Restaurateur Koh Huey-bong outside his establishment Dos Tacos has survived the pandemic, but fears the recovery will not match pre-Covid spend levels. Photo: Asia Times / Andrew Salmon

SEOUL – “I hope the economy gets better, I hope that more people will be coming to my restaurant,” said Koh Huey-bong, who operates small Mexican eatery Dos Tacos in an alley in Jongno, downtown Seoul.

“Especially at night, I hope that a lot more businessmen will come back to this area.”

After almost two years of Covid-19, those are no longer vain hopes.

With South Korea having passed the 70% mark of the population vaccinated this week, Seoul is set, on November 1, to begin a seismic shift in national policy and national habits: from Covid containment to “Living with Covid.”

The planned process is both phased and prudent – and is one that the wider world may want to pay attention to, given prior policy successes here.

South Korea emerged as a global leader in pandemic management. Despite a behind-the-curve vaccination drive, this land of 51 million people mastered the crisis with only 2,757 deaths and without a single lockdown.

Still, things have not been easy for the service sector. “Rental fees have not gone down, so it has been very hard to exist,” Koh said.

Normalcy can’t come soon enough for the formerly upbeat 63-year-old who has plainly suffered. Over the last two years, his revenues plunged about 30%, he estimated. He survived thanks to the now-ubiquitous food delivery services.

Koh’s district was not devastated, but it certainly looks more downbeat than at any time in recent memory.

Jongno is a city-center entertainment zone comprising two blocks of buzzy, neon-lit restaurants, cafes and bars that borders the scenic Cheongyecheon Stream, a flagship urban-generation project that is a favored space for walkers, lovers and families.

Despite these man-made and natural attractions, imdae (“for rent”) signs are visible in vacant windows on every street and every alley.

While South Korea’s giant, family-run industrial conglomerates may be the global face of the economy, domestically it is owner-operated small services like Koh’s – shops, eateries, cafes, educational institutes, health and fitness facilities – that are its ground zero.

Meanwhile, South Korea’s ever-problematic household debt soared amid Covid’s loose-liquidity policies, spurring new tightening.

Elsewhere though, Seoul is wading in with big hands and full pockets. A record-high budget of 604.4 trillion won ($519 billion) has been put forth for 2022 – which perhaps not coincidentally will see a presidential election in March. The amount proposed marks an 8.3% rise, year-on-year.

And on Wednesday, the government announced the latest support package for the nation’s mom-and-pop ventures.

For rent signs in vacant windows are a common feature in downtown Seoul nightlife and shopping districts. Photo: Asia Times / Andrew Salmon

Money for the little guy

The package is worth a cool 2.4 trillion won ($2 billion) in easy-to-obtain financial support for SMEs.

Speaking to foreign reporters and executives from chambers of commerce on Wednesday morning, Minister of SMEs and Startups Kwon Chil-seung announced that the package had more than doubled in size “after heated discussions.”

The “Loss Recovery Fund” targets 800,000 small businesses that suffered under social distancing regulations, which restricted the numbers of people who could gather, and capped opening hours between July and September.

Of the 800,000 businesses the ministry researched, 3% suffered from the ban on gatherings, while 97% experienced losses due to limitations on opening hours, Kwon said.

The fund was established after multiple rounds of consulting with SME associations and is ultra-simple to access. That could save many thousands of man-hours, for while South Korea boasts a first-class high-tech infrastructure, it is also weighed down by a national bureaucracy with an insatiable appetite for form-filling.

To access the fund, no documentation of any kind is required, government officials explained with some pride as they demonstrated the interface. Business owners simply enter their personal details and their business license number and the compensation they are due will be automatically calculated, based on National Tax Service data.

“Payments will begin from today,” Kwon said on Wednesday. “At this moment, hundreds of thousands of small business owners are receiving text messages.”

Restaurateur Koh, who spoke to Asia Times four hours after Kwon’s press conference, confirmed he had received notification. “I will be applying,” he said.

Still, it is no magic bullet. “Last time I received [support funds] from the government, it was only helpful for a month,” he said.

He has higher hopes for the upcoming “Living with Covid” initiative.

Goodbye social distancing

“Based on stable containment and high vaccination rates, we are commencing a gradual return to normal life,” President Moon Jae-in said Monday, calling the development “a threshold of hope.”

A government-led panel outlined a three-phase lifting of social distancing restrictions on the same day. The tentative plan will start from November 1 and, if it remains on course, will be completed at the end of January.

At present, cafes and restaurants in the sprawling Seoul Metropolitan area, home to approximately half of South Korea’s population, must close at 10 pm. In lower-risk areas of the country, they must close at midnight.

In Phase 1 of the scheme, the cap on business hours of these facilities will be entirely lifted from November 1.

After-dark entertainment facilities, such as clubs, have been required to close their doors since June in the Seoul area. In the first phase, these facilities will be allowed to re-open until midnight.

And a “vaccine pass” system, which will demand either a vaccination certificate or a negative test for entry into multi-use locations that house, for example, karaoke bars and gymnasia, will be instituted. Those aged under 18, and those unable to inoculate due to health conditions, are exempt.

South Korea now offers citizens paper certification as proof of inoculation or the use of a mobile app that shows their status.

Phase 2 will permit concerts and outdoor rallies to restart from mid-December, albeit with the use of the vaccine pass. Sports venues will be permitted to expand their audiences to 75% of capacity – up from the current caps of 30% (outdoors) and 20% (indoors).

Also in December, and just in time for the end-of-year season, Seoul’s 24/7 nightlife will return, with entertainment facilities allowed to remain open around the clock.

The third and last stage of the scheme, expected in late January, will lift numbers on private gatherings. At present in Seoul, only eight people – four of whom must be fully vaccinated – are allowed to recreate together.

However, the mandatory wearing of masks in public places, both indoor and outdoors, is expected to continue for an indefinite period.

It is unclear when – or if – pre-Covid levels of business will return to Jongno, regardless of an upcoming ‘Live with Covid’ plan. Photo: Tom Coyner

What happens next?

Public spending and behavior as the country aims to exit Covid is hard to predict.

On the macro front, South Korea surged ahead in 2020 and entered the G10, bolstered by its sound pandemic response and the massive appetite for electronic components – the country’s key exports – by a world under lockdown.

The good news continues as the OECD expects real GDP to increase by 3.8% and 2.8% in 2021 and 2022, respectively.

But on the micro front, not all is rosy despite a record budget and the handouts for SMEs – what Seoul giveth with one hand, it taketh away with the other.

On Tuesday, authorities announced they were accelerating the enforcement of tightened-up lending rules based on borrowers’ repayment capabilities.

Household debt has been a perennial socio-political and economic problem in South Korea since the turn of the millennium. Then mortgage and credit card conditions were greatly eased to increase spending in order to speed up recovery from the 1997-8 Asian financial crisis.

That first tranche of indebtedness expanded, driven by the massive educational spending which so many South Korean families believe is essential to grant their children entry to top colleges. Then there is the ever-rising price of metropolitan property – the favored investment destination for the middle class.

The loose liquidity that has been a feature of pandemic response policies in both South Korea and worldwide has exacerbated the issue further. South Korean household debt surged by 7.9% year on-year in 2020 – far faster than a 4.1% rise in 2019.

That pace “has far exceeded overall trends,” Financial Supervisory Commission Chairman Koh Seung-beom said this week. “Potential risks from household debt have been deepening as an expanded credit supply remains in place for a long period amid the coronavirus.”

South Korea’s runaway Netflix hit Squid Game is a dark fantasy based on this indebtedness.

Amid these contrasting metrics, it is unclear if the lifting of restrictions will see an explosive spending mood take hold, or whether the habits and practices inculcated by Covid will linger.

The pandemic has been long and South Korea suffered the first major national outbreak of Covid-19 after China in February 2020. In the interim, many businesses, classes and meetings have gone online, and some believe the home dining and entertainment trend is here to stay.

This suggests that there may not be a boom for South Korea’s high streets in the months ahead. Restaurateur Koh is unconvinced that the phased return to normalcy will ignite a return to pre-Covid levels of commercial activity.

“I don’t think things are going to get better than they were in early 2020,” he said.