Regulation Armageddon

 

The Korean government will abolish 2,200 economic regulations, amounting to 20 percent of the total, by 2016. It will also implement a British style regulation ceiling system, “cost-in, cost-out”, from next year, to keep new regulations in check. 

A meeting chaired by President Park was held among policymakers and private-sector experts and produced a report, “Regulatory Reform Policy,” to cover the agenda. The Office of Government Policy Coordination under the Prime Minister’s office revealed that it will reduce the 15,269 currently registered regulations to 13,069, which is about a 20 percent drop, by 2016.

For starters, the government will target 11,000 economic regulations to reduce them by 10 percent (1,100) this year, by assigning quotas to each related department depending on the departmental characteristics. The departmental outcome of the regulatory revamp will be disclosed at the end of the year.

Park stressed the importance of the regulatory reform, saying, “Deregulation serves a double purpose: not only the key to economic innovation and renewal, but the basis for serving and supporting economic principles in an endeavor to challenge them.”

The government also decided to extend the “sunset” system, which allows regulatory effects to last only a limited time or to be re-examined as to their existence, from 12 percent (1,800 cases) to 50 percent (7,500 cases).

In addition, a British style cost-in, cost-out system will be implemented to its full extent from next year, to monitor newly created regulations. The system aims at putting a ceiling on the overall cost of regulations by abolishing existing regulations on a cost basis to make room for any new ones.

The system will be launched full scale from January next year, after a test trial on seven departments including the Ministry of Land, Infrastructure and Transport, the Ministry of Environment, and the Small and Medium Business Administration in July this year. Also, on all new regulations from April, it will apply a “negative list system” and a “sunset” system. The negative list system only allows listed regulations and policies, barring unlisted or exceptional ones. And under the sunset system, all regulations automatically expire in five years. These systems will first focus on new businesses or new industry/technology segments, to induce investment in private companies.

During the meeting, diverse opinions were pouring in from the economic section. The Korea Chamber of Commerce and Industry’s Chairman Park Yong-man proposed, “The biggest problem is complex regulations, as they cannot be addressed by a certain department. Majority cases like factory expansion or new business launches get hampered by complex regulations. Thus, it is vital to build an inter-departmental system to cope with complex regulations.”

“We need to stress that regulatory reform is undoubtedly for creating jobs. In the past, priorities were put on investment size or profitability, but now we should put employment first,” added Chair Park. He urged to re-examine everyday regulations and gave examples such as how up until recently, any rice cake delivery services were banned, whereas pizza delivery services were not, and how installing Active X and accredited certificates interfered with the online purchases of Hallyu products.

Lee Seung-chul, vice chairman of the Federation of Korean Industries, also emphasized that “Active X is a unique regulation in Korea that is a necessary evil for identification and payment. But because of this, in China, it is impossible to buy Chunsongi coats which went viral on the back of Hallyu.”

President Park reiterated, “Bad regulations and practices are the main culprits of the lower productivity of domestic companies and lower foreign investment. These hurdles need to be stripped away without hesitation, to create more jobs for the young, venture companies, and women, and to achieve 3-year economic innovation.”

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