Tremors from the long night of December 3
The night of December 3 was scary for South Koreans, to say the least. The world’s 12th largest economy, which has also been a vibrant democracy in recent decades, was plunged into a shocking crisis. In a baffling move, President Yoon Suk-yeol announced emergency martial law in the dead of the night—the first in the country in over four decades—and sent troops to the National Assembly.
Fortunately, enough number of lawmakers were able to reach parliament and vote out the martial law in only six hours. Whereas Yoon justified his act as just a warning to the opposition members who were blocking his policies and appointments—and generally making governance difficult—there is no doubt that he crossed all the limits.
It may be true that after the opposition secured 192 of the 300 seats in the National Assembly in April 2024, Yoon was feeling frustrated because he was not able to get several of his bills passed. But the extreme step he took is largely attributed his own autocratic way of dealing with democratic contestations.
Yoon was a prosecutor before he got an opportunity to become presidential candidate from the conservative People’s Power Party in 2022. His inexperience in democratic politics—which is a domain of give-and-take, compromises and, more importantly, tolerance for dissent—led him to become increasingly unpopular in South Korea. Rather than rectifying his mistakes, he tried to run over dissent. In foreign and domestic policy-making too, it has been alleged that did not take along popular opinion and has been too ‘bold’ in his alignment with the West.
The declaration of martial law was, basically, a move in desperation and delusion. It not only shocked South Koreans but also enraged them. Soon, people took over the streets and the National Assembly proposed an impeachment motion. The first impeachment motion, which was voted on December 7, did not succeed as People’s Power Party members did not participate in the proceedings. But the second impeachment motion was successfully passed by the National Assembly a week later.
The matter has gone to the Constitutional Court, which will decide the final fate of Yoon in the next few months. Meanwhile, most presidential powers have been delegated to Prime Minister Han Duk-soo. In all likelihood, if the Constitutional Court judges are not divided on ideological lines—their nomination is being debated at present—it would be an open-and-shut case and Yoon is going to be removed from the presidential office.
After his final removal from the post, election to choose a new president is required to be held within two months. It is likely to herald a return of the centre-left Democratic Party. This would mean a president who would be less inclined to be as unabashedly supportive of the US and Japan as Yoon was, and more accommodative of engagement with China.
One may say that another bout of authoritarian era in South Korea has been avoided largely because of the people’s vigil and resolve, apart from the armed forces’ cooperation. But it could also be said that a huge damage has been done to its political and economic credentials.
South Korea has experienced long periods of authoritarian politics in the past and was able to have a democratic set-up only in 1987. It earned strong democratic credentials with the course of time, but the declaration of martial law revived old memories and images. It would have implications for domestic politics, but hopefully not too much for the South Korean economy.
It was never expected that the mayor of Seoul would have to release an advertisement saying ‘Seoul is safe’ and appeal to foreign tourists not to change their plans of visiting the capital. It shows that the martial law incident has affected how the world is viewing the country.
The short-term effect of the declaration was seen in the financial market—the KOSPI market index, which was at 2500 on December 3, dipped to 2360 by the 9th, the lowest in a year; the KOSDAQ, similar to the Nasdaq in the US, moved down from 690 to 627, which was its lowest in five years. Fortunately, after almost a week of downturn, both of them bounced back to 2482 and 683 by December 12.
Meanwhile, individual investors sold almost $700 million worth of stocks on the day after martial law was declared, but the trend has gradually been reversed. South Korea’s small businesses reported a 90 per cent fall in sales soon after December 3, but things have since been improving.
The country’s currency won also fell to its lowest level in the last two years, but stabilised later. The South Korean central bank has been trying to maintain liquidity in the market through special repo operations, and has announced a stock market stabilisation fund.
The finance minister had assured foreign investors and the international community that South Korea’s economic fundamentals are strong, and productions as well as exports are not going to be affected by the brief upheaval. He suggested that for the same reason, the country’s credit rating must remain the same. In a way, he is right—around the time the impeachment motion passed on December 14, many of the short-term economic setbacks were restored to pre-martial law levels. However, if the impeachment issue drags on in the Constitutional Court, it may have a deeper impact on the economy, as decision making in the transition would be largely on an ad hoc basis.
Once Yoon is formally removed and a new president is elected, in all probability, the transitory problems of the economy will be fully overcome. However, though the low growth rate and fear of stagnation in the economy, visible in the revision of the growth rate for 2025 from 2.2 to 2.0 per cent, remains to be addressed. The country also needs to assure the international community and foreign investors that such a political turmoil would not occur again.
It could be concluded that the impact of the martial law and the impeachment process—though utterly shocking—would not have any long-term negative effect on the country’s economy. But that now depends, first, on the efficiency of its judicial process.
Sandip Kumar Mishra
Professor, Centre for East Asian Studies, JNU)
(Views are personal)