Posts tagged ‘political risk consultancy’
On Friday 27 August 2011, Mayor of Seoul, Oh Se-Hoon stated that he would resign immediately, as he indicated prior to the failed referendum on free school meals.
Initial assessments have been that Oh’s defeat is a blow to the Grand National Party (GNP) with the referendum seen as a test of voter sentiment ahead of parliamentary elections next April and the presidential vote in December 2012. Read more
On the weekend of 12-13 March 2011, a number of foreign correspondents based in Seoul were dispatched to Japan to report on earthquake and tsunami recovery efforts. This comes amid a growing debate on the numbers and status of foreign correspondents based in Beijing, Seoul and Tokyo, as foreign media organizations seek to consolidate their numbers in Asia. Read more
Hyundai Engineering and KCC Engineering and Construction Corporation have signed a deal with Saudi-based Polysilicon Technology Company (PTC)—a joint venture between Saudi Mutajadedah Energy Co (MEC) and South Korea’s KCC Corp—to construct a polysilicon plant in Jubail, on Saudi Arabia’s Gulf Coast. The deal signifies an important step for Saudi Arabia, which is seeking to diversify its energy consumption in order to conserve oil for export. Read more
On 22 February 2011, in an event that went largely unnoticed, the Korea Trade Insurance Corporation (K-sure) and Nippon Export and Investment Insurance (NEXI) signed an agreement to coordinate the provision of trade insurance for joint projects undertaken by Japanese and Korean companies in third countries. Read more
On 17 February 2011, the Financial Services Commission (FSC) suspended the operations of Busan Savings Bank and its affiliate Daejeon Mutual Savings Bank, for a period of six months (until 16 August 2011) due to insufficient liquidity. At the end of 2010, Busan Savings Bank held equity capital of minus KRW21.6 billion as of the end of 2010 and Daejeon Savings Bank held equity capital of minus KRW32.3 billion won. Read more
During 8-10 March 2011, a three-day meeting to discuss revisions to the constitution was attended by 125 National Assembly representatives of the Grand National Party (GNP).
The key agenda item was revision of the constitution to change the presidential term of office from the current single five-year term to a four-year term with one chance for re-election. Constitutional revision to allow for two-term presidency has been on the national political agenda for a considerable period of time.
Supporters contend that a two-term presidency will increase the willingness of the president to negotiate with his or her opponents and encourage a first-term presidential administration to better reflect the will of the people. However, there is little chance of constitutional revision gaining wider public support.
Constitutional revision is perceived as a non-critical issue and cannot compete for public attention with issues that currently have a more direct effect on the national population, such as food and energy price rises, inflation, and national security. Further, the public holds a dim view of political infighting over what is perceived as a non-critical issue. The issue is highly contested within the ruling GNP; with several notable pro-Park Geun-Hye faction stalwarts not attending the 8-10 March meeting; and is currently not supported by the opposition parties.
On 11 February 2011, the Bank of Korea (BOK) announced interest rates would be held at 2.75 percent. The BOK maintained its cautious approach, indicating more time was needed to assess the impact of January’s 25 basis point benchmark rate rise.
A key underlying consideration in the decision is thought to be the effect that a rate rise would have on household debt. Korea’s already high household debt levels, which in part stem from an inflated property market, have risen further with the combination of low interest rates and the economy’s rapid recovery from the global financial crisis. However, concerns remain.
Incomes and assets are still rising and credit remains relatively easy to access. More alarmingly, figures on credit card issues for 2009-10, indicate an upsurge in the number of credit cards issued to consumers with poor credit reports, as lower-income households turn to non-bank lending institutions.
As yet, comparisons with the 2003 credit card lending crisis are unfounded. In 2003, credit card lending skyrocketed, whilst issuers were on the brink of collapse. As asset quality deteriorated and liquidity and solvency challenges became more difficult, the banking sector and financial markets were exposed to systemic risk, which ultimately affected the real economy.
Regulators and bank lending institutions are this time more aware that the stay on interest rates merely defers concerns regarding household debt and action to address the issue is cautiously being prepared.
As expected, January 2011 core inflation figures were above the Bank of Korea’s target range, with the consumer price index rising 0.9 percent month-on-month, and 4.1 percent year-on-year.
Food prices have been a particular concern with fresh food products rising 30.2 percent year-on-year. Raw produce speculation across the region and the lead-up to Lunar New Year have contributed to food price rises. Extraordinary contributing factors also continue unabated with foot-and-mouth disease, avian influenza, and now substantial sugar price rises expected from recent weather events in Australia, furthering price pressures. Inflation and food prices in particular, carry an inherent political risk.
The Lee Myung-Bak administration has to date demonstrated that it considers inflation as a priority and is poised to take further measures. In a televised interview on 1 February 2011, President Lee stated that the government was currently considering reductions in taxes and import tariffs on food and energy. The public focus accorded to the issue substantially reduces high-impact political risk factors associated with food price inflation but will inevitably add to wider public dissatisfaction.
