Removing ‘brics’ on path to growth

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Removing ‘brics’ on path to growth

It’s no different in the United States or the Republic of Korea. Newly inaugurated President Park Geun-hye may well find, as recently reelected President Barack Obama has, that getting elected and getting down to the business of governing are two very different challenges.

But unlike President Obama whose tone and style of governing, as well as policy priorities, have already been much in evidence in his first four years in office - elating some and disappointing others - President Park still carries with her the hopes of her fellow citizens and others rooting, as I am, for an even more dynamic and engaged South Korea, in Asia and the world.

Moving the nation forward into a “new era of hope,” however, will require not just addressing the significant international challenges posed by North Korea or by rising tensions in the region over maritime borders and the legacies of war and colonialism. As in the United States, the path ahead also will require President Park and policy makers to address four fundamental questions if South Korea is to overcome slowing growth and soaring welfare costs.

First, is government bureaucracy hindering or fostering economic growth?

Around the world, the track record of government performance is mixed. Yet, whether in Seoul or Washington, DC, a real fight against bureaucracy is not about new organization charts. It is about assessing what works and what does not, and changing or getting rid of the latter. No matter where you locate the bureaucracy, it is not just the size, but also the service quality, that matters.

Second, how are regulations impacting job creation?

This is one of the most critical questions. Some level of regulation is essential. Yet, rules also need to be enforced fairly, transparently and equally. We must also ask policy makers if ill-timed or excessive regulations from the past, albeit well-intentioned, are imposing too high an economic cost today. President Park in her inauguration speech made clear that changes must take place to ensure that small- and medium-sized businesses can also flourish. That’s as true in the United States as it is in South Korea.

Third, when is government intervention appropriate?

South Korea’s nurturing of its family-owned conglomerates, or chaebols, is well known, and by some measures has succeeded tremendously, with the likes of Samsung and Hyundai having emerged as global players. But, as President Park noted, that too needs to evolve.

Ensuring that South Korea’s businesses and entrepreneurs live up to their full potential will indeed mean “rooting out various unfair practices and rectifying the misguided habits of the past.” Too often, government interventions and inefficiency can go hand in hand. Policy makers need to ensure such interventions, if any, are limited and a matter of last resort if there is to be a “second miracle on the Han River.”

And fourth, what more can be done to root out corruption?

Throughout the world, corruption and cronyism also go hand-in-hand. The United States is not immune, ranking only 19th on Transparency International’s 2012 Corruption Perception Index, which looks at perceived levels of public sector corruption, with the lower the number, the better the ranking. Mired at the bottom of the list of the more than 175 rated countries and territories are North Korea, Afghanistan and Somalia.

South Korea, ranked at 45th, can do better. Allegations of favoritism or leniency must be investigated, institutions strengthened and individuals held accountable if people are to keep their confidence in the public sector.

For three and a half years, from 2007-2010, I served under Presidents George W. Bush and Barack Obama as U.S. ambassador to the Asian Development Bank (ADB) - a Manila-based international financial institution focused on poverty reduction. And decades before that, in the early-1970s, I spent part of my childhood in Yongsan, where my father, a U.S. army officer, was stationed.

Having been an elementary student in Seoul that fateful month of August 1974, I remember the assassination of Park Geun-hye’s mother - then Korea’s First Lady - by what proved to be a North Korean agent. Regardless of nationality, we can all admire and respect Park’s subsequent journey to the presidency in the aftermath of both her parents’ deaths.

In those four decades, from my childhood to today, South Korea and the United States have both changed in once unimaginable ways - from new free trade agreements, to new types of leaders. Just a few months ago, Americans re-elected their first African-American president, and South Korea has since elected its first female president.

Yet no matter who sits in Blue House, or the Oval Office for that matter, I found that at some point the prescription for economic growth in any nation - whether the United States, South Korea or any of the region’s poorest nations in which the ADB provided loans, grants or technical assistance - was and is straightforward.

Improve the bureaucracy, regulate fairly, intervene rarely and stamp out corruption. Investment, capital and business confidence and growth will follow. A simple prescription perhaps, but also seemingly difficult to fill in too many nations across the region.

At the heart of this prescription for growth for both South Korea and the United States is the notion that our leaders, regardless of political party, must come together to tear down new walls being built of bureaucracy, regulation, interventionism and corruption. This lowercased “bric” - more so than the much-touted emerging BRIC economies of Brazil, Russia, India and China - may well pose the bigger challenge to both countries’ economic growth.

During my time at the ADB, my board colleague from South Korea often joined me in joint statements on a range of projects being considered by the ADB for financing. For me, this underscored the United States’ and South Korea’s close relationship and continued shared interest in pushing for a more effective and efficient institution - one that was changing as fast as the region it was founded to serve - and for an Asia that is both increasingly prosperous and at peace with itself.

Now, citizens of both nations - which remain the strongest of allies and friends - can each, I hope, do more to focus on a common path forward, one where innovation, infrastructure improvements and a policy environment foster the job growth necessary to drive both our economies forward.

*The author, former U.S. ambassador to the Asian Development Bank (2007-2010), is a senior fellow and executive-in-residence with the Asian Institute of Technology, and a managing director with RiverPeak Group.

by Curtis S. Chin

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