Feb. 25 (Bloomberg) -- Thirty-four years ago, Park Geun Hye spent her last night in South Korea’s presidential mansion washing her assassinated father’s blood-soaked shirt. Today she returns as the country’s first female president.
The eldest daughter of the late President Park Chung Hee assumed executive power at midnight, and took the oath of office this morning at an outdoor ceremony in front of the National Assembly. Park moved out of her home in Seoul’s Gangnam district with two Korean Jindo puppies, a present from her neighbors to “protect her.” She officially moved into the presidential Blue House at 1:15 p.m. local time.
“We are confronted anew with a global economic crisis and outstanding security challenges such as North Korea’s nuclear threat,” Park said in her inauguration speech. “The tasks we face today are unlike any we have confronted before.”
In succeeding Lee Myung Bak for a single five-year term, Park, 61, inherits an economy burdened by a widening income gap, record household debt and the won’s 25 percent gain in six months against the yen that’s hurting export competitiveness with rival Japan.
Her success may hinge on whether she can escape the shadow of her father’s dictatorial 18-year rule, which was marked by double-digit growth, as well as torture and censorship to quash dissent. She also faces a North Korea emboldened by this month’s nuclear test, which has forced her to amend pledges to engage with the totalitarian state.
‘Work Cut Out’
“Park has her work cut out for her, at least more than what Lee faced when he took office five years ago,” said Jeong Han Wool, deputy director of the Center for Public Opinion Research at the East Asia Institute in Seoul. “She not only has a longer roster of issues to tackle, but most are vulnerable to external factors, such as the global financial crisis and the North Korean threat.”
Park campaigned on pledges to raise wages, boost welfare spending and rein in the influence of the chaebol, the business conglomerates such as Samsung Group and Hyundai Motor Co. that her father helped create. Her new government’s first priority is to create jobs by funding more research in information technology and science.
“One of my critical economic goals is to ensure that anyone that works hard can stand on their own two feet,” Park said in her speech today. Small and medium-sized enterprises must prosper alongside large companies, she said.
When Park’s mother was killed by a North Korean agent in a 1974 assassination attempt on her father, the never-married Park became South Korea’s first lady at the age of 22. She left public life when her father was killed by his intelligence chief in 1979, before returning as a legislator in 1998.
Older South Koreans, who make up most of her fan base, are nostalgic for an economy that grew an average 10.3 percent in the last nine years of her father’s regime. Younger voters tend to associate her with his dictatorship, and she vowed after her December victory to heal the scars of his legacy.
Park takes office with a 61.4 percent approval rating, according to a Feb. 18-22 survey by Seoul-based Realmeter. The poll of 2,500 respondents had a 2.0 percentage-point margin of error.
Asia’s fourth-biggest economy grew an average 4.3 percent over the five years through 2007, before a U.S. housing market crash triggered a global recession. In the fourth quarter of last year, gross domestic product expanded 1.5 percent from a year earlier, less than the 1.8 percent median forecast in a Bloomberg News survey.
‘People’s Happiness Era’
The economy is likely to achieve 2.8 percent growth this year, Bank of Korea Governor Kim Choong Soo said in an interview on Feb. 19. South Korea’s benchmark Kospi index has gained 0.8 percent since the presidential election on Dec. 19.
The new president promises to usher in a “People’s Happiness Era” by broadening both the middle class and the proportion of working citizens to 70 percent of the country’s 50 million population.
While the country’s unemployment rates is 3.2 percent, only 40 percent of youths aged 15 to 29 are engaged in economic activity, according to a report by the finance and labor ministries published earlier this month.
“More jobs please,” Shim Yo Sup, a 20-year-old student at Hanyang University in Seoul, said while waiting to take a photo of Park’s motorcade. “More jobs is the answer to a lot of problems in Korea and Park should push to create jobs for us young people.”
Park has portrayed herself as emblematic of South Korean women’s push for equality, pledging incentives to companies to increase the number of females in management roles, and tripling child-support subsidies for single-parent homes to 150,000 won per month.
Her government has allocated 72 percent of the budget in the first half of the year to aid a recovery. She hasn’t announced how she will finance her pledges to raise wages, increase welfare spending and immediately introduce an 18 trillion won ($16.6 billion) fund to help avert loan defaults.
“The current economic climate doesn’t allow for front-loading the budget to fund new welfare and employment programs,” said Jeon Young Jae, a research fellow at the Samsung Economic Research Institute in Seoul. “There will be many costs that would require a boost in affordability but she still hasn’t announced how she will practically realize these pledges without raising taxes.”
Standard & Poor’s, Moody’s Investors Service and Fitch Ratings boosted South Korea’s sovereign rating last year, all citing strong fiscal fundamentals and room to respond to external shocks.
S&P sees no major policy shifts under Park, while “much hinges on the details and capacity to deliver on her pre-election policy pledges of revitalizing small businesses, boosting social spending and enacting conglomerate-related measures,” Elena Okorochenko, managing director and lead analytical manager for Asia-Pacific sovereign ratings, said in an e-mail on Dec. 20.
While North Korea’s militarism remains a “credit negative factor,” its Feb. 12 nuclear test isn’t expected to affect South Korea’s “strong financial and economic fundamentals,” Moody’s said earlier this month.
The detonation forced Park to shift from calling for more engagement with Kim Jong Un’s regime. While during the campaign she expressed willingness to hold a summit with Kim and expand economic aid, the new government’s stance is “based on strong deterrence, not one of appeasement,” Park told her advisers a day after the test.
“North Korea’s recent nuclear test is a challenge to the survival and future of the Korean people,” Park said today. “I urge North Korea to abandon its nuclear ambitions without delay and embark on the path to peace and shared development.”
During her term, Park will oversee South Korea’s taking back operational control of its troops during wartime from the U.S. force stationed on the peninsula. She has proposed reducing mandatory military service for males to 18 months from the current 21 months, drawing criticism that the cut may weaken the South’s ability to respond to increasing threats.
Park is now commander-in-chief of South Korea’s 649,000 troops, compared with the North’s 1.2 million soldiers. The two Koreas remain technically war as the 1950-1953 conflict ended in a truce, not a peace treaty.
About 70,000 people were invited to Park’s inauguration today, including Thai Prime Minister Yingluck Shinawatra and Thomas E. Donilon, President Barack Obama’s national security adviser. Park held her first summit as with Yingluck, followed by a meeting with Japanese Finance Minister Taro Aso.
Singer and rapper Psy of South Korean record label YG Entertainment Inc. performed “Gangnam Style” ahead of Park’s swearing in ceremony. His song last year became the most-viewed video on Google Inc.’s YouTube website, propelling him to global fame.
To contact the reporter on this story: Sangwon Yoon in Seoul at email@example.com
To contact the editor responsible for this story: Peter Hirschberg at firstname.lastname@example.org