South Korean President Park Geun Hye said her nation will seek to join the Trans-Pacific Partnership trade talks and wants progress toward a commercial deal with China this year, as an appreciating won threatens exports.
“We also hope to be able to smoothly move forward with our consultations with the TPP members so we can actually realize Korea’s formal participation in the TPP,” Park, 61, said in an interview at the presidential office known as the Blue House in Seoul yesterday. “This year we plan to work to make substantial progress in negotiating free-trade agreements with China, Indonesia and Vietnam.”
Park’s government for months has been considering whether to join the U.S.-led TPP negotiations, which encompass 12 nations from Singapore to Chile. Expanded export opportunities would benefit South Korean manufacturers as they confront exchange-rate appreciation that has seen the won reach a five-year high against the yen.
Policy makers are focused on helping companies contend with a stronger won through measures including expanded insurance against volatility in the currency, Park said. “Taking direct measures is something we ruled out” to influence the won’s value, she said. The president’s office later said in a statement that Park’s remark “does not rule out smoothing operations to ease market volatility.”
Park, speaking in the Rose of Sharon room of the Blue House that’s named after South Korea’s national flower, also is seeking expanded economic ties with India, Asia’s third-largest economy, where she will visit next week. Nuclear reactors offer one field of opportunity for South Korean companies in India, she said.
The president’s office said Park’s remarks on TPP followed on the “expression in November of interest” in the talks, and don’t “presuppose or finalize official participation.”
The trade agenda complements a domestic economic program focused on expanding opportunities for entrepreneurs and the spread of technology, along with addressing the underrepresentation of women in the workforce. Park, daughter of former President Park Chung Hee, who came to power in a 1961 military coup and ruled until his assassination in 1979, five days ago laid out a three-year plan to boost potential growth to 4 percent.
Taking office as the nation’s first female president after economic expansion slowed to a three-year low of 2 percent in 2012, Park pushed through a 17.3 trillion-won ($16 billion) extra budget in May that together with an interest-rate cut by the Bank of Korea that month helped lift business sentiment.
She followed up with measures to bolster a weakening real-estate market that weighed on households with record debt, along with incentives to encourage companies to increase investment.
“With the economy on a more stable footing this year, her priorities have shifted towards the longer term,” said Wai Ho Leong, a Singapore-based economist at Barclays Plc. “Her plan to deliver a more comprehensive three-year plan to boost Korea’s potential growth rate -- through economic restructuring and fostering innovation -- will not be easy to deliver. But these are the sort of policies that will leave her administration with a strong legacy, if properly implemented.”
The strengthening won, which gained 23 percent against the yen in 2013, could limit the acceleration in growth projected for this year, the Ministry of Trade, Industry and Energy said Jan. 1. The finance ministry forecasts gross domestic product to rise 3.9 percent in 2014 after a 2.8 percent gain in 2013.
“The foreign exchange rate of course has a big impact as exports are an important part of this country,” Park said. “As we cannot just sit and watch hardships companies continue to go through there are indirect measures I mentioned earlier -- including expanding FX insurance for small-to-medium sized companies, as a temporary measure. I don’t think we can make more efforts outside such measures.”
Park said that “the Bank of Korea obviously cannot directly intervene in the FX market,” when asked whether the central bank should take steps to address won gains. The nation typically buys or sells the dollar to address won volatility, and Vice Finance Minister Choo Kyung Ho said yesterday that officials will “take swift, decisive actions to stabilize the market against herd behavior and speculative moves.”
Samsung Electronics Co., Asia’s biggest technology company, “is paying close attention to global foreign-exchange trends and strives to protect its interests against currency fluctuations,” the Suwon, South Korea-based company said in a Jan. 3 e-mailed statement.
The Bank of Korea opted to forgo lowering interest rates two days ago to address gains in the won, even with inflation -- at 1.1 percent in December -- below its target range of 2.5 percent to 3.5 percent. The gathering was less than three months before Governor Kim Choong Soo’s term ends in March.
“As to who would be the right person as the next Bank of Korea governor, we’re casting our net wide in terms of looking into who will be the right person,” Park said. “We continue to search for the candidates.”
The proposed Trans-Pacific Partnership agreement, championed by U.S. President Barack Obama, goes beyond typical trade deals that focus on tariffs and market access, with discussions on protection for companies that compete against government-backed businesses and stricter safeguards for patents and copyrights. Negotiators missed a 2013 deadline to complete the deal and have yet to announce a new timeline for talks to be finished.
“The TPP will allow Korea to further expand and build up its global FTA network,” Park said. “Indeed, Korea has already concluded or is close to concluding individual FTAs with 10 out of 12 TPP members.”
South Korea would need the agreement of the current 12 TPP nations to join in, an achievement that wouldn’t be without hurdles at this stage. One help is that it already has a free-trade deal with the U.S., the largest TPP nation.
“They will have very little bargaining power coming in this late and they would have to be prepared to concede on some very near and dear topics,” said Deborah K. Elms, head of the Temasek Foundation Centre for Trade & Negotiations in Singapore. “The sticky issues would be autos, beef, rice,” she said. “It’s possible that Korea may have decided it’s worth it for them to make those kind of concessions,” rather than wait till possibly 2017, she said.
With China, the first phase of free-trade talks have been completed, and given the “strong” commitment of the two nations to a deal, “I’m sanguine about the outcome,” the president said.
Park, who served as South Korea’s first lady after her mother was killed in a 1974 assassination attempt on her father, said that promoting the participation of women in the economy is one of her most critical agenda items. What’s most important is to ensure women don’t suffer interruption in their careers due to childbirth and bringing up children, she said. A number of policies are being crafted to address the challenge, she said.
The president also said she plans to showcase her vision for a “creative” economy when she attends the World Economic Forum gathering in Davos, Switzerland later this month. The initiative is designed to promote entrepreneurship and foster new technologies in Asia’s fourth-largest economy.