This is the seventh in a series of interviews with international experts on Korea giving advice to President Moon Jae-in on how to overcome challenges and create a better future for the Korean people. ― ED.

By Kim Jae-kyoung

Alicia Garcia-Herrero

For President Moon Jae-in, one of the key economic tasks during his term is to foster global talent and transform South Korea into an innovative economy.

This is not only to reform the structure of the economy but also to brace for the Fourth Industrial Revolution that is disrupting the way we work and do business.

To this end, Alicia Garcia-Herrero, chief Asia-Pacific economist at Natixis, said that Moon should introduce policies aimed at internationalizing education systems and attracting more talent from abroad.

"In order to create an ecosystem to grow more internationally competitive players fit for the 21st century, fostering the arrival of foreign talent is absolutely key," Garcia-Herrero said in an interview.

"Korea will need to compete for talent with rest of the world," she added. "One way to do so is to create special visa programs but, even before that, to create world-class business schools, which would help attract foreigners to study in Korea."

She pointed out that the best way to target "talent" immigration is through education.

Korea's schools and universities in her words are too hierarchical and too rigid and are lacking internationalization.

"Korea should try to internationalize its tertiary education at the undergraduate and graduate level through English-speaking programs and generous scholarships and offer visas for students to remain and find jobs in Korea. This will add diversity and talent to the Korean economy," she said.

"In a world of robotization and artificial intelligence, countries will no longer fight for capital but for talent," she added.

The Hong Kong-based economist cited "elderly care" as another sector where immigrants may be most needed.

"For elderly care, it is basically nurses and other caring services. While the language is a barrier, it is obvious that the part of the Korean labor supply, which can cover these needs, will not be enough," she said.

Another urgent issue for Moon is demographic challenges — a declining working population and low birthrate.

She called on the Moon administration to come up with measures to increase the participation rate of the female workforce and encourage couples to have more babies.

For a higher birthrate, she suggested Moon look at the French case, considered a real success in Europe.

"France introduced aggressive policies to support families having more children both in terms of tax breaks as well as public services related to parenting and education," she said.

Reforming chaebol

As for economic reform, she stressed that Moon should revamp the production structure of the Korean economy by cutting its dependence on exports.

She said that it is urgent to restructure the Korean economy away from heavy industries toward becoming a high-value added services economy.

"This plan needs to include further liberalization of the economy by reducing oligopolistic practices and introducing more competition. The latter necessarily implies opening up to foreign competition," she said.

"Although Korea is open for investors there are issues with chaebol in terms of transparency and their strong hold over the economy," she added, urging Moon to push for reforms to improve the conglomerates' corporate governance.

For strong sustainable growth, the veteran economist advised Moon to expand the nation's presence in the ASEAN (the Association of Southeast Asian Nations) market, which will help diversify overseas markets and reduce its dependence on China and the U.S.

She explained that 20 percent of Korea's exports are destined to go to China and that dependency comes with a cost especially should China slow down or flex its soft power, as recent geopolitical tension shows.

"Korea is well ahead in knowledge and the digital economy but it needs to reduce its isolation from the rest of Asia — other than China and Japan," she said.

"Korea needs a master internationalization plan starting with ASEAN, followed by South Asia but also Europe and other emerging markets eventually," she added. "ASEAN markets offer both diversification and growth opportunities."

The Spanish economist also said that Moon needs to come up with a clear plan for potential unification with North Korea because it could come much earlier than expected.

"You may think reunification is a far cry from now but I was studying in East Germany in 1987 and 1988 and everybody thought the same both there and in West Germany," she said. "I do think it is closer to an immediate possibility than what people imagine right now."