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The Grand National Party, which dominates parliament and holds the presidency, has been plunged into infighting over its policy direction amid concerns about job security, rampant inflation and the growing wealth divide. Moreover, the conservatives are caught in a trap over their support for the country's powerful conglomerates, known as the chaebol, as public anger mounts over the growing disparities between haves and have nots, and small and big businesses. The conundrum for the GNP: to continue backing the chaebol which produce the lion's share of earnings in the export-driven economy, or support the small and medium size firms which employ around 70 percent of the workforce. With parliamentary polls not due until April and the presidential polls in December 2012, there's a risk that South Korea, whose strong fiscal position under President Lee Myung-bak helped it through the 2008 financial crisis, could face policy paralysis. The fiscally conservative GNP, which suffered embarrassing defeats in by-elections earlier this year and is now running neck and neck with the opposition in opinion polls, has veered left with its support for populist welfare policies. In May, the party's new floor leader said his top priority was to slash college tuition fees, in the face of initial resistance from the administration. Senior party members have also pushed for improved child care, free school lunches and anti-discrimination policies in the workforce. They have also questioned tax cuts for the wealthy. WEALTH DIVIDE Redistribution of wealth is now the second most important political issue for the South Korean public, after job creation, according to a July poll by the Asan Institute for Policy Studies, a Seoul-based thinktank. "This must be the first time ever in South Korea that an election campaign will be fought primarily on welfare policy," political analyst Yu Chang-seon said. "And the GNP not only will be fighting the opposition to differentiate itself from them, but it will be clashing with the Blue House (presidency) and the government all the way which will be trying to stop runaway welfare spending." Lee has distanced himself from those in his party who want to spend their way out of trouble, saying that in some countries, competitive welfare populism by lawmakers has brought about national bankruptcy. While South Korea's export-led economy has boomed on the back of rising demand in emerging markets for its cars and other manufactured products, income inequality has shot up dramatically faster than other developed economies, rising by 5.5 percentage points faster from 1997-2008, according to data from the Organization for Economic Cooperaion and Development. The number of non-regular workers has also grown dramatically to 29 percent of the total in employment, mainly in the non-tradable sector of the economy, leading to widening income gaps at a time of rising prices. "The country's economy has come to a point where distribution needs to be improved," economist and former central bank governor Park Seung said recently. Panicked ruling party MPs have been scrambling to recover their poise and align behind the person many see as the next president, Park Guen-hye, the daughter of former military dictator Park Chung-hee. But she has so far not provided any clear guidance on her policy views beyond those that very much echo the incumbent's. Park, who in 2007 lost to Lee in the battle to win the ruling party's nomination for the presidency, has an approval rating of 31.5 percent nearly six times that of the opposition leader, according to a poll published this week by the Dong-a Ilbo newspaper. "Fiscal soundness is the backbone of national economy," the 59-year old has said. "Public finance can worsen in a blink of a moment," she said, adding policy planning must be conducted with an eye on long-term fiscal responsibility. Lee Jung-hyun, a member of parliament who is a close confidant and the unofficial spokesman for Park, said her position was rooted deeply on ensuring fiscal conservatism and giving businesses the incentive to take socially positive initiatives. "She is all for tax cuts," Lee said. "She is totally against the populist messages now being issued by (the Grand National Party). "Big businesses will be given tax cuts and incentives to invest and create jobs." (Editing by David Chance, Jeremy Laurence and Sanjeev Miglani) World South Korea Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (0) Be the first to comment on reuters.com. Add yours using the box above. Social Stream (What's this?) 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