[EDITORIALS]Ease Regulations, Instill Confidence

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[EDITORIALS]Ease Regulations, Instill Confidence

Where is the economy going? The government and economists are contradicting each other, and indicators point in all directions. Even inside the government, the Bank of Korea is projecting 3.8 percent growth for the year, but the administration and the state-run Korea Institute of Finance are more optimistic, forecasting 4 percent growth. Private think tanks are also divided, with projections ranging from just 3.5 percent to nearly 5 percent growth. The administration and the central bank believe a recovery will start in the third quarter, but the Korea Development Institute predicts one only in the fourth quarter or perhaps early next year. Real pessimists think we are in a long-term recession of the kind Japan is now enduring.

Indicators are confused. While the rate of growth of production has been slipping, sales figures are moving higher. More unnerving is the clouded outlook for the backbone of the economy, capital investment and exports. While the largest world economies such as the United States and Japan continue to struggle, Korea's exports declined for the last four months, curbing the economic recovery. Capital investment has been falling and there is no concrete sign of a turnaround anytime soon. Companies that are relatively cash-rich are shying away from making commitments for the future, and even the Samsung Group, which appears to be on a winning streak, is planning to downsize its personnel.

The government is in a difficult position because stimulus measures can be risky. The effect of lowering interest rates and expanding fiscal spending to promote business investment is questionable when business confidence has sunk to its current level. Plummeting productivity, which has dropped to below the mark of 1998, could mean that a stimulus package would lead to inflation. The focus, then, should be to buoy investor confidence and to boost productivity. What should have been already under way is to sort out the losers from the winners in our economy and support promising emerging sectors. Business confidence must be raised by easing regulations and making more resources available to new industries. The government must administer the state to reduce the people's suffering.
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