid China’s rise and Japan’s head start, the more living standards will slide