Former Finance Minister Lee Hun-jai on Tuesday lashed out at the government for its inaction on fundamental problems of the local economy, calling Korea a child failing to mature due to the fear of growing pains.

“Korea is like a child that skipped growing up because of the fear of growing pains and is now aging,” he said at a forum in Seoul hosted by consulting and accounting firm Ernst & Young Han Young.

“All economic players know that the current system ― both in terms of industrial and macroeconomic management ― can’t continue, but they just wait and see because they don’t want to be the first ones to feel the pain of restructuring,” he added.

Lee was Korea’s two-time finance minister ― in 2010 and from 2004-2005, the second time doubling as deputy prime minister. 

His remarks came as Korea braces for the era of slower growth after decades of high growth, with its once-marching corporate giants stumbling on global fronts.

The country must undertake painstaking restructuring to reboot its economic and industrial system, Lee continued, if it wants to realize the long cherished dream of joining the ranks of advanced economies.

“Industry-wide policies and approaches are wrong. They allow zombie companies to eat away at the competiveness of well-performing companies, and thereby, let those viable ones turn into zombies,” he said. “The government must look at individual companies, not industries as a whole.”

Lee also said that the local economy’s high dependence on chaebols will have to end, as the family-owned large conglomerates will no longer be the main drivers for the economy in the new growth era.

“I hate to see the chaebols locked in a zero-sum game over the government-issued business privileges. After watching them fight over the duty-free store licenses recently, I realized that the era of chaebol-driven growth has come to an end,” he said.

The former minister also warned that credit-driven consumption growth could backfire, if it is not backed by sustainable growth in disposable income, in a thinly veiled jab at the government’s property-market boosting measures last year.

In a long-term perspective, the government must take bold steps to shore up the middle class, helping them alleviate the burdens of housing and education and augment disposable income, he added. 

By Lee Sun-young
(milaya@heraldcorp.com)