S. Korea's political crisis a graver threat to foreign policy than economy

Without a clear driver in the seat, partners will be reluctant to engage, expert says

- Wendy Teo

SEOUL - As South Korea reels from the shock of the short-lived martial law debacle of Dec 3, its bureaucrats are racing to stabilize the economy and reassure diplomatic partners of the country's return to normalcy.

This is as the botched self-coup attempt by President Yoon Suk Yeol has roiled financial markets, placed speed bumps on the country's diplomacy and thrown its politics into disarray.

Immediately after the martial law declaration, the Korean won plunged to a two-year low, hitting 1,430 won against the greenback, and it has since fallen further to hit nearly 1,435 won at 2pm Korean time on Dec 9.

In the three days following the debacle, from Dec 4 to Dec 6, South Korea's main stock market index Kospi lost 57 trillion won (S$53.3 billion), while the smaller Kosdaq dropped 14 trillion won - a combined loss equivalent to the market value of the Hyundai Motor Group, said a Chosun Daily newspaper report.

The panic selling came as investors were already jittery with key trading partner China's economic slowdown and the prospect of US President-elect Donald Trump's return to office with his hardline tariff policies.

All diplomatic engagements have been halted while South Korea's biggest ally, the US - caught on the back foot by the martial law announcement - called it a "bad misjudgment" on Mr Yoon's part.

While analysts expect that Asia's fourth-largest economy should be able to ride out the initial bumpiness and withstand any strong impact for the longer term once the situation stabilizes, things on the foreign relations front are less rosy.

Without a clear driver in the seat, foreign partners will be reluctant to engage South Korea and decisions of consequence cannot be made, said Dr Troy Stangarone, director of the Hyundai Motor-Korea Foundation Centre at the Washington-based think-tank Wilson Centre.