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South Korea is facing nationwide strikes, debt troubles and drought so severe that President Kim Dae Jung has called on the military to help farmers and civilians.

Kim’s falling popularity has left him unable to push through needed economic reforms, and his continued efforts at inter-Korean reconciliation could further damage him politically and hurt the economy.

Amid a regional economic slowdown, South Korea is facing its worst drought in a century. Compounding problems for Seoul, nationwide strikes in the transportation, medical and manufacturing sectors began June 12, and more than a quarter of all outstanding corporate bonds will come due between July and December.

The myriad of problems Seoul faces would each alone cause concern, but coming all at the same time, they make a coordinated government response both more important and more difficult. President Kim Dae Jung, facing flagging domestic popularity, has little mandate to press through painful economic reforms, particularly amid growing challenges from the opposition and within his own ruling party as next year’s elections approach.

In an attempt to revive his power, Kim continues to focus on inter-Korean relations – a risky strategy because it has contributed to his falling popularity. His efforts may ultimately seal his status as an ineffective, lame-duck president as he fails to alleviate South Korea’s economic woes and leads the country into the kind of economic situation Japan now faces.

South Korea is in the midst of its worst drought since records began being kept in 1904. It has affected agriculture, water-intensive industries and the general population. Prices of food staples like cabbage and radish have doubled and even tripled in some areas over the past month, according to South Korean media reports.

Water for rice cultivation is being supplied by the military, government and industry. The crisis has reached such a level that Seoul has called for a full-dress mobilization of the entire military – the first since its founding – to assist farmers and civilians, according to the Korea Times.

The Associated Press reported June 12 that 130,000 troops were dispatched to 90 hard-hit regions. They were armed with drilling machines, trucks, excavators and pumping motors to dig wells or draw water from reservoirs.

”It’s like pouring water into a bottomless pot,” said Warrant Officer Oh Kwang-Jei, supervising 60 soldiers watering a parched rice paddy. ”But we will make this land wet again and fit to raise the rice.”

While the government is dealing with the water shortages, the Korean Confederation of Trade Unions (KCTU) began a series of nationwide strikes June 12. The KCTU announced that 55,000 members are demonstrating to criticize the government’s hard-line tactics against strikers, to demand a 12.7 percent wage hike and to call for an end to the government corporate-reform process.

Those striking include unions in both of Korea’s major airlines, hospital workers and the Federation of Korean Chemical Workers. The airline strike alone is expected to cost $20.3 million a day, according to the Ministry of Transportation and Construction. The government has declared the general strike illegal, and while Kim has demonstrated in the past his resolve to crack down on strikes, it was a recent police intervention at a strike in Ulsan that in part triggered the current KCTU action.

“Down with President Kim Dae Jung’s government,” chanted about 3,000 workers as they marched in central Seoul June 12, Reuters reported. “The government should stop corporate restructuring, which takes away jobs from us.”

There were no clashes between the marchers and riot police.

“We will become a loser overnight in global competition if we stop restructuring,” Kim said in a statement after a Cabinet meeting, warning that the government would deal sternly with the illegal walkout and any violence. “If we cannot restore social order, foreign investors will stop investing in Korea and domestic firms will leave for China and Southeast Asia,” he said.

Meanwhile, the broader process of economic restructuring and recovery is presenting additional challenges. The Ministry of Finance and Economy, in its May 31 Korea Economic Update, cautioned that the economy is “riddled with uncertainties” due to external forces and emphasized the need to carry on with a “constant restructuring system.” Yet politics, rather than economics, is driving government policies.

Earlier this year, the chaebol reform process, intended to restructure South Korea’s business conglomerates, was slowed from within the ruling party. South Korea’s presidential elections, although a year away, are driving the reform decisions, as no prospective candidate wants to be associated with policies that could be seen as causing economic hardship to the average Korean or to corporate donors.

A more serious challenge to the on-again off-again economic restructuring is a recent announcement by the Bank of Korea that $27.9 billion in corporate debt will come due in the second half of 2001.

South Korea faces a major economic shock unless the government intervenes, and while it likely will in order to protect short-term economic and social stability, continued debt bailouts undermine Korea’s prospects for recovery in the long term.

Faced with a combination of short- and long-term economic and social problems, Seoul needs to mount a coordinated and strong response to effectively avoid a deteriorating cycle of crises.

Yet Kim has lost much of his public and political mandate, and he is constitutionally barred from running for a second term in 2002. He has become increasingly ineffectual in promoting policy initiatives or keeping economic restructuring on track.

Kim instead continues to focus much of his efforts on his one claim to fame: inter-Korean reconciliation. Under Kim’s guidance, the government is offering support for the money-losing Mount Kumkang tourism project run by Hyundai Asan Corp.

Government officials have announced that because of the continued cooperation between Hyundai Asan and North Korea’s Asia-Pacific peace committee, stalled inter-Korean talks are expected to resume as early as late June.

With the recent announcement from Washington that the United States would resume talks with Pyongyang, Kim is hoping for a quick breakthrough and a reciprocal visit from North Korean leader Kim Jong Il to Seoul.

If his Sunshine Policy yields tangible results, Kim Dae Jung expects to rebuild his popularity – at a high point just a year ago – and thus be able to press through painful economic reforms.

But even if Kim can pull off a diplomatic coup and gain a guarantee of a visit from Kim Jong Il, it is unclear if he can rebuild his popular mandate in time to affect deep and potentially painful structural reforms.

According to a recent poll, 69.6 percent of respondents said that the South should not make any more concessions to the North, while during last year’s inter-Korean summit, 53.8 percent said the government should be more favorable toward the North. The more Kim does to appease the North, such as offering lenient treatment over recent incursions of North Korean ships into the South’s waters, the more he must rebuild his political credibility.

As Kim continues to focus on North Korea, political infighting and partisan bickering in Seoul keeps significant long-term economic restructuring a distant dream. Ultimately, Kim may find himself only proving his lame-duck status, simply postponing and exacerbating a major economic shock while South Korea slips down the fiscal path Japan has tread during the past decade.



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