Advice for South Korea’s Moon
Proceed with caution to preserve economic progress and national security
In the 64 years since the end of the Korean War, South Korea has built itself into a regional economic powerhouse and a global innovator whose citizens enjoy a stable economy and democratic governance. At this moment in its history, however, serious economic, political and national security risks threaten this stunning accomplishment. A new president taking the helm following a political scandal, a belligerent Kim Jong-un in the North, and intensifying economic challenges have created a volatile situation where missteps could quickly undermine decades of peace and prosperity for South Korea.
Koreans elected Moon Jae-in early May in a special election to replace Park Geun-hye, ousted due to a bribery scandal involving some of Korea’s largest businesses. Samsung Group chief, Jay Y. Lee, was arrested in February and remains jailed as he awaits his next court date. Mr. Lee’s arrest and the former president’s removal from office have rocked South Korea’s political and business communities. In addition, the leadership vacuum at Samsung created by Mr. Lee’s arrest is significant and politically harmful given that Samsung’s operations account for more than 20 percent of the South Korean gross domestic product (GDP) and 30 percent of its exports.
The election of President Moon was certainly a reaction to these events. Mr. Moon is a lawyer, not an economist. His election, marking a rather sudden about-face from the policies that have shaped Korea’s economic success, means the country could go in a very different direction — but which direction and where it leads are open questions.
On top of these internal challenges, Mr. Moon inherited a brazen and antagonistic leader in the North. A series of defiant missile tests potentially capable of delivering nuclear weapons suggest Kim Jong-un is increasingly impervious to international pressure, or simply reckless. While Koreans have lived with an uneasy ceasefire for more than 60 years, with the 33-yearold Mr. Kim, they have never before faced with such erratic leadership in the North.
For context, the capitals of the two Koreas, Pyongyang and Seoul, are only 120 miles apart — a little more than the distance between Columbus and Cincinnati, Ohio. And the distance from the demilitarized zone at the border (DMZ) to Seoul is the same as the distance between two baseball parks, Nationals Park and Camden Yards, at either end of the BaltimoreWashington Parkway.
Thus, Mr. Kim does not need an intercontinental missile to threaten greater Seoul, where 11 million of South Korea’s 50 million people live. If Mr. Kim is looking to the South and seeing an untested leader whose first actions are likely to cripple his country’s economic engines, Mr. Kim’s provocative actions will likely continue or even escalate.
Meanwhile, South Korea’s economic performance could invite new challenges as well. Due in no small part to uneven exports, its GDP has effectively stalled, growing to just 0.9 percent in the first quarter. And the prolonged jailing of Samsung’s heir can only have the effect of slowing or stopping innovation at a company elemental to South Korea’s economic prospects.
According to the market research firm TrendForce, Samsung’s share of the global smartphone market is about 26 percent. Apple’s share is about 17 percent. No doubt, Apple would like to change that and has begun touting the expected release of its new iPhone later this year, which seems to come at the perfect time to take market share from its distracted and leaderless competitor.
Everyone knows that Apple and Samsung have been in a fierce smartphone competition for the better part of a decade. Not as many people know that China’s two major smartphone makers, Huawei and Oppo, have market shares of 11.4 percent and 8.1 percent each. Together, their 19.5 percent of smartphone sales outpace iPhones. And it is no secret that there is a lot more room for growth in smartphone sales in China than in the U.S. or South Korea. China would be delighted to use Samsung’s problems as an opening to drive its two major phone manufacturers to the doorstep of consumers worldwide — market share that is very hard to reclaim in the competitive tech sector.
While Samsung remains formidable (as the makers of Blackberry devices can attest) market leadership can turn to market laggard in the blink of an eye. Blackberry’s sales were off 73 percent in just two-and-a-half years between September 2013 and March 2016. Mr. Moon should take note.
It has long been understood that there is a strong, indispensable relationship between national security and economic strength. Nations are better able to meet foreign threats when they can provide ample economic opportunity and hope for upward mobility to their citizens. That explains why Secretary of Defense James Mattis recently told The New Yorker that the cynicism and sense of alienation many people in the U.S. and other countries feel toward their governments and each other keeps him up at night more than North Korea and other foes.
When I was tapped by President George W. Bush to serve as the first secretary of homeland security after the September 11 terror attacks, I needed to reassure the American people and signal to the rest of the world that the U.S. was ready for emerging threats. Similarly, with the serious economic and military threats circling South Korea, President Moon must take steps to demonstrate to North Korea and the global marketplace that South Korea is stable, secure and committed to sustaining the economic progress it has made over the years.