Low Birthrate is Biggest Threat to South Korean Economy, Governor Kim Says

The biggest threat to South Korea’s economic health isn’t from North Korean aggression or Chinese competition, according to Kim Moon-Soo, governor of the country’s largest province and a potential presidential candidate. It’s from the country’s low birthrate.

South Korea will face “a very big obstacle to our growth” unless families have more babies, Gyeonggi Governor Kim said in an interview at Bloomberg’s headquarters in New York. The government needs to be “more active” in providing child care and lowering families’ education cost, he said.

Women with careers, who tend “not to marry and not to have children,” have added to this “difficult” issue, said Kim, the third-most-favored candidate from the ruling Grand National Party for next presidential election, according to a Realmeter poll this month. Gyeonggi province has introduced incentives for encouraging government employees to have more children, Kim said.

South Korea’s fertility rate was 1.21 per woman in the last five years -- the fourth-lowest in the world, according to United Nations data.

Asia’s fourth-largest economy is seeking further business cooperation with the U.S. as it faces rising competition from China, which has lower labor costs and land prices. Kim urged the U.S. to ratify the free trade agreement between the two countries, adding to the existing military alliance between the nations that is “critically essential” because of China.

Increasing China Trade

China, overtaking Japan last year as the world’s second- biggest economy, is a competitor as well as a close trade partner with South Korea, even while it is always on the side of North Korea on military affairs, Kim said. The two countries in the Korean peninsula remain technically at war since their 1950-53 conflict ended in a cease-fire, which was never replaced by a peace treaty.

“If there were no China, the U.S.-Korea alliance may not be as essential,” he said.

Korea’s anti-U.S. groups may try to spur animosity against the U.S., said Kim, noting that the trade agreement that awaits ratification was completed during President George W. Bush’s administration, with some provisions renegotiated in December.

A firm security tie with the U.S. is also important for South Korea in dealings with North Korea, Kim said.

“We have to try to continue our dialogue and cooperation with North Korea, but it has to be based on a very strong military alliance” with the U.S., he said.

South Korea has refused to engage in dialogue with North Korea until the government in Pyongyang apologizes for last year’s attacks that killed 50 South Koreans, hampering international negotiations on North Korea’s nuclear weapons program.

Moving to Korea

Some Japanese electronics and semiconductor makers, including Canon Inc., are considering moving plants to Gyeonggi province to take advantage of Korea’s growing market for such products, a trend that began after the earthquake in Japan last month, according to Kim. San Diego-based Qualcomm Inc. (QCOM), the world’s largest producer of mobile-phone chips, will also expand its investment in the country, he said.

Kim, who said he was imprisoned twice while an anti- government activist, said he became a conservative after seeing failure in communism in 1990s following the collapse of the Berlin wall and the Soviet Union. He said his first visit in 1994 to the U.S., where he saw “impressive values” of human rights even in poor neighborhoods such as New York City’s Harlem, also helped change his views.

When asked to confirm his plans to run for president, Kim, 59, said, “Let’s wait and see” -- and noted that there are 20 months to go before the election.

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: Kenneth Fireman at kfireman1@bloomberg.net

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