These steps look stopgapIn efforts to prevent Yeongjong Island, a reclaimed area off the west coast of Incheon City that is home to the Incheon International Airport, from turning into a white elephant, the government plans to ease regulations on property and immigration rules there. It will help insurers get foreign clients as well as permit remote medical examinations and treatment in local hospitals. The cabinet agreed to put into action some of the ideas to rejuvenate domestic consumption floated during a debate between government officials and private experts at the presidential office last month.
New measures ranged from a temporary lifting of taxes real estate developers must pay for major construction projects like industrial complexes or golf course to an increase in financial support to exporters and shipbuilders as well as easing of restrictions on building industrial sites near the capital. The ideas came straight from industry players and therefore should help the economy.
But the new measures also come across like a laundry list of ideas to stimulate the domestic market that lacks sustainable growth. Such incoherent policy-making will fall short of helping the economy in the short-term as well as strengthening the potential for growth in the longer run.
Today’s economic slowdown is caused by both temporary and structural problems. The global economic woes due to the crisis in Europe is the temporary factor as our export-driven economy hinges on global market demand. But more fundamentally, the economy has lost vitality due to a low birth rate and an aging society. The economy has hit a bottleneck as weak domestic demand has been further depressed by the sluggish global economy.
To pull the economy out of its rut, we need more fundamental changes. The economy must be driven by domestic demand with lesser reliance on overseas orders. We need a more productive hiring system to combat the aging trend.
The solution lies in a radical lifting of regulations on domestic services. High-value-added services in the field of medicine, tourism, education and law should be opened wide to create jobs. The Lee Myung-bak government is nearing its end of its tenure. Instead of faking its way with temporary measures, it should take an aggressive initiative. Otherwise, the task of reviving the economy will have to be handed onto the next government.