Lee Ju-yeol’s name had been floated by the media as a potential nominee, but it was still a little surprising that President Park Geun-hye chose him as the next governor of the Bank of Korea, as there were seemingly stronger candidates.
Unlike his predecessors, Lee, who retired from the BOK as senior deputy governor in 2012 after 35 years of service, is neither a star economist with an impressive resume nor a prominent bureaucrat. Nor is he a member of the president’s inner circle.
Detractors say that the lack of a Ph.D. from a famous foreign university or international career could be a handicap for him. But those qualifications should not have much to do with the job of a central bank chief.
On the contrary, Lee, a “lifetime BOK man,” could be in a better position to fulfill his mission of ensuring monetary stability and inflation control while safeguarding the central bank’s independence from the government.
In selecting Lee, President Park might have considered that this will be the first time a BOK governor-nominee will have to face a parliamentary confirmation hearing, where opposition lawmakers are usually very hostile to presidential appointees. Whatever her motivation, Park’s choice of Lee over other outside candidates with political connections must be well received.
So far, neither the opposition nor the media appear to have discovered any major personal irregularities with Lee, which increases the likelihood that his nomination will pass muster in the National Assembly.
But if he does assume the post, what challenges will he face as the chief of the central bank?
Lee’s nomination comes at a time when the Korean economy faces daunting challenges, both at home and abroad. Externally, the U.S. tapering of its quantitative easing is buffeting the global economy, particularly those of emerging markets; China is facing a slowdown of its growth; Japan is suffering from the side effects of “Abenomics”; and on top of these are global concerns arising from the volatile situation in Ukraine.
Domestically, Korea faces snowballing household debt, rising unemployment, low growth and a stagnant real estate market. The Korean economy has long been in a low growth, low inflation trap, which obliges the BOK to think about its role in the new economic environment.
Of course, Lee’s primary job as head of the central bank should be ensuring monetary stability and inflation control. Being a “man from within,” Lee might have little difficulty attaining the central bank’s mission without being swayed by outside pressure.
While being faithful to the central bank’s traditional mission, Lee should not ignore the fact that these days, central banks in many countries are sticking to low interest rates to create jobs and boost the economy. The BOK should not get left behind in this global trend, and should be ready to support the government’s efforts to pull up the economy.
It might be a tall order for Lee to meet all of these challenges ― ensuring price control, monetary stability and assisting economic growth. But this is a difficult time for the Korean economy, and Lee should make sure the central bank maintains principle, flexibility and balance in its policies.
Lee should also note that the outgoing governor, Kim Choong-soo, often faced criticism that he did not communicate enough with the market. Lee is also advised to form a solid network and working relationships with governments and central banks around the world, especially those of the G20 member countries.
We hope that next week’s parliamentary hearing will serve to confirm that Lee has the qualifications and determination needed to carry out these duties.