Bloomberg News

South Korea Ruling Party Loses Seoul Vote in Warning for Lee

October 26, 2011

Oct. 27 (Bloomberg) -- Independent candidate Park Won Soon won the Seoul mayoral election, dealing a blow to the ruling party ahead of elections for South Korea’s legislature and president next year.

Park, 55, beat Na Kyung Won, a lawmaker from President Lee Myung Bak’s Grand National Party, by 53.4 percent to 46.2 percent, the National Election Commission said on its website. Park, a lawyer and civic activist, had criticized Lee’s policy of eschewing broad engagement with North Korea, and tapped discontent with a widening wealth gap and elevated inflation.

“This clearly doesn’t bode well for the Grand National Party, they really have an uphill battle” ahead of the legislative elections in April, said Jae Ku, director of the U.S.-Korea Institute at the Johns Hopkins School of Advanced International Studies in Washington. Any move by the opposition to coalesce around a credible presidential candidate would also likely see a defeat for the current ruling party, he said.

Lee’s public approval has tumbled by more than half from 76 percent when he took office in February 2008, after tensions rose with North Korea and he pushed to cut corporate taxes in a country where income inequality widened more than the average for industrialized nations in the past decade, according to the International Monetary Fund. Park and Na vied to lead South Korea’s biggest and richest city after Oh Se Hoon resigned in August, having lost a fight to curb free student lunches in the capital to reduce public spending.

Entrepreneur Backer

Park, who was backed by software entrepreneur and possible presidential candidate Ahn Cheol Soo, said in an e-mailed statement he will seek to improve people’s welfare during his term. Na, in an e-mailed concession, urged Park to lead the city well.

Both candidates said they would cut the capital’s deficit by billions of dollars and build more apartments to alleviate a rental squeeze. Park supports free lunches for all elementary and junior high school students. Na favored subsidizing lunches based on household income.

Seoul’s population of more than 10 million accounts for more than 20 percent of the country and about a quarter of South Korea’s $1 trillion economy, which faces “downside risks to growth” because of Europe’s debt crisis, the Bank of Korea said on Oct. 13.

Consumer prices rose 4.3 percent in September after climbing 5.3 percent in August, the fastest pace in three years. Bank of Korea Governor Kim Choong Soo said last week the economy this year may fall short of his 4.3 percent growth estimate. The central bank’s desire to raise interest rates to fight inflation is being hindered by the uncertain economic outlook, he said.

Rating Slides

Lee’s approval rating has dropped to 32.3 percent, according to a weekly survey of 3,750 people by Realmeter conducted Oct. 17-21. The poll had a margin of error of plus or minus 1.6 percentage points.

The government last month abandoned a plan to lower the corporate tax rate to 20 percent from 22 percent to bring it closer to the levels of Asian neighbors, and cut the top income tax rate.

The IMF said in an August report that income inequality in the nation has been linked to a gap in growth between export industries and the services sector, along with a deepening in old-age poverty.

Beef Ban

Seoul’s incoming mayor is a civil rights lawyer who helped found the People’s Solidarity for Participatory Democracy, which helped organize protests against lifting a ban on U.S. beef imports in 2008. He is currently executive director of a non- profit organization that supports the underprivileged. In 2006, he received the Ramon Magsaysay Award for Public Service, given in honor of the former Philippine president.

Park asserts that the government’s North Korea stance contributed to two deadly attacks last year, including the March 2010 torpedoing of a South Korean warship that killed 46 sailors. North Korea denied any involvement in the incident.

Lee rolled back predecessor Kim Dae Jung’s “Sunshine Policy” of engagement and dialogue with Kim Jong Il’s regime, saying the policy rewarded the regime for provocative behavior.

Na, 47, is a former district court judge who was first elected to public office in 2004. She was backed by likely GNP presidential candidate Park Geun Hye, the daughter of former president Park Chung Hee.

“Support for Park Geun Hye will weaken,” said Kim Yong Ho, professor of political science at Inha University in Incheon. “As she failed to help Na Kyung Won win, people will start questioning her campaign ability,” he said, predicting the ruling party will discuss other options.

Seats in South Korea’s 299-member National Assembly are up for election in April next year. The presidential election will be held in December 2012 before Lee’s single five-year term ends in February 2013.

--With assistance from David Lerman in Washington. Editors: Chris Anstey, John Brinsley

To contact the reporters on this story: Taejin Park in Seoul at tpark31@bloomberg.net; William Sim in Seoul at wsim2@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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