The regulations plague

The central government’s deregulation policies will not work if local governments don’t respect them. The “regulations at the grass-roots level” have a far bigger impact on business activities, and they are a constant problem and a plague. As of last December, the number of business regulations on the local level reached 81,954 after 4.3 percent annual increases over the past seven years. A considerable portion of the regulations play a big part in hampering enterprises’ investments.

Fortunately, the Park Geun-hye administration has rolled up its sleeves to ease such business regulations. In a Friday meeting presided over by the president, the Ministry of Security and Public Administration came up with ideas to improve 790 unreasonable regulations by local governments and revitalize the now-defunct decree aimed at exempting civil servants from responsibilities for unexpected damages arising from their aggressive efforts to help businesses. The decree, adopted in 2008, came to a halt due to some adverse effects like deepening moral hazard or contributing to corruption among public servants.

Companies abhor such grass-roots regulations. According to the latest survey by the Korea Chamber of Commerce and Industry on 4,020 small and midsize businesses, 36 percent viewed local governments’ regulations negatively. In most cases, local governments didn’t reflect the central government’s lifting of regulations.

In some cases, local governments transferred their own financial burdens to businesses. For instance, Incheon City still collects commissions amounting to millions of won from companies who want to enter industrial compounds in the city because it still follows the kind of regulations the central government lifted 16 years ago. In another case, 24 local governments out of 162 still have not changed their ordinance on building coverage - the proportion of a site’s total area that is taken up by buildings - even as the central government relaxed the upper limit to 70 percent from 60 percent.

A pushes for deregulation is the only prescription for economic growth. But the number of regulations, which stood at 7,546 in 2002, has increased to 15,069 this year despite every administration’s call for an easing or elimination of them. That explains why foreign direct investment ($25 billion) in Korea for the last five years is only a sixth of our companies’ overseas investments ($150 billion). The government must swiftly ease all types of unnecessary regulations if it really hopes to get rid of our shameful label of the “land of regulation.”