Deregulation is key to progress
As countries around the world deregulate in order to improve economic efficiency and overcome the recent economic recession, the Korean government’s strong effort to implement regulatory reforms under the active leadership of President Park could help Korea make a giant leap forward. Among the recent reforms presented by regulatory authorities, the introduction of a “cost in, cost out” system, moving from a positive to a negative list system and requiring regulators to justify new and existing regulations, are noteworthy.
In addition, Park herself has pledged to allow the foreign business community more opportunities to share its views. Providing a formal mechanism that enables the foreign business community to be involved in this process will help Korea deregulate its economy in a way that promotes economic growth and creativity, encourages more FDI and helps minimize unintended consequences. If the Korean government truly embraces such reforms as a unified goal to push the Korean economy to the next level, it could transform the Korean economy and, at the same time, provide a huge added boost to Korea’s goal to increase FDI.
In many ways, Korea is truly emerging as a global leader. Expectations as to how Korea should conduct itself diplomatically and economically are rising in line with Korea’s growing stature. Yet for the past several years, foreign companies have noted how “over-regulated” and more inwardly-focused the Korean market has become compared with other jurisdictions in the region. More and more Korea-unique regulations have popped up even in the last year in areas related to financial services, environment, government procurement, consumer protection and small and midsize enterprises.
In fact, according to the Product Market Regulation (PMR) index, which is published annually by the OECD, Korea ranked fourth for having the most restrictive regime and second for having the most barriers to trade and investment (BTI) out of 33 OECD members.
There are many areas that seem ripe for deregulation. The IT industry, one of Korea’s growth-driving sectors, is one of them. To give an example, while K-pop artists’ popularity is growing internationally, Korean customers cannot buy goods and services related to their own stars from online commercial markets abroad with Korean credit cards because of current regulations. It is quite telling that Korean customers are the only ones who cannot buy Psy’s albums on iTunes while millions of people around the globe are enjoying his music by using one-click payment systems. We are glad that the government seems to be reviewing this issue now.
Korea is currently at an important crossroads. The country can choose to embrace global best practices through this deregulation initiative, thereby enhancing the competitiveness of its economy. Or it can focus inwardly and continue to apply a series of new regulations that, although intended to achieve certain laudable social goals, actually close off its economy to new, innovative ideas and make investors turn to other, more open economies. In retrospect, the Miracle on the Han River was made possible by the determination and skill of Korea’s leaders and economic actors in promoting new ideas, making difficult but necessary changes and overcoming many challenges - all to develop the country. This spirit needs to be cultivated anew.
We strongly encourage the Korean government to unite in order to boldly deregulate the Korean economy. Foreign companies in Korea are Korea’s best cheerleaders. If Korea is inclusive and embraces this process, foreign companies operating here will have new, very valuable leverage to persuade their headquarters to invest more in Korea. We, the American business community, would like to actively assist Korea in achieving what can be a great outcome from this process - namely for Korea to achieve its “Second Miracle on the Han River.”