BOK Succession Challenge for Park as Scrutiny Increases: EconomyEunkyung Seo and Sam Kim
South Korea President Park Geun Hye, who has rocked her administration with past Cabinet picks, faces one of her biggest personnel challenges yet: ensuring a smooth central bank leadership transition as she tries to steer Asia’s fourth-largest economy to faster growth.
Park’s nominee to succeed Governor Kim Choong Soo, whose term ends on March 31, will face questions from opposition and ruling party lawmakers in a parliamentary hearing, a first in the Bank of Korea’s 64-year history that raises the hurdle for candidates. Park had four Cabinet picks withdraw amid graft allegations and two for personal reasons when she was trying to form a government a year ago.
“Holding a parliamentary hearing may limit the pool of potential candidates as the yardstick is so high in terms of everything from wealth records to plagiarism to credit card use,” opposition Democratic Party lawmaker Hong Jong Haak said in an interview at his office in Seoul on Feb. 7. “My concern is the parliamentary screening is so tough that many competent candidates are reluctant to come forward, so it can block the best choice.”
The successful candidate will have to navigate risks spanning record household debt to U.S. Federal Reserve stimulus tapering that has sparked turmoil in emerging markets. At the same time, Park’s government is seeking to boost the nation’s growth potential to 4 percent, lift employment and achieve per-capita income of near $40,000 before her term ends in February 2018.
Governor Kim and his board held the seven-day repurchase rate steady at 2.5 percent after a cut in May, the Bank of Korea said in a statement in Seoul today, in line with the forecasts of all 17 economists surveyed by Bloomberg News.
The Kospi index rose 0.1 percent as of 10:11 a.m. in Seoul. The won climbed 0.1 percent to 1,061.27 per dollar. The South Korean currency is down about 3.8 percent against the yen this year, following a 23 percent gain in 2013, which aided Japanese exporters.
Local media and analysts have flagged nearly 20 possible candidates while Park hasn’t dropped any hints.
“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 in an interview on Jan. 10. “We continue to search for candidates.”
A report in the Chosun Ilbo newspaper Feb. 8 revived speculation that Shin Hyun Song, a professor of economics at Princeton University and former South Korean presidential adviser, could be a contender for the job. Shin said in an e-mail on Feb. 10 that his appointment from May as an adviser at the Bank for International Settlements precludes him from considering the role.
“Shin’s declining the post puts pressure on the government, which has been troubled in personnel affairs,” said Shin Kwan Ho, a professor of economics at Korea University in Seoul. “He would have been the most trouble-free candidate to face parliamentary hearings at a time when it’s difficult to find someone with both professional and ethical credentials that are infallible.”
Shin was among several potential candidates mentioned by analysts surveyed by Bloomberg News. Others include former BOK senior deputy governors Lee Ju Yeol and Park Cheul, former BOK board member Choi Do Soung, and President Park’s campaign policy adviser Kim Kwang Doo.
An Chong Bum, a lawmaker in the ruling Saenuri Party who is one of 26 members of the parliamentary committee that will vet the nominee, said he expects the hearings to take place next month.
Opposition lawmaker Hong, another member of the committee, said he will propose two days of hearings.
“The new BOK governor will face an unchartered path as the world economy needs to find a smart way of dealing with the unprecedented amount of money printed following the global financial crisis,” Hong said.
Park’s office in March last year vowed rigorous vetting of personnel appointments after her picks for prime minister, defense minister, fair trade commission chief and deputy justice minister all backed out following graft allegations.
A nominee for chief of an agency that supports small businesses stepped down during Park’s first month in office because he didn’t want to comply with rules requiring senior officials to place their shares in a trust fund. A nominee for science minister withdrew after opposition lawmakers questioned his record of working for the Central Intelligence Agency.
In May, Park fired her chief spokesman, who was accused of groping an intern at South Korea’s embassy in Washington during her U.S. trip.
On Feb. 6 this year, Park sacked her fisheries minister for reportedly making a series of comments exacerbating the frustration of residents affected by an oil leak off the southern coast.
Park’s approval rating stood at 56.6 percent according to a Feb. 3-7 survey by Realmeter, a local pollster, recovering from a dip to 45 percent in the fourth week of March last year when the controversy over her appointments soared.
“The race for the next BOK chief is wide open, with no particular candidates on the table now,” said Saenuri Party lawmaker An, who worked for Park’s election campaign and transition committee in 2012.
The successful candidate should be able to build close relations with policy makers in other countries, An said. “At the same time, the governor should work with the finance minister for better policy coordination, while ensuring the central bank’s independence.”
Park will also soon face another BOK personnel decision, with policy board member Lim Seung Tae’s four-year term ending on April 14. The other five board members are set to retire in 2015 or 2016.
Top jobs at the Export-Import Bank of Korea and General Insurance Association of Korea are also vacant.