Tuesday, October 26

S. Korea’s Lee runs risks with new city plan

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SEOUL: South Korean President Lee Myung-bak put his rising popularity ratings and economic reform plans at risk yesterday by changing the focus of a planned new city that has angered a key power broker in his ruling party.The issue will likely dominate parliament when it convenes in the next few weeks and could delay Lee’s plans to cut taxes, expand the mandate of the Bank of Korea and reform a rigid labour market by making it easier to hire and fire workers.

The pro-business president wants to dump the original plan to shift large chunks of the government from the capital to a new city called Sejong about 150 km (95 miles) south of Seoul.

He proposes instead to turn it into a science city and offer incentives to local and foreign firms to relocate there. His government argues it is a waste of money to build another city just to house bureaucrats and point to a large administrative centre which already exists just outside the capital.

“Provincial elections are coming up in June and regardless of what policies the government comes up with, Sejong City will be the centre of clashes until the vote,” said Kang Won-taek, a political science professor at Soongsil University.

The elections for major city mayors and provincial governors are the main political event for the year and will help lay the ground for the next presidential race in December 2012.

Lee’s key rival within the ruling party, Park Geun-hye and a strong contender to succeed him as president, has sided with the opposition in pushing for the original plan which is favoured in the central region, traditionally home to swing voters who could determine the presidential race.

Lee has seen his support rate top 50 per cent in recent polls, about double from a year ago, winning credit for leading Asia’s fourth-largest economy out of the global downturn ahead of other countries in the region.

“If the conflict over Sejong gets out of hand, Lee’s support rate will suffer,” Kang said.

Park, daughter of a former autocratic leader who was the country longest-serving president, commands enough support within the party — combined with opposition MPs — to derail Lee’s policy plans for the city and delay his economic reforms.

One of the main pieces of legislation for this year is to revise the Bank of Korea Act to allow the central bank to launch an independent probe into financial companies, including non-bank financial firms.

Investors welcome the move, seeing the central bank as free from the politics of financial regulators.

Lee’s plans for the new city appears to have won early support from the country’s biggest and most powerful conglomerate, the Samsung Group.

Local online news provider MoneyToday quoted a Samsung Electronics’ vice chairman as saying the group planned to invest 2.05 trillion won (US$1.83 billion) from 2011 to 2015 in Sejong city, to develop new businesses such as green energy and health care.— Reuters