The onset of the Korean economic crisis over the recent months makes it more difficult for President Lee to recover from the political setback caused by the US beef negotiation. Most Koreans still have vivid memories of the severity of the financial crisis ten years ago. This time the economic crisis is caused by external factors such as the US financial crisis. Even a few months back, not many Koreans would have expected this kind of serious economic convulsion.  Korean business leaders are now warning that this is a more serious crisis than the crisis of 1997-8. Korea’s expected economic growth rate for 2009 has been downgraded a few times by the economic think-tanks in the recent few months from around 4-5 per cent to 1-2 per cent.

So the biggest challenge for the Korean people in 2009 will be how to overcome the economic crisis. The government has been doing its best to stimulate the economy and boost domestic demand by lowering interest rates and expanding public spending. It also has been increasing the social safety network for the unemployed people.

The Korean government is also working hard to get the Korea-US FTA ratified by both the Korean national assembly and the US Congress because the FTA has very important political and security implications for the alliance over and above any economic benefits. But the current crisis of three big US auto companies, the generally grim economic situation in the United States, and President-elect Obama’s skepticism about the Korea-US FTA are all working against these efforts. How to achieve the goal of ratification of Korea-US FTA will be a big challenge for the Koreans in 2009.

The other important challenge for the Koreans in 2009 is denuclearization of North Korea.  Six years have already passed since the second nuclear crisis began in October 2002. Much precious time was squandered without progress in negotiation until President Bush, for the first time, permitted his negotiator Christopher Hill to meet North Korean counterpart Kim Kye-Gwan on a bilateral basis in January 2007. Following that, North Korea began cooperating with the United States, disabling Yongbyon Plutonium facilities and reporting nuclear related materials in 2008. Yet it would not budge on the issue of verification, which is the key part of the whole denuclearization process. Probably, the North Koreans are waiting for the inauguration of the Obama administration, expecting a better deal with the new U.S. negotiation team.  They may have sweet memories of the thawing relations with Clinton’s democratic administration in 2000 when there were exchanges of visits by high-level officials from both countries.

Will there be a successful negotiation between the Americans and the North Koreans in 2009?  Will the US administration be able to mobilize enough political capital to focus on and make significant progress with the nuclear deal with North Korea despite the many other urgent tasks awaiting its attention?  Will the North Korean leader, Kim Jong-il, despite his health problems, be able to make the strategic decision to give up nuclear option as Qaddafi once did?

Most Koreans and international observers would like positive answers to these questions in 2009.

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Yoon Young-kwan is Professor at Seoul National University and former Foreign Minister of South Korea.

This is part of the special feature: Reflections on developments in Asia in 2008 and the year ahead