Reform Bills Gain Momentum as Government Pushes to Accelerate Policy Results [June 3 Public Choice]

As the 9th nationwide local elections were held on June 3, exit polls by the three major terrestrial broadcasters — Korean Broadcasting System (KBS), Munhwa Broadcasting Corporation (MBC) and Seoul Broadcasting System (SBS) — projected that the Democratic Party of Korea (DPK) would win in 11 of the country's 16 metropolitan and provincial governments, while the People Power Party would win in one. Four races were too close to call. With the DPK expected to secure victories in 11 regions, observers say the Lee Jae Myung administration is likely to gain strong momentum in its second year in office. The election drew attention as the first nationwide vote since the administration took office a year ago. According to the exit polls, the People Power Party's campaign message of checking the ruling bloc failed to gain traction, while voters appeared to place greater weight on government stability. Cheong Wa Dae and the ruling party are viewing the result as a midterm assessment of state affairs and as momentum for advancing reform tasks. As a result, they are expected to launch a full-scale policy and legislative drive on key issues, including livelihoods.
■ President Lee signals a second-year push for speed
President Lee Jae-myung has identified "results" and "speed" as the key words for the administration's second year in office. While the first year was focused on stabilizing the policy direction and setting the course for major initiatives, the second year is expected to deliver tangible changes that people can feel in their daily lives. He made that vision clear at a State Council of South Korea and Emergency Economic Review Meeting held at Cheong Wa Dae on June 2, a day before the election. "Starting with the second year of my term, we need to build on the policy achievements so far to create bigger, faster and broader changes in people's lives," he said. He added, "If we double the pace of state affairs over the next four years and devote ourselves fully, I believe we can work as if we had eight years, even though only four remain."
The local elections are expected to give added weight to President Lee's second-year agenda. As the public appeared to favor government stability over the opposition's call to check the ruling bloc, Cheong Wa Dae is taking the result not only as a sign of restored governing momentum but also as a mandate to push ahead with reform tasks. In particular, key priorities that Lee has emphasized — including livelihood issues and the normalization of the real estate and capital markets — are likely to move to the forefront of state policy.
There is also a strong sense within the ruling camp that the second half of this year through next year will be the "golden time" for reform legislation, given that the next general election in 2028 could reshape the political landscape. In that phase, the government and the ruling party will have to consider voters' interests, making an aggressive policy and legislative push more difficult. Against that backdrop, Cheong Wa Dae and the DPK are expected to use the political momentum gained after the local elections to accelerate reform efforts and deliver results.
■ Interest grows over possible real estate tax reform
Among the policy and legislative drives by Cheong Wa Dae and the DPK, the issue drawing the most attention is whether real estate tax reform will move forward. If a reform package is pursued, it is likely to broadly increase the tax burden on multiple-home owners and owners of high-value homes, while favoring owner-occupiers. There is also growing speculation that the long-term holding special deduction could be revised to tighten occupancy requirements and raise the tax burden on single-home owners who do not live in the property.
With the KOSPI climbing close to the 9,000-point mark and repeatedly hitting record highs, there is also rising interest in policy and legislation aimed at advancing the capital market. Cheong Wa Dae and the DPK believe that three rounds of revisions to the Commercial Act have helped ease part of the long-standing Korea Discount affecting the domestic stock market. They also think more institutional safeguards are needed to better protect the rights of minority shareholders. To that end, legislation such as the so-called stock-price suppression prevention law is expected to be pushed in earnest after the local elections. The law would aim to prevent companies from deliberately lowering share prices, which serve as the basis for inheritance tax assessments, for purposes such as succession.
At the same time, discussions on abolishing the crime of breach of trust are also expected to move forward. Under current law, the offense has been criticized for criminalizing cases in which losses arise from ordinary business judgments. The government and the ruling party have already begun working since last year on abolishing the offense and preparing alternative measures to prevent any legal vacuum that could result.
There is also growing attention on whether talks over extending the retirement age will gain momentum. As aging accelerates and the working-age population shrinks, raising the statutory retirement age above the current 60 has emerged as a major policy issue.
■ Will the ruling party move ahead with the special prosecutor act on alleged manipulated indictments?
The ruling bloc is also expected to speed up handling of the Special Prosecutor Act on uncovering allegations of manipulated investigations and indictments by the Yoon Suk Yeol administration's prosecution service, National Intelligence Service (NIS) and Board of Audit and Inspection (BAI), which could become a major flashpoint in interparty conflict. Under the bill, the special prosecutor would examine the entire investigative process in 12 cases, including the Daejang-dong case involving President Lee, as well as the Moon Jae-in administration's West Sea civil servant shooting incident and the Real Estate Statistics Manipulation Scandal, to determine whether investigations or indictments were manipulated. The bill also includes a provision allowing the special prosecutor to withdraw indictments if manipulated investigations or indictments are confirmed in those 12 cases. The DPK had delayed the bill out of concern that forcing it through could trigger a backlash ahead of the local elections. Now that the election hurdle has disappeared, however, the party is unlikely to hesitate. The election result itself, which appeared to favor the government and ruling party, also provides the DPK with a rationale for moving ahead, as it can interpret the outcome as public support for stable governance.
The negotiations over the National Assembly's leadership lineup are expected to be the first hurdle for the government's reform drive. Riding the momentum of its local election victory, the DPK plans to wrap up talks on the second-half National Assembly leadership lineup early and secure legislative momentum. In particular, whether it secures control of key Standing Committees is expected to determine the pace of future legislation.
cjk@fnnews.com Choi Jong-geun, Kim Hyeong-gu Reporter