Welcome to the AKBC Business Connect - March Edition

Dear Subscribers,

Uncertainty (불확실성).

The last week in both Korea and Australia has been marked by major political developments. With the election in Australia called for May 3, Korea could also be heading to the polls at a similar time, with political turmoil continuing in Korea over the December martial law order. While we wait for President Yoon's impeachment verdict by the Constitutional Court, last week in Korea, two other significant court decisions were handed down, affecting both major parties.

First, the Constitutional Court ruled against the impeachment of Prime Minister Han Duck-soo, reinstating him as Acting President of South Korea. While this decision and Prime Minister Han's return to office marks a critical turning point, with President Yoon's fate still undecided, the nation's political uncertainty is still far from over. 

Second, the opposition Democratic Party of Korea's Lee Jae-myung High Court ruling also came out last week, where he was found not guilty, overturning a ruling by a lower court. Lee Jae-myung had previously been found guilty of making false statements during his 2022 presidential campaign. South Korean prosecutors have appealed the High Court ruling and now the case sits with the Supreme Court. 

This is significant as Lee Jae-myung is the favoured candidate for the next Korean President, and if the Constitutional Court decide to impeach President Yoon, this will trigger an early Presidential election, potentially paving the way for Lee Jae-myung to run as a Presidential candidate. If Lee Jae-myung is found guilty, he will not be eligible to run as a contender in the next presidential election. Timing here is therefore critical - if President Yoon is impeached, then the election must be held within 60 days, and the Supreme Court by law has three months to rule, which may be too late if the election has already been held. 

Both parties in Korea are calling for the Constitutional Court to quickly announce the date of President Yoon's verdict as the vacancy of the Presidential position only prolongs uncertainty. With two Constitutional Court judges set to retire on April 18, it is likely that Constitutional Court will hand down its decision before then. 

Acting President Han was quickly back to work after he returned to Acting President and is navigating challenges from a looming global trade war and the growing external uncertainties including the US administration's tariff policies. POSCO and Hyundai Steel have been impacted by US 25% tariff on steel and aluminium, a tariff which was waived for South Korea in Trump's first term. Korea will again be significantly impacted by Trump planned 25% tariffs on imported cars, with Korea representing the third largest car importer to the US, behind Mexico and Japan, amounting to around US$34 billion and 49% of Korea's total automobile exports. In response, Hyundai Motor Group announced an investment of US$21 billion in the US over the next four years, including a Hyundai Steel plant in Louisiana to supply steel to Hyundai's auto parts and plants in Alabama and Georgia. Amid the tariffs however, the US is approaching Korea to co-operate on a $44 billion gas pipeline project in Alaska, with US officials in Korea last week to discuss the project. 

Our analysis shows that the recent political and economic developments in Korea, alongside the impending elections in Australia and (potentially) Korea, underscore a period of significant flux that could reshape the economic relationship between the two nations. With Korea preoccupied with internal domestic political issues and navigating the impact and response to US tariff policies and Australia in campaign mode, we expect more certainty in each country sometime in the second half of the year, making the September KABC-AKBC Joint Meeting a timely opportunity to travel to Korea to engage with stakeholders. 

Amidst the political chaos in Korea, multiple wildfires last week raged in Korea's southeastern region. The fires have now been extinguished, and recovery efforts are underway. We offer our thoughts and condolences to the communities impacted by these wildfires in Korea. 

On some more positive news, Korean-Australian golfer Min Woo Lee has just claimed his first PGA Tour win at the Houston Open. Congratulations Min Woo.   

Kind regards,

Liz

Chief Executive Officer

Australia-Korea Business Council 

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