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South Korea’s Park Impeached: What Next?

Marcus Noland says South Korea’s political crisis not only could have a dampening effect on investment but also leaves open a dangerous power vacuum at a volatile time in its relations with North Korea.

Marcus Noland (PIIE)

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Pedro da Costa: Hi I'm Pedro da Costa and this is Peterson Perspectives. I'm here with Marcus Noland who's our Executive Vice-President and Director of Studies. And he's also our Asia expert. And given what's happening in South Korea, I thought I'd have you in. First, if you could give us a little bit of background on how did we get here? How did the president get impeached? And what's the background on the scandal for those—?

Marcus Noland: Well, today, the National Assembly voted a bill of impeachment on the president. Here's basically the background. Park Geun-hye, the President the country, is the daughter of the former president and then military dictator, Park Chung-hee. When she was a teenager, North Korean agents attempted to kill her father, but instead they killed her mother. And then eventually her father was killed by his own director of intelligence.

So, both of her parents were killed in assassinations. And as a teenager, she came into contact with the leader of a religious sect. And over a period about 40 years, that man's daughter, Choi Soon-sil, became a very, very close confidant and has emerged as a kind of Rasputin-like character in the Korean Blue House, the equivalent of the White House.

This woman has been indicted on extortion, fraud, abuse of power, and other crimes. The crimes that she is alleged to have committed included participation in government meetings and possession of classified documents despite she had no standing in the government, abuse of her proximity to the President to get favors for her son and her daughter, promotions for people, demotions for others. And perhaps, worst of all, the creation of two foundations and the shakedown of more than 50 South Korean firms for donations that were presumably for her personal use and perhaps the use of President Park once she left office.

This is the sort of extensive web of scandal and corruption. And today, the National Assembly moved to impeach the President.

Pedro da Costa: Wow. And, of course, it's pretty stunning stuff. And this is the result of a long process where we saw continuous protests that seem to keep on getting larger in the streets. And so, essentially, it's the President's association with this very controversial figure that became her downfall if I can summarize what you said.

Marcus Noland: Sure. Her defense is, yes, there may well have been illegal activities going on around me, but I certainly had no knowledge of them. And, of course, I did not sanction or encourage these sorts of activities. So that's her defense.

Now, in terms of process, the way it works in Korea is this essentially bill of particulars that's been drawn up by the prosecutor will now go to the Supreme Court. And the Supreme Court has up to 180 days to decide whether these charges warrant her removal from office or not. The vote of impeachment takes away her political power. The country is now technically being run by the Prime Minister. So you have 180 days.

For the Supreme Court to remove her from office, the Supreme Court which has nine members has to have six votes in favor of removal. Most of those nine members were appointed by conservative governments in the past. She's a conservative. Two of the members, their terms are due to expire in the relatively near future.

So there's a kind of worst-case scenario that if this process drags on to a 140, 150, 160 days, you could end up with a Supreme Court that only has seven members making this decision. And six votes are required to remove her for office. So it's no slam dunk that she is actually going to be removed from office.

There was one case in the past where another president was impeached and it went to the Supreme Court. And the Supreme Court declined to remove him from office. But I think the consensus of almost all observers is that the crimes that he was alleged to have commit are relatively minor compared to the crimes that Park Geun-hye is being alleged to have committed.

Pedro da Costa: And so what kind of economic impact does this likely to have on South Korea? They've been showing fairly firm steady growth recently and forecast in the vicinity of 2.5 percent for the coming years. Is this uncertainty likely to be large enough to have a macro-impact? Or does it depend on how long this drags out?

Marcus Noland: Well, the growth rate in South Korea has been decelerating. And corporate investment has been quite weak. And more investment is going out of South Korea at this point than coming in. This kind of political uncertainty is probably going to put an even greater damper on corporate investments. So I think it's actually going to worsen the situation. It may not have a great deal of impact on consumption, but the weakness in the corporate investment is likely to be exacerbated by this. So it's definitely a negative for the South Korean economy.

Pedro da Costa: And what about the relationship with North Korea and the security implications there? What does a power vacuum in the South mean for the region itself and for the US relation with the region?

Marcus Noland: Well, it's a potentially a dangerous situation right now. You have a political transition in the United States to a new administration about which there's a lot of uncertainty. You have a political crisis in South Korea. If the President is removed, then the South Korean Constitution holds that a new election has to be held within 60 days. So if it were to go full term, so to speak, 180 days for the Supreme Court to decide to remove her then 60 days until the next election. We're talking about possibly eight months where you have essentially a technocrat running the country until you have a new president.

So a prolonged political uncertainty in South Korea and the United Nations has just added more sanctions onto North Korea in response to the North Korean nuclear tests. North Korea in the past has tended to respond with defiance to Security Council resolutions of that sort. And it's also tended to test new incoming US presidents. So this situation, UN Security Council sanctions, a new US President, and political upheaval in the South is almost a perfect recipe for the North Koreans to do something provocative. So I think we have to be on the lookout for that.

Pedro da Costa: Well, let's hope that at least the other side can show some restraint in the face of North Korean bluster. Anyway, thank you so much, Marcus. I appreciate your time.

Marcus Noland: My pleasure.