South Korea ruling party mulls policy shift amid crisis

The conservative Grand National Party (GNP) has signaled a shift toward more populist policies ahead of parliamentary and presidential elections next year, amid sharp declines in support in opinion polls and humiliating by-election defeats last month.

"We will be scrapping further tax cut policy, such as on corporate tax and income tax," Hwang Woo-yea, elected as the GNP's new floor leader last week, was quoted as saying by the mainstream Chosun Ilbo newspaper Monday.
"We'll use about 10 trillion won ($9.2 billion) from the money saved from (scrapping) tax cuts and from last year's budget surplus for school tuition, child support and lower income housing," Hwang said.
President Lee Myung-bak, a former construction company CEO who rose to power two years ago with promises of economic growth through pro-business policies, had vowed to gradually lower income taxes on companies and individuals.
But the by-election defeat dealt a blow to Lee's pro-big business stance and threw its leadership in disarray amid worries that it could lose its solid majority in a parliamentary election next April.
Sharp interest rate cuts, massive fiscal stimulus spending and an undervalued currency have enabled Asia's fourth-largest economy to pull out of the 2008 global financial crisis ahead of its rivals, but domestic demand remains in slump.
IN-FIGHTING
The infighting within the GNP has featured prominently in the media over the past week, and came to a head at the weekend when out an outgoing party chief candidly criticized Lee for failing to communicate with the people.
The GNP, which holds 172 seats in the 299-seat parliament, has openly fractured into factions, with lawmakers arguing over how to rejuvenate the party.
"If this power struggle continues in the party, and if we fail to unite, the situation will become really complex and the GNP will face a much deeper crisis," Chung Ui-hwa, who has been named head of an emergency council to deal with the crisis, was quoted as saying by the JoonAng Daily.
Analysts say the crisis could spur former party chief and hot favorite to win next year's presidential race, Park Guen-hye, to break her silence on policy issues in a bid to reunite the party.
Park, who left South Korea a day after the party's by-election defeats, has been criticized for failing to step up to help the party in its hour of need.
Local media reported that Park, the daughter of the founder of modern-day South Korea, Park Chung-hee, said last week in Greece that she would become more vocal from now on.
Lee reshuffled his cabinet Friday and replaced his long-serving finance minister with the current labor minister, who said he would try to make sure the benefits of economic growth are felt by the lower and middle income class.
Lee's popularity has dropped from around 50 percent when he hosted the G20 summit of world leaders in November to about 30 percent, opinion polls show.
The opposition Democratic Party has closed the gap on the GNP, and its leader and potential candidate for president has seen his support surge after winning a parliamentary seat in a traditional GNP stronghold in last month's by-elections.