South Korea: Political and Travel Risk Analysis: Nov-Dec 2016

Current Situation:

  • On December 18th, a special investigation team formed under the headship of Lee Young-ryeol, Chief of South District Prosecutors’ office imposed travel bans on the conglomerate chiefs Samsung Electronics’ Vice Chairman Lee Jae-yong, SK Group’s Chairman Chey Tae-won and Lotte Group’s head Shin Dong-bin from traveling abroad. While a day before that on 17th December Korea Customs Services chose four firms including Lotte, Shinsegae DF and Hyundai Department Store to grant new duty-free store licenses in downtown Seoul.
  • On 12th December Acting President Hwang Kyo-ahn launched a new ministerial consultative body Monday, setting security, the economy, people’s livelihood and public safety as top items on his agenda for stable state management. Instead of taking over regular meetings of top presidential secretaries and the Cabinet in place of President Park Geun-hye, Hwang opted to create a semi-weekly separate session with similar functions.
  • Moon Jae-in, the current forerunner in the race of the Presidency and the leader of the Minjoo Party vowed on 15th December to revisit key foreign policies of the Park Guen hye that include deployment of US-led THAAD missile defense system, and the agreement with Japan about former sex slaves for the Japanese Army during World War II.
  • On December 19th Seoul and Tokyo started sharing intelligence on North Korea’s nuclear weapons and missiles under a bilateral pact that went into effect on Nov. 23.
  • On 9th December National Assembly passed a bill with 234 for and 56 against votes to impeach President Park Geun-hye.
  • On 8th November South Korean, Foreign Ministry Spokesman Cho June-hyuck said President Park Geun-hye decided to miss the APEC Summit, 2016 to be held from 19-20 November at Peru amid concerns over North Korean Nuclear Crisis.

Assessments:

  • The imposition of a travel ban on senior officials of Samsung, SK Group and Lotte Group is one of the interesting developments in the ongoing investigation. This is because the three companies were among the 19 conglomerates who donated around 48.6 billion won to Mir Foundation and 28.8 billion to K-Sports foundation, both of which are headed by Choi-Soon-sil. That said, the prosecutors also believe Samsung to have gained favor from the government-owned National Pension Fund, which has $18 billion stakes in Samsung C&T Corporation. Interestingly, the Lotte Group and the SK Group who are under investigation, have also been awarded new duty-free store licenses in downtown Seoul by Korean Custom Services (KCA). Since the Choi-Soon-sil scandal has drawn n a huge public attention, there is a possibility of further scrutiny of credentials and possible inducements by Lotte and SK Group by the special investigation team in cooperation with KCA.
  • The corruption scandal has resulted in deep fissures within the ruling Saenuri party. As a result, many loyalists including Lee Jung-Hyun, Gyeonggi Gov. Nam Kyung-pil, and third-term lawmaker Kim Yong-tae have resigned. Due to this, the incumbent party has lost its majority reducing the President to a lame duck leader. The Minjoo Party who have won the 2016 legislative elections, currently holds the majority in the national legislature. Hence, this development will further curtail the power of the acting president Hwang Kyo-ahn, to pass necessary legislation leading to gridlock.
  • The aforementioned development poses risk to the national economy as the critical economic reforms like a restructuring of the 300 odd debt-ridden companies across sectors like shipbuilding, shipping, construction, steel making and petrochemicals hasn’t started yet. Also, the looming threat of protectionist measures from Trump presidency and BREXIT will further put a strain on South Korea’s export-oriented economy. The investigation on corruption has also affected President Park Geun-hye’s creative economy project, which aims to promote start-ups and transform South Korea’s manufacturing-heavy economy into a services-oriented because of their link with Choi Soon-sil. The prosecution is currently investigating Cha Eun-taek, a close associate of Choi and former head of the creative economy promotion team who was involved in the establishment and operation of the centers. Hence there is a high probability of slow economic growth and persistent unemployment level, as these creative centers fail to attract necessary funds.
  • Moon Jae-in, the leader of the Minjoo Party who is the leading figure in the opposition for 2017 Presidential election has vowed to revisit the deployment of THAAD missile system and agreement over sex slaves with Japan. This is because as per him the key foreign policy decisions should be left on the next administration to take up. Part of his aversion is based on the possible development of instability in the East Asian region as the development of THAAD missile systems will draw China’s ire with whom South Korea has substantial economic and cultural relationship.
  • Also in November 2015, after Lotte Groups’ handover of land to Defence Ministry for deployment of THAAD missile system, resulted in a surprise raid and audit checks on Lotte Groups’ operations across China by Chinese authorities, making it an indirect harassment. That said Moon Jae-In is also critical of Trump’s jibes on South Korea to bear the cost of deployment of 28,500 U.S troops on its soil. Even if, there has been a visible change in the tone of the President-elect, his intermittent anti-china views and protectionist overtures will result in discomfort to South Korean administration.
  • Following North Korea’s 5th underground nuclear test in September 2016, the South Korean defense minister Han Min-koo signed an intelligence sharing pact with Japanese Ambassador to Seoul Yasumasa Nagamine on November 24. On 19th December South Korea has begun formal sharing of information on North Korea with their Japanese counterparts. The intelligence pact will give South Korea access to Japan’s sophisticated surveillance system that includes five reconnaissance aircraft and 77 maritime patrol aircraft. Apart from that, the concern over North Korea’s future missile test will also push South Korea to develop its own indigenous Korean Massive Punishment and Retaliation System that includes killer missiles.
  • President Park Geun-hye was impeached on December 9th, with total 234 votes in favor and 56 against leading to the political crisis in the East Asian country. She was charged on 20 counts in which she accused of having granted Cho-Soon-sil access to her speeches and other official documents that contained critical information of national importance. Apart from that she also has been charged with inaction during the sinking of Sweol ferry incident in which 304 people either dead or missing. The allegation entails her absence from the action leading to delay in rescue efforts. The constitutional court which already has begun pre-trial consultations have 180 days to take a decision on the impeachment of the president. That said, the corruption scandal has left ruling party in deep shame with many loyalists having resigned from the party posts. The current interim government under Hwang Kyo-ahn will have to bear the responsibility of ensuring successful completion of trial and conduct of 2017 presidential election.
  • Asia Pacific Economic Summit is hailed as one of the most diplomatic heavy platform utilized by member countries to sway global powers on their favor. But with choi gate corruption scandal looming large over Park Geun-hye administration, she skipped the annual summit thereby sending Prime Minister Hwang Kyon-ahn instead. This resulted in Hwang missing important diplomatic engagements such trilateral summit with Japanese and Chinese leaders and voicing its concern over North Korea’s rogue behavior on a global platform. Not only that this was an appropriate platform to set the stage for discussions with the U.S government over the possible political and foreign policy moves of the Trump administration. This overall diplomatic gaffe is gradually leading to foreign policy vacuum. Hence the interim government headed by the acting president Hwang Kyo-ahn must look after foreign policy to augment South Korea’s diplomatic and economic interest.

Recommendations:

  • The country is safe to travel. Hence all essential and non-essential travel can be planned with due diligence.
  • Tourists planning to visit must recheck availability of necessary modes of communication that includes flights, cabs etc. to prevent last minute hassle. As the ongoing civil protests may delay their transportation across planned destinations.

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