LEVICK Risk and Business Strategy | January 3rd, 2017
The South Korean Political Crisis

In October 2016, South Korean media reported that President Park Geun-hye had been sharing state information (mostly speeches, but perhaps more classified information) with her longtime friend and confidant, Choi Soon-sil. Choi has separately been charged with using her relationship with Park to extract millions of dollars from several chaebols (large family-owned conglomerates whose combined revenue is equivalent to about 80% of South Korea™’s GDP). The payments were supposed to be donations for educational and social programs, but in reality Choi is believed to have skimmed much of the money for herself and her daughter.
The public™’s discontent is tangible: since the exposure of the scandal, hundreds of thousands of citizens have continuously filled the streets of Seoul in the largest protests since 1987, when the military dictatorship gave way to South Korea™’s present democracy. Park has been impeached by the legislature and temporarily suspended from official duties, but is immune to criminal prosecution as long as she is still technically president. South Korea™’s Constitutional Court must now decide whether to uphold the impeachment or declare it unconstitutional, which may take up to six months.
More Damage for a Strained Economy
 Driven by a series of business setbacks over the last several years on the part of its massive chaebols, the South Korean economy had already been weakening before the eruption of the Park scandal. The country™’s economic growth rate for the last quarter of 2016 is expected to be close to zero, and expected growth for 2017 has been shaved from 2.7 percent to 2.4 percent. Consumption, production, investment, and exports are all down. The South Korean public is increasingly losing trust in the perceived mismanagement of chaebols and the disproportionate impact on the national economy that results.
South Korean citizens are, unfortunately, used to the air of corruption surrounding their presidents. But this is different – unlike previous presidential corruption scandals involving family members of the president, Park is directly and personally implicated in this scandal. Concordantly, the protests against Park (and the chaebols) have been massive and sustained. Her approval rating has plummeted to four percent.
Park™’s Ambivalence and the Future
Park has apologized for her inappropriate relationship with Choi, but maintains that she has not broken any laws and so far seems unwilling to resign, which would make her vulnerable to criminal prosecution. The country will face continued political and economic stagnation until a resolution to the crisis is achieved.Â
If Park refuses to resign and the Constitutional Court allows her to be reinstated and finish out her term:
- Park could still be thrown out in the next regular general election, which is scheduled for December 20, 2017. The anti-Park opposition (including defectors from her own party) would have time to plan, organize, and solidify.
- The system™’s decision to protect Park, a symbol of the collusion between the elite political and business classes, will signal that traditional corruption has remained normalized. The case for systemic overhauls of South Korea™’s political and economic structures would be made only more obvious, and the public™’s demand for change would be made even more determined.
Even though a resignation by Park would bring about a quick resolution to the current political crisis, there would still remain a high degree of uncertainty and potential instability in South Korea™’s near future.
- There is talk of a populist movement achieving concrete political ascendency in South Korea as it has in Europe and the United States – Seongnam mayor Lee Jae-myung has emerged as a popular contender for the presidency. Comparing himself to Bernie Sanders, he has vowed to break up the chaebols. Lee is currently ranked third in the polls behind the top two possible candidates, but only trails them by two points (the other two are tied).
- Park™’s conservative Saenuri Party is fracturing along anti- and pro-Park lines, which will result in two new parties by the end of 2017. No prominent presidential candidates have arisen to lead either faction, weakening the barriers to entry for the emerging populist movement.
The public™’s appetite for massive structural reforms has been whetted by real problems, and may now be as insatiable as in 1987 – no matter when Park leaves office or how. Politics and private business will both be forced to adapt.
For further information about LEVICK Business Intelligence™’s political risk assessment capabilities – including obtaining a complete copy of this report or others – please visit us online at http://levick.com/practices/business-intelligence or contact us directly at LEVICKIntelligence@LEVICK.com.
LEVICK Risk and Business Strategy | January 3rd, 2017
The South Korean Political Crisis

In October 2016, South Korean media reported that President Park Geun-hye had been sharing state information (mostly speeches, but perhaps more classified information) with her longtime friend and confidant, Choi Soon-sil. Choi has separately been charged with using her relationship with Park to extract millions of dollars from several chaebols (large family-owned conglomerates whose combined revenue is equivalent to about 80% of South Korea™’s GDP). The payments were supposed to be donations for educational and social programs, but in reality Choi is believed to have skimmed much of the money for herself and her daughter.
The public™’s discontent is tangible: since the exposure of the scandal, hundreds of thousands of citizens have continuously filled the streets of Seoul in the largest protests since 1987, when the military dictatorship gave way to South Korea™’s present democracy. Park has been impeached by the legislature and temporarily suspended from official duties, but is immune to criminal prosecution as long as she is still technically president. South Korea™’s Constitutional Court must now decide whether to uphold the impeachment or declare it unconstitutional, which may take up to six months.
More Damage for a Strained Economy
 Driven by a series of business setbacks over the last several years on the part of its massive chaebols, the South Korean economy had already been weakening before the eruption of the Park scandal. The country™’s economic growth rate for the last quarter of 2016 is expected to be close to zero, and expected growth for 2017 has been shaved from 2.7 percent to 2.4 percent. Consumption, production, investment, and exports are all down. The South Korean public is increasingly losing trust in the perceived mismanagement of chaebols and the disproportionate impact on the national economy that results.
South Korean citizens are, unfortunately, used to the air of corruption surrounding their presidents. But this is different – unlike previous presidential corruption scandals involving family members of the president, Park is directly and personally implicated in this scandal. Concordantly, the protests against Park (and the chaebols) have been massive and sustained. Her approval rating has plummeted to four percent.
Park™’s Ambivalence and the Future
Park has apologized for her inappropriate relationship with Choi, but maintains that she has not broken any laws and so far seems unwilling to resign, which would make her vulnerable to criminal prosecution. The country will face continued political and economic stagnation until a resolution to the crisis is achieved.Â
If Park refuses to resign and the Constitutional Court allows her to be reinstated and finish out her term:
- Park could still be thrown out in the next regular general election, which is scheduled for December 20, 2017. The anti-Park opposition (including defectors from her own party) would have time to plan, organize, and solidify.
- The system™’s decision to protect Park, a symbol of the collusion between the elite political and business classes, will signal that traditional corruption has remained normalized. The case for systemic overhauls of South Korea™’s political and economic structures would be made only more obvious, and the public™’s demand for change would be made even more determined.
Even though a resignation by Park would bring about a quick resolution to the current political crisis, there would still remain a high degree of uncertainty and potential instability in South Korea™’s near future.
- There is talk of a populist movement achieving concrete political ascendency in South Korea as it has in Europe and the United States – Seongnam mayor Lee Jae-myung has emerged as a popular contender for the presidency. Comparing himself to Bernie Sanders, he has vowed to break up the chaebols. Lee is currently ranked third in the polls behind the top two possible candidates, but only trails them by two points (the other two are tied).
- Park™’s conservative Saenuri Party is fracturing along anti- and pro-Park lines, which will result in two new parties by the end of 2017. No prominent presidential candidates have arisen to lead either faction, weakening the barriers to entry for the emerging populist movement.
The public™’s appetite for massive structural reforms has been whetted by real problems, and may now be as insatiable as in 1987 – no matter when Park leaves office or how. Politics and private business will both be forced to adapt.
For further information about LEVICK Business Intelligence™’s political risk assessment capabilities – including obtaining a complete copy of this report or others – please visit us online at http://levick.com/practices/business-intelligence or contact us directly at LEVICKIntelligence@LEVICK.com.
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