Conservative opposition candidate Yoon Suk-yeol was elected South Korea’s new president following a heated election, raising questions about the future of Asia’s fourth-largest economy amid the global pandemic and U.S.-China tensions.
Yoon, a prosecutor-turned-politician of the main opposition People Power Party, will replace the progressive Democratic Party’s outgoing President Moon Jae-in, whose single five-year term ends in May. Yoon defeated ruling party candidate Lee Jae-myung by less than 1% in yesterday’s elections, the country’s tightest race since it restored direct presidential elections in 1987.
“The result that we see today is the result we have achieved together with the People Power Party,” said Yoon, 61, in his victory speech delivered to an audience of supporters. “But more than that, it is the victory of the great people of Korea.”
Born in 1960 to parents who were educators, Yoon studied law at South Korea’s prestigious Seoul National University. He took ten attempts to pass the bar exam, eventually becoming a prosecutor in 1994. He is the first former prosecutor to become president in South Korea and the first in decades to have not served in the country’s legislature.
Yoon joined a leading government investigation unit and oversaw the corruption charges and resulting imprisonment of two former presidents, Park Geun-hye and her predecessor Lee Myung-bak, along with Samsung’s Jay Y. Lee.
Yoon, who served as prosecutor general under Moon, resigned from his post last year after prosecutors under his leadership began investigating allegations of wrongdoing involving Moon’s political allies, including a former justice minister. He became an outspoken critic of Moon’s administration, joining the conservative People Power Party a month later.
The election between Yoon and Lee was shaped by key issues of South Korean foreign policy, including relations with the U.S., its most important ally, North Korea’s ongoing hostility, and heightened tensions between the U.S. and China, its biggest trading partner. Other key issues included sky-high housing prices, which had roughly doubled in the capital, Seoul, under Moon, lack of job opportunities for young adults, growing income inequality, and anti-feminist sentiment.
Yoon’s stance on business similarly reflected how close relations with the U.S., growing anxieties regarding China’s influence and intentions, and pride in South Korea’s international contributions are altogether playing into concerns about domestic policies and foreign investment.
“What’s clear is that Yoon Suk-yeol will use more business and enterprise-friendly policies,” Shin Dong-cheon, an emeritus professor of economics at Yonsei University and the former dean of the university’s College of Commerce and Economics, tells Forbes.
In addition to lowering capital gains and property ownership taxes, Yoon has said he will abolish a planned new tax for people who earned 50 million won from stock investments, to be effective next year. He also promised to create at least 2.5 million homes in the next five years to make housing more affordable.
Yoon also said he wanted to add another U.S. Terminal High Altitude Area Defense (Thaad) system to counter North Korea, potentially risking new economic retaliation from China. That includes eliminating the “strategic ambiguity” between ties with Washington and Beijing–but foreign policy aides have said that Yoon aims to “reset” testy diplomatic ties with China by promoting more regular security dialogue. In 2017, Moon deployed Thaad in South Korea, which China viewed as a threat.
However, Shin notes that Yoon is unlikely to adopt a radical stance towards China, despite his interest in deploying an additional Thaad.
“Considering China’s market size, its importance in the global supply chain and Korea’s trade relations with China, it’s unthinkable for Korea to participate in an open and aggressive stance against China,” says Shin.
China is the largest market for many South Korean companies. At the start of the pandemic, China accounted for 24.3% of South Korea’s exports, according to a report from business lobby group Federation of Korean Industries.
On an international scale, foreign domestic investment in South Korean businesses reached an all-time high of $29.51 billion in 2021, according to government data. That compares with $20.7 billion a year earlier, based on reports from Korea’s Ministry of Trade, Industry and Energy.
Yoon’s top economic advisor Kim So-young, an economics professor at Seoul National University, told local media that Yoon would attract further investments by fostering innovation in the country.
“The government’s role is inducing people to start new businesses in innovative areas of high demand and better prospects of profits like digital health care, Korean cultural content and digital education,” Kim said.
Part of this innovation lies in cryptocurrency. On the campaign trail, Yoon also announced plans to deregulate the cryptocurrency industry, announcing at a conference in January that he would overhaul regulations that are “far from reality and unreasonable” in order to realize the potential of cryptocurrency.
The former prosecutor also proposed raising the tax threshold for cryptocurrency investments from the current 2.5 million won to 50 million won, equalling that of equities. Yoon’s crypto-friendly stance, which contrasts with rival Lee’s more measured approach to cryptocurrency, bodes well for investment into the field.
As South Korea emerges from the pandemic, its economic performance has risen to pre-pandemic levels, according to the OECD. Still, the OECD expects South Korea’s GDP growth to slow to 3 per cent in 2022, raising questions about the future of South Korea’s recovery–now in Yoon’s hands.