Seoul & Busan Mayoral Election 2021

Political and Economic Implications of the Elections in Seoul and Busan

Cover Story

By Jim Fatheree

Election Results Send Sharp Message to Democratic Party

The April 7 mayoral elections in Seoul and Busan, the Republic of Korea’s two largest cities, were a blow to the ruling Democratic Party (Minju Party) and President Moon Jae-In due to the decisive losses by the Minju candidates to those from the conservative People Power Party (PPP). Most attention was focused on the Seoul election, as the Mayor of Seoul is widely considered to be the most powerful political leader in Korea after the President. There, Oh Se-hoon, the PPP candidate and mayor of Seoul from 2006 to 2011, won by a 57.5% to 39.2% margin over Park Young-sun, a former member of the Moon cabinet who had tried to distance herself from the national party.

In Busan, generally a more conservative city than Seoul, the PPP candidate Park Heong-joon, a former professor, Secretary General of the National Assembly and political aide to President Lee Myung-bak, won with 62% of the vote. This election was marked by very high turnout for a bi-election, an indication of the growing disenchantment among voters over the policies under President Moon as he enters the final year of his mandated five-year term. Specifically, voters seemed to react to the accumulated fatigue from Covid-19 as the government struggles to contain new spread and roll out a vaccine program. This is telling, as the Minju Party won a large majority in the National Assembly elections last April due to the effectiveness of Covid management at that time. Now, the perception that it was the people, not the government, that helped contain Covid by following social distancing seems to have been a factor. Additionally, voters were unhappy over the Moon government’s failure to rein in escalating housing prices – and related high taxes – as well as a speculation scandal in the government agency with oversight over housing. Among specific voting groups, voters in Seoul have tilted towards the Minju Party in recent years, but that changed in this election. Affluent and wealthy municipalities such as Seocho, Gangnam, and Songpa had a high turnout rate, and voted for Oh Se-Hoon.

Young men voted overwhelmingly for the PPP candidates, for the reasons cited above, and perhaps as a backlash against policies by the government aimed at supporting women. This is not to say that younger men are anti-feminist, but that they pride themselves on being different than older men on gender relations and felt that Moon policies may discriminate against them based on faulty assumptions. For people in their 30s concerned with buying houses and raising families, the housing issue was a major factor underlying support for the PPP.

The political lens now is focused on prospects for the President elections in April 2022, and names of possible candidates such as Lee Jae-myung, Yoon Seok-youl, Ahn Cheol-soo, Rhyu Si-min, Chung Sye-kyun and Kim Chong-in are already floating around.

In our view, the key issue for the Minju Party will be the effectiveness of the Covid-19 vaccination rollout. With only 2.9% of the population vaccinated to date, accelerating vaccines and returning to a more normal situation sooner than later is critical.

Implications for European Businesses Operating in Korea

Going forward, businesses should focus on the big picture while looking for ways to adapt to the new political circumstances. First, major internal and external challenges remain. The Moon government must focus on Covid-19 containment/vaccinations, boosting economic growth and employment for young people, cleaning up the real estate scandals, and managing foreign relations with the United States, China and Japan in an effort to salvage something on North Korea. It will be a difficult last year for the Moon government, made more complicated by its political status. The Seoul/Busan elections chastened him, and he has rededicated himself to resolving issues.

President Moon deserves credit for containing the economic damage from Covid, as Korea’s real GDP rate of -1.0% in 2020 was the best in the OECD. Projections for growth in 2021 and 2022 are solidly over 3% as exports and Chaebol business rebound, but these projections are lower than the average for the G20, suggesting that the structural problems – in particular high youth unemployment and slow growth in the SME sector – remain.

Second, President Moon has some major initiatives underway, most notably the Korean New Deal, which includes the Digital New Deal and Green New Deal, and a new Net Zero 2050 carbon emission commitment. There are 10 specific projects such as the Data Dam, Smart Governance, Smart Healthcare, Green Technology, etc. aimed at increasing e-commerce, creating jobs, and reducing carbon emissions that have received budget support through 2025.

President Moon will work to advance these as far as possible as part of his legacy. In this context, it is also important to keep in mind that the Minju Party controls the National Assembly. The Digital New Deal and Green New Deal are forward-looking areas for some major Korean chaebol. Companies are making significant investments and adapting businesses in response, and the competition from other countries will put pressure on policymakers, so these programs are not likely to go away with a change in government.

For Mayor Oh, options for bold initiatives are likely limited by the fact that the Seoul City Council is dominated by the Minju Party, but he will be compelled to make progress in some areas with another mayoral election in 15 months.

As members of the ECCK know, there is no shortage of regulatory, standards and other issues that affect business in Korea. Amidst these political and economic dynamics, businesses must continue to work on their problems, but also keep an eye open for new opportunities. This requires that companies be smart about finding allies in both parties, building relations with the new mayors in Seoul and Busan, and identifying the right stakeholders and developing effective strategies for the government and National Assembly.

About Mr. Jim Fatheree

Executive Director

GR Group

BIO

Mr. Jim Fatheree, Executive Director for the GR Group in Washington DC, is former Vice President for Asia at the US Chamber of Commerce, covering Korea, China, Japan and Southeast Asia. In such role, Mr. Fatheree was involved in the US-Korea Free Trade Agreement in 2015-16 and co-led the US Coalition for the Trans-Pacific Partnership. Mr. Fatheree is also a former President of the US-Japan Business Council covering tax, trade, IP and other issues.

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