To enliven service sector, leave it alone

Using the solid twin engines of the manufacturing industry on one side and service industry on the other to power the Korean economy high into the air, is the dream of the future for every Korean.
Last week, the government announced “the comprehensive program for reinforcement of competitiveness in the service industry,” a blueprint for that coveted future. Not just one or two ministries, but 21 government agencies worked together for four months to conceive the program, and we can well imagine the enthusiasm devoted to it.
Of course, everyone feels threatened by the growing deficit in the service industry. Moreover, we all agree that the service industry should become the new growth engine after the manufacturing industry. The problem is that we all agree with the arguments and concept but have no solutions to offer.
When we face this kind of problem, it is easy to conclude that the government should do something about it. However, the government has no Midas touch. It is seriously wrong to think that the touch of the government can make a change.
Industrial policy is pursued by the government essentially drawing a draft, distributing resources accordingly and nurturing particular industries. The policy to foster the heavy and chemical industries in the 1960s and 70s was a notable success. However, as the size of the economy and the strength of the market grows, government-initiated industrial policy loses its effect. The days when government safeguards nurtured a certain industry are over. The status of the Ministry of Commerce, Industry and Energy, the main executor of the industry policy, illustrates the changes. In the past, the ministry used to wield quite an influence, but now it hardly gets an opportunity to handle a major project.
The Ministry of Finance and Economy, which announced the program last week, knows that better than anyone. The government’s agony is evident in the program. The comprehensive program is a collection of odds and ends. While each measure seems reasonable, the result is a focusless collage. The government used various tactics, but it is unclear whether its point is to relax regulations, provide assistance or pursue restructuring.
In fact, the reinforcement of competitiveness in the service industry cannot be attained by the government’s hastened policy. It would have been better to concentrate the time and energy devoted to the preparation of sundry measures on the existing regulation reform. Instead of feeling nostalgic about industrial policy, the government had better let the private sector take over. The regulations in the service sector should be drastically relaxed. It might sound like a cliche, but it is the answer.
Relaxation of regulation often means that the regulation will be eased but still be in place. Approval power might be transferred to a lower authority, or a license system might be changed into a registration system. The minister can step in and take decisive action if the change does not influence the big picture, but the working-level official cannot make decisions at his discretion. He would have to follow the regulation, or the law, to the letter.
The government would take credit for easing regulations by changing a license system into a registration system. Currently a government official in charge can intervene with a company filing a registration if he wants to. Some companies have had a hard time when some officials abused the newly-introduced technology in the registration system.
The layers of regulations we have now are leftover vestiges piled up by the industrial policies of past administrations. If the government does not have the will to get rid of them, the service industry will have trouble enhancing its competitiveness. Each ministry is to announce detailed plans next year, and I hope that the plans focus more on what not to do than what to do.

*The writer is a deputy business news editor at the JoongAng Ilbo.

by Nahm Yoon-ho