Matthews Asia Snapshot

Postcard from Korea

Week of 14 April 2017

Two of my recent trips back to South Korea allowed me to witness quite emotional public movements calling for the removal of President Park Geun Hye, following a corruption scandal that erupted late last summer.
During an early December candlelight protest in Seoul, I was moved by the outpouring of civic activism that included families of multiple generations, including many parents who wanted to teach their children the meaning of participatory democracy. I found this high level of political engagement and widespread awareness most encouraging for such a young democracy.

In my personal view, since South Korea’s June Democratic Uprising of 1987, the nation seems to have taken 10 steps forward and two steps back. With these latest controversies, the country has achieved an important milestone—the ousting of a high power through a legitimate, peaceful and patient (but swift) process.
After completing what has been praised as a “textbook case for impeachment,” South Korea and its incoming administration—to start in May—is faced with the difficult task of dealing with China’s trade sanctions against adopting a U.S. missile defense system, protectionism and structural reforms to curb the power of the country’s chaebol, or conglomerates.  While it is difficult to speculate on how successful Korea’s response to any of those challenges would be, I feel strongly optimistic over the prospects for better transparency and corporate governance, and particularly for the willingness of the public to demand it and hold leaders accountable.  Park was elected five years ago by a thin margin against her then liberal opponent and now leading candidate, Moon Jae In. She adopted most of his liberal agenda such as chaebol reform and improvements to welfare. As it turns out, she largely broke with her promises and wasted her opportunity. During primary debates, leading liberal candidates including Moon addressed their commitment to these broken promises. Will the next administration move the needle? Only time can tell for sure. Still, they must now be aptly aware of the public backlash they could potentially face. Also, it is important to note that even under Park’s presidency, lawmakers continued to pass new legislation to improve transparency and bolster minority shareholder rights. Our focus for investing in Korea has always been largely centered on its rising middle class of highly educated and motivated people with proven track record of overcoming challenges. This time won’t be that different.

Michael Han
Portfolio Manager 
Matthews Asia

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