By one metric, Lee\u00a0Jae Myung\u2019s eight months as South Korean president\u00a0have been a smashing success, with the stock market more than doubling on his watch.<\/p>\n
Before Lee\u2019s election in June, he ran on a Kospi 5,000 platform that struck many as fanciful. At that time, the benchmark was below 2,500.<\/p>\n
Lee pledged to raise the index during his five-year term, and thanks to the global artificial intelligence boom, he achieved it in just over five months.<\/p>\n
The AI trade made things a bit too easy for Lee\u2019s administration. He was elected to restore calm to an economy wracked by domestic political turmoil and the US trade war<\/a>.<\/p>\n Thursday (February 19) will bring some\u00a0closure\u00a0<\/a>concerning the first issue. That\u2019s when the verdict on the former President Yoon Suk Yeol\u2019s insurrection case gets handed down. It stems from his controversial imposition of martial law in December 2024, a stunt that led to Yoon\u2019s impeachment and removal from office.<\/p>\n Lee\u2019s first job after taking office was to get the economic reform process back on track. The previous six months were a legislative dead zone. Zero happened to cut bureaucracy, loosen labor markets, increase productivity and level the playing fields so that startups can thrive.<\/p>\n Nor has there been any real progress in reducing the regulatory volatility and tightening corporate governance to end the so-called \u201cKorea discount.\u201d<\/p>\n This phenomenon has led Korean corporations to be valued lower than their peers in Japan or Taiwan. Lee\u2019s administration \u201chas proposed reforms to the Commercial Act that will\u00a0introduce a fiduciary duty for corporate directors to shareholders and likely crack down on stock manipulation,\u201d explains Jeremy Chan, an analyst at Eurasia Group.<\/p>\n \u201cHe has also proposed increasing dividend payments and share buybacks to boost investment in domestic equities,\u201d Chan said.<\/p>\n Yet Lee has recorded no such reform victories. Even so, the Kospi is now trading above 5,500, though no actions on his part. Just the vague promise that with companies like Samsung producing semiconductors used by AI developers, all of Korea\u2019s economic challenges are forgiven.<\/p>\n In a sense, Lee is getting off easy. The Kospi rally isn\u2019t completely unearned. In November, Lee introduced his government\u2019s first budget aimed at ushering in the \u201cartificial intelligence era<\/a>. He said that \u201cin the AI era, being a day late means falling behind an entire generation.\u201d<\/p>\n To avoid falling too far behind, Team Lee is spending 10.1 trillion won (US$7 billion) on AI investments \u2014 three times as much as in 2025. Seoul is also establishing a National Growth Fund to allocate approximately $107 billion to develop AI and other high-tech industries over the next five years.<\/p>\n The government is also supporting \u201cphysical AI\u201d investments that are targeted at integrating AI into semiconductors, automobiles, shipbuilding, robotics and other key manufacturing sectors. And Samsung, by far Korea\u2019s biggest company, is reorienting itself to better ride the AI wave.<\/p>\n JPMorgan Chase strategist Mixo Das has raised his bank\u2019s \u201cbull case\u201d Kospi target to 7,500. Beyond chips, the drivers include defense and shipbuilding. There is also the potential that Lee\u2019s push for corporate governance reforms\u00a0could boost investor confidence, both domestically and internationally.<\/p>\n James Lee, head of global business at Must Asset Management, adds that \u201cglobal attention on South Korea\u2019s value\u2011up story isn\u2019t fading anytime soon. For the market to truly level up, though, this concentration in Samsung and SK Hynix needs to spill over into the broader market and lift the rest of the sectors as well.\u201d<\/p>\n The South Korean stock market\u00a0climbed\u00a0to a valuation of over $3.3 trillion last week, overtaking Germany as the world\u2019s 10th largest. The combined market capitalization of Samsung and SK Hynix<\/a> has reached more than $1.1 trillion,\u00a0surpassing\u00a0the combined market capitalization of Chinese tech giants Alibaba Group and Tencent Holdings.<\/p>\n But the reform dead zone that predated Lee was really a multi-year one. Indeed, by some measures, it was a multi-decade one. Virtually all Korean governments over the last 20-plus years arrived with a burst of big reform plans \u2014 only to demur when they realized the scale of the job of raising competitiveness.<\/p>\n The glacial pace of vital upgrades now leaves Korea balancing the desire for disruption with strict regulations and innovation. An overlapping cacophony of compliance burdens, the need for \u201chigh impact\u201d risk assessments and the process of \u201cwatermarking,\u201d whereby digital content providers are embedded with a unique identifier.<\/p>\n Arguably, Yoon\u2019s 2022-2025 presidency was the fifth in 20 years to overpromise and underdeliver major reforms to increase competitiveness and innovation.<\/p>\n He and his predecessors, Moon Jae-in, Park Geun-hye, Lee\u00a0Myung-bak and Roh Moo-hyun pledged, to varying degrees, to deregulate and reduce the role of exports as the leading growth engine.<\/p>\n Each sought to curb the economic dominance of the family-owned conglomerates (chaebol) that tower over the economy, increase efficiency and boost average wages. Since the 1997-98 Asian crisis, a succession of governments set out to create more economic space for small- and medium-sized companies to thrive.<\/p>\n Once these leaders learned how strong the opposition from the status quo would be, each, like clockwork, pivoted to working with the chaebols, not wrestling economic power away from them.<\/p>\n It\u2019s by now a well-established pattern: getting growth into the\u00a03% range, declaring victory and then pivoting to other pursuits. This cycle has prevented the bold moves needed to disrupt an\u00a0economic system<\/a>\u00a0that\u2019s putting Korea at a disadvantage in the Chinese era.<\/p>\n The threat from China has grown in other ways, too. For all China\u2019s troubles, including a deflation-generating property crisis, China Inc continues to grab global market share, often at Korea\u2019s expense.<\/p>\n The backdrop is that Korea Inc knows that so much of what it does well has been commoditized. China and other rising Asian powers are now rivals in cars, electronics, robots, ships and popular entertainment.<\/p>\n Taiwan is constantly raising its innovative game, while upstarts like Indonesia and Vietnam are making the race for tech \u201cunicorn\u201d startups more dynamic.<\/p>\n The best way for Korea to maintain its high living standards is to innovate in ways that propel the economy upmarket even faster. That\u2019s why Yoon and the three leaders who preceded him pledged an innovative \u201cbig bang\u201d to move Korea upmarket into higher-value sectors.<\/p>\n During Moon Jae-in\u2019s pre-Yoon tenure from 2017 to 2022, chaebols continued to monopolize the economic oxygen startups need to grow into large game-changers. That\u2019s still Korea\u2019s dilemma today as Lee grabs the baton.<\/p>\n In 2013, Park Geun-hye, Korea\u2019s first female president, took office with bold talk of devising a\u00a0more \u201ccreative\u201d economy<\/a>. Park ended up going easy on the chaebols.<\/p>\n Worse, she was impeached and removed after being co-opted by the chaebol establishment. Between 2008 and 2013, Lee came and went without fundamental changes to the chaebol<\/a> system. The same for 2003-2008 leader Roh Moo-Hyun.<\/p>\n The Lee administration arrived in June, eager to establish Korea as a global financial hub, but with few notable reforms in the pipeline to achieve the goal.<\/p>\n That said, it\u2019s still early days for Lee, who took office 260 days ago. But he must accelerate efforts to overhaul the economy\u2019s mechanics as fallout from US President Donald\u00a0Trump\u2019s tariffs<\/a>\u00a0increasingly puts Korea in harm\u2019s way.<\/p>\n As Trump\u2019s trade war drags on, it\u2019s unclear how Lee\u2019s government will end the three-year low-growth \u201ctrap<\/a>,\u201d as some economists call it, now facing the country.<\/p>\n South Korea\u2019s\u00a051 million\u00a0<\/a>people are still experiencing, on average, stagnant real wage growth. Sky-high\u00a0household deb<\/a>t remains a major drag on consumer confidence. So, too, is the uncertainty about where Trump\u2019s trade war is headed.<\/p>\n Chatter about positioning Korea as a leading global semiconductor manufacturing hub is one thing. But improving life for the common person on the street struggling amid the surging costs of property, childcare and education is just as important.<\/p>\n Lee must overcome the perception that, post-Yoon, the political establishment is too preoccupied with score-settling to take legislative steps to raise South Korea\u2019s financial game.<\/p>\n Political stability is one thing, but bold and creative moves to raise living standards are arguably just as important, if not more so, at this crucial juncture in the fast-transforming global economy. Lee is now firmly on the clock for following through on the reforms his various predecessors articulated but failed to accomplish. \u00a0<\/p>\n Follow William Pesek on X at @WilliamPesek<\/p>\n","protected":false},"excerpt":{"rendered":"By one metric, Lee\u00a0Jae Myung\u2019s eight months as South Korean president\u00a0have been a smashing success, with the stock…\n","protected":false},"author":2,"featured_media":291620,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[365,363,364,22128,161541,161542,161543,161544,161545,161546,161547,33465,111,139,69,869,68538,4790,145,143873],"class_list":{"0":"post-291619","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-artificialintelligence","11":"tag-block-2","12":"tag-chaebol-reform","13":"tag-chaebols","14":"tag-korea-ai","15":"tag-korean-economy","16":"tag-korean-semiconductors","17":"tag-korean-startups","18":"tag-kospi-boom","19":"tag-lee-jae-myung","20":"tag-new-zealand","21":"tag-newzealand","22":"tag-nz","23":"tag-samsung","24":"tag-sk-hynix","25":"tag-south-korea","26":"tag-technology","27":"tag-yoon-suk-yeol"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/291619","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=291619"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/291619\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/291620"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=291619"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=291619"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=291619"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}