At the Dora Observatory, on the south side of the Korean demilitarized zone, binoculars let tourists take a look into North Korea. For decades, South Koreans have been anxious about their Communist neighbour but confident in their own economic success; but recently, many have been worried about both.
Marking the two-year anniversary of his inauguration on Friday, South Korean President Yoon Suk Yeol would have been forgiven for not being in any mood to celebrate.
Last month, voters delivered a stinging rebuke to Mr. Yoon’s People Power Party, with the left-wing Democrats winning 175 of the 300 seats in the National Assembly. Mr. Yoon has three years left in his term, but he’s already being labelled a lame-duck president, with various reforms – on labour, education and pensions – likely doomed to partisan gridlock.
“It’s going to be a dogfight for the next three years,” said Jung-hoon Lee, professor of international relations at Yonsei University in Seoul. “It’s not a good situation for him.”
Commuters at a Seoul transit station watch President Yoon Suk Yeol's May 9 news conference about his first two years in office.Ahn Young-joon/The Associated Press
Political stagnation could be costly for South Korea, however: the country is grappling with a slowing economy struggling to regain the dynamism of the 1990s, growing poverty, and a rapidly aging population – as well as an increasingly aggressive North Korea that earlier this year abandoned the idea of unification, and described the South as its “primary foe.”
Visitors to South Korea once spoke of the bizarre calmness of a country that lived under persistent threat of war. That remains true: like Taiwan, South Korea never feels like the geopolitical front line it is, even at the demilitarized zone separating it from the North, today more a tourist site than a battlefield.
And despite the many challenges facing the country, Seoul remains bustling, dynamic and just plain fun. It’s the heart of a cultural explosion that has the world in its grip, a soft-power dynamo unmatched by any country of Korea’s size, with planeloads of tourists flying in to attend K-pop concerts and pose for photos at locations featured in popular TV shows.
But, under the surface, problems remain: income inequality is among the highest of the countries that are members of the Organization for Economic Co-operation and Development (OECD), youth unemployment is rising, and many people struggle to afford housing, particularly in Seoul, where much of the economy is still centred.
Poverty is more visible than a few years ago, and household debt has ballooned from 155 per cent of net disposable income in 2014 to more than 200 per cent. South Korea’s stock market has lagged its neighbours, falling behind Japan, Taiwan and even Hong Kong in recent weeks.
Gen Z South Koreans face the unwelcome prospect of being the first generation worse off than their parents since the end of the Korean War in 1953. They will also have to foot the bill for their elders: by 2040, almost 35 per cent of the population is projected to be older than 65.
South Korea’s birth rate – the number of babies a woman can be expected to have in her lifetime – is expected to drop to 0.64 this year. Seoul’s is already well below that rate, at 0.55, far short of the replacement level of 2.1, and even below that of neighbouring Japan, which is at 1.26, a country long held up as emblematic of aging Asian societies. Efforts to turn this around have been unsuccessful and costly: Mr. Yoon said successive governments have spent close to $275-billion in the past 16 years on population policies such as stipends and tax breaks for new parents.
An elderly visitor gets her picture taken at the Korean Folk Village in Yongin. By 2040, South Korea expects more than a third of its population to be over 65.
Canada’s birth rate is 1.43, also well below replacement. Like most Western countries, it makes up the shortfall with immigration, something South Korea is starting to embrace as well, easing restrictive rules on migration and naturalization.
Since 2014, the country has seen a net increase of around 386,000 foreigners, who, at 1.75 million, now make up around 3.4 per cent of the total population, though still well below the developed nation average of 10 per cent.
Mr. Yoon’s government has doubled the annual quota for bringing in low-skilled workers on temporary visas to 120,000. In the manufacturing hub of Ansan, just south of Seoul, signs in Chinese, Vietnamese and Urdu are a common sight on the city’s Multicultural Street, where many restaurants and businesses cater to the local foreign work force.
A sign in Ansan celebrates the multicultural character of a city with a growing foreign work force.
Ansan hopes to be the site of a planned immigration agency, which will centralize functions currently spread out across a variety of government ministries, said the city’s deputy mayor, Kim Dae-soon. He said there was a general trend toward relaxing immigration restrictions, “but we don’t know the degree, we need more radical relaxation.”
In the past, many Koreans have opposed immigration, with the country’s large Chinese-Korean population often complaining of discrimination, but this has shifted as the birth-rate issue has become more and more acute.
“Our No. 1 problem is not North Korea, it’s the decreasing society,” said tour guide Sharon Choi. “People used to be very negative about accepting immigrants, but nowadays they realize that if we don’t accept immigration, Korea might disappear.”
The tidal energy station in Incheon is the largest green power project of its kind in South Korea, fuelling the many businesses that have made the city an increasingly important hub of commerce.
Many foreign workers are employed in the industries that drove the “Miracle on the Han River,” when South Korea’s electronics-manufacturing-based economy boomed in the latter half of the 20th century, with the rise of brand names such as Samsung and Hyundai that continue to dominate today. The cities which surround Seoul are characteristic of this boom, sprawling collections of high-rise residential complexes, shopping malls and car dealerships.
“Twenty years ago, this was just mud flats, it was nothing,” said Yun Wonsok, head of the authority which runs a free economic zone in Incheon, home to South Korea’s largest airport and dozens of multinational companies and institutions, including Boeing, GM and the World Bank.
Incheon is bidding to host the approaching Asia-Pacific Economic Co-operation summit, due to be held in South Korea in November, 2025, which Mr. Yun said was an ideal opportunity to brand it as an “international city,” attracting innovative startups and new businesses to complement the family conglomerates, or chaebol, that have long dominated the Korean economy.
Fei Xue, a Korea analyst at the Economist Intelligence Unit, said the dominance of the chaebol can make diversifying the economy difficult, as their strong vertical supply chains built up over decades mean it is next to impossible for startups and foreign companies to compete.
Last year, South Korea’s economy expanded just 1.4 per cent, and while this is expected to bounce back to around 2.2 per cent for 2024, the Bank of Korea said it expects average growth to slow to around 0.6 per cent in the 2030s, and begin to drop in the following decade. Mr. Fei said this was to be expected as the economy matures and is not necessarily a concern. He pointed to positive data from the first quarter of this year showing South Korea’s continuing strength in tech manufacturing, boosted by strong global demand for microchips amid an artificial-intelligence boom.
But he said the country faces a number of problems, chief among them the demographic issue, the geopolitical rivalry of the United States and China – South Korea’s top two export markets – and domestic inflation and flagging demand.
Shopping districts like this one in Seoul have felt the pinch from South Korea's recent economic problems, such as inflation and lower export demand. Increasingly, many are blaming Mr. Yoon for those difficulties.
Efforts to reform pensions and housing – which would reduce the burden on younger workers – have stalled, and Mr. Yoon may struggle to find common ground between his free-market principles and a more populist left legislature.
Recent polling by Gallup Korea found a majority of respondents blamed Mr. Yoon for the crisis, even as they largely agreed with his proposed reform. Only 23 per cent said they approved of the President’s performance, with his economic record receiving particular criticism.
The President’s popularity hasn’t been helped by a perceived closeness to big business. Two chaebol heads, Samsung’s Lee Jae-yong and Lotte’s Shin Dong-bin, were charged in relation to the bribery scandal that brought down former president Park Geun-hye; both were pardoned in 2022 by Mr. Yoon, who said he hoped it would be “an occasion for the people to pull their strength together to help overcome the economic crisis.”
At a May Day parade in Seoul, trade unionists lampoon Mr. Yoon, whose free-market policies have created friction with the left.ANTHONY WALLACE/AFP via Getty Images
There is still plenty of excitement to be found in the South Korean economy. Mr. Yun said the “tech war” between Washington and Beijing created opportunities for South Korea to act as a haven for companies seeking to diversify their supply chains. In April, Canadian Trade Minister Mary Ng led a delegation to Seoul, where she met her Korean counterpart Inkyo Cheong and local and foreign business leaders. South Korea is Canada’s third-largest Asian trading partner, and seventh overall.
In an interview, Mr. Cheong said Canada was a “crucial partner for Korea” and had played a pivotal role in the country’s industrialization. Trade between the two countries reached US$14.6-billion last year, an increase of 70 per cent from 2015, when a Korea-Canada free trade agreement was implemented.
In the current climate, “geopolitical uncertainties are no longer a mere variable when establishing trade policies, but a constant that always must be considered first,” Mr. Cheong said.
“In particular, we are strengthening industrial, supply chain and technological co-operation with key allies such as Canada, based on our conviction that stable supply chains centred around reliable partners are more efficient for sustainable and long-term industrial development.”
James Griffiths has covered the Koreas since 2015. For this article he visited Seoul, Suwon, Incheon, Ansan and the demilitarized zone. His travel to South Korea was paid for by the World Journalist Conference. The WJC did not review this article.
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