Moon Jae-in must brave stalled North Korea talks, a slowing economy and a demanding US in his third year as president

Despite the challenges he faces, South Korea’s president has a sterling track record of negotiations – with both the US and North Korea – plus a secure economic foundation to stand on

Thomas Byrne

Published: 11:00am, 10 May 2019

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As South Korean President Moon Jae-in begins the third year of his single five-year term, he faces major challenges. Looming large are the stalled nuclear negotiations between the United States and North Korea – a situation exacerbated by Pyongyang’s two weapons tests in the past week, both overseen by Supreme Leader Kim Jong-un himself.

A little over a year ago, Moon bravely initiated what could be called “the year of summits”, when he met Kim on the south side of the military demarcation line in Panmunjum. Since then, he has met Kim twice more (in May and September 2018).

That initial meeting with Kim paved the way for all the summits that followed, including two between US President Donald Trump and Kim, and one between Russian President Vladimir Putin and Kim. Japanese Prime Minister Shinzo Abe is now also said to be contemplating a summit with Kim.

All are a direct result of Moon’s opening. This is a stunning run of diplomatic activity and a sharp departure from a past dominated by multiparty talks and conventional, bottom-up diplomacy as the modus operandi in dealing with North Korea.

Until the recent diplomatic impasse following the Trump-Kim summit in Hanoi in February, bilateral relations between the North and South had thawed. The military hot line was restarted and a North-South liaison office opened in Kaesong, the industrial complex north of the demilitarised zone.

There are tight limits, however, on resuming inter-Korean economic cooperation projects, since they would require that an exception be carved out from existing US and UN economic sanctions. This stalemate was painfully evident when South Korea last month staged a celebratory event on the anniversary of the first Kim-Moon summit – and North Korea declined to participate. Aptly, the title of the celebration was “The Long Journey”. Nonetheless, the diplomatic achievements of the last year are an impressive testament to Moon’s persistence.

The South Korean economy highlights his other major challenge. South Korea’s gross domestic product contracted 0.3 per cent in the first quarter of 2019 from the last quarter of 2018, according the Bank of Korea’s advance estimate, the most since the global financial crisis a decade ago, and there were negative reverberations in South Korea’s stock market. Exports are falling, and there are signs of weakness in some segments of the country’s bellwether technology sector.

Will Moon trade South Korean democracy for North Korean diplomacy?

But the Korean economy remains fundamentally sound. It has ample fiscal space to provide stimulus, with government debt levels and refinancing needs even more favourable than AAA-rated Germany. Risks in the financial sector are well managed, and the South Korean economy will continue to prove resilient to external economic or global capital market shocks.

South Korea is also well positioned to manage geopolitical shocks. The US-South Korean alliance continues to be the solid foundation on which Moon can rely, and which he has consistently cited as the basis that has enabled his outreach to North Korea. Moon has worked diligently to coordinate his diplomatic efforts with the US, even when differences have arisen over the feasibility of a stepped approach to denuclearisation.

Moon does face a very difficult renegotiation of the Special Measures Agreement that governs cost sharing for the 28,500 US troops stationed in South Korea. The agreement is usually renegotiated every five years. After very strained deliberations that concluded in February, the South agreed to pay an additional 1.04 trillion won (US$924 million), which was well below Washington’s ask, but in exchange conceded to renegotiate its contributions every year.

It should be noted that South Korea has significantly stepped up its military contributions in recent years and shoulders its fair share of the burden. Under Moon, Korea's total defence expenditure stood at 2.6 per cent of its GDP in 2018, far greater than the 2 per cent Nato benchmark achieved by only a few member countries. And Moon has committed to increasing the defence budget by an average of 7.5 per cent each year between 2019 and 2023.

South Korea has also agreed to deploy a US missile-defence system on its soil under Moon’s tenure despite serious resistance from China. This has deeply strained South Korea’s relations with its mammoth neighbour. Moon should be applauded for his approach to burden sharing and support of US military strategy on the peninsula.

Thomas Byrne is president of the non-partisan Korea Society and formerly the regional manager for sovereign risk in Asia-Pacific and the Middle East for Moody’s Investors Service

This article appeared in the South China Morning Post print edition as: Moon deserves praise for his tough diplomacy

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