Park switches her focus to clear path for local businessThe main focus of the Park Geun-hye administration’s economic policy has shifted from restoring exports to boosting domestic demand and the service sector.
The Ministry of Strategy and Finance on Wednesday announced the government will create over 6.2 trillion won ($5.1 billion) worth of new investments by removing minor regulatory hurdles for business projects that are near implementation, while fostering new service markets with a goal of producing 320,000 new jobs.
The plan was confirmed in the ninth trade and investment promotion meeting presided over by President Park at the Blue House. It was the biggest pan-government meeting on policies centering on regulatory reforms for businesses, developing new industries and supporting exporters.
“Currently, both global and local markets are foggy and shaky, and we need to focus on bolstering domestic demand and the service sector in order for Korea to become competitive or successful in this race to survive,” said Finance Minister Yoo Il-ho in a briefing at the Seoul Government Complex.
“The government’s plan would not have direct impact on Korea’s growth rate right away, but I am sure that it will play a key role from a long-term perspective.”
On investment, the Finance Ministry came up with plans to build a district specialized in research and development (R&D) of private companies, induce new investments in the sports, health care and education sectors, and legalize new “sharing economy” businesses such as Airbnb and Uber.
The main point of the investment plan is to accelerate the implementation of investment projects that have been held back for regulatory reasons.
In Seoul and nearby areas, the government will swiftly eliminate regulations that are considered obstacles to major business projects.
The government will lift the greenbelt regulation on the Yangjae-dong and Mt. Woomyeon areas, located in southern Seoul, in order to construct a business R&D district. There have been regulations regarding construction of high and large buildings because of the mountain.
The government will raise the building coverage and floor area ratios for R&D buildings, while easing regulations on visa issuance for foreign specialists working in the new R&D district.
“About 3 trillion won in new investments are estimated to be created in the R&D district,” said Cha Young-hwan, an official in charge of growth strategy policy at the Finance Ministry. “Along with Pangyo, the government hopes to transform the area into a new R&D-specialized region.”
In Goyang, Gyeonggi, the government will gather facilities related to Korean cultural content, calling the region “K-Culture Valley.” On 92,000 square meters (23 acres) of land, the government will approve construction of concert halls, a theme park and hotels. An automobile service complex will also be created in the area that has been restricted due to the greenbelt rule, allowing car tuning and maintenance services.
To promote the sports industry, the government will ease the current regulation on private golf clubs, which requires agreement from all members to open the club to non-members. The agreement ratio will be reduced to 80 percent.
When a golf club is opened to the public, it can receive loans from the Korea Sports Promotion Fund at rates that are 1 percentage point lower than offered by commercial banks.
There are 64 golf clubs that allow players to play without caddies and carts, which help cut club fees by 40,000 to 50,000 won. The government aims to increase the number of clubs to 150 by June.
The “sharing economy” is another key part of the government plan. After years of debate over sharing services, the government decided to accept the idea by designating certain regions.
The government will set regulation-free zones in Busan, Gangwon and Jeju, where tourism is critical to the regional economy, and allow sharing accommodation facilities in the regions. By law, it is illegal for individuals to rent out residences for tourists without registering with the authority. To protect existing businesses, new businesses will be limited to renting their residences for up to 120 days.
Sharing cars will also be legally protected. Local car-sharing businesses like Socar will be overseen by the National Police Agency and Road Traffic Authority regarding drivers’ qualifications. The government will come up with legislation to enable authorities to check drivers’ history. It will also designate some cities to start car-sharing services in April.
Experts view the reforms positively. “It is a good attempt to lift the regulations regarding the sharing economy,” said Kim Sang-hoon, a professor at Seoul National University. “Although there is concern that foreign sharing businesses like Airbnb and Uber might dominate the local market, it will be a good opportunity for local businesses to seek new growth.”
As for trade, the government came up with emergency remedies. After experiencing a shock last month when exports fell at the steepest pace since August 2009 due to slow demand from tumbling emerging economies, the government will run short-term booster strategies and long-term preparations to seek more exports.
The Ministry of Trade, Industry and Energy picked three strategic markets - China, Iran and Brazil - which are believed to still have plenty of purchasing power amid a global growth slowdown, and expand marketing there. Brazil was included because of the 2016 Summer Olympics in Rio de Janeiro. The ministry will host exhibitions that feature Hallyu, or Korean Wave, celebrities in May and August. The exhibitions will focus on selling Korea’s five best-selling products, including cosmetics, fresh produces, fashion and baby products.
Internally, state-run trade authorities will assist some 5,000 small manufacturers who have never exported before to begin cross-border deals by the end of this year by expanding financial and policy assistance.
At the same time, the government reformed its industrial regulation system to be led by the private sector and independent professionals, unlike the state-led system in the past.
When a company requests to create, eliminate or revise regulations, the demand will be evaluated by an industrial investment committee, which consists of analysts and researchers, and directed to the regular trade and investment meetings hosted by the Blue House. From now on, all business regulations will only have minimal restrictions to encourage as many new businesses as possible.
Instead of pressing the private sector with bureaucratic power, the government said it will play a role bridging different industrial sectors by forming a cross-sector business alliance and initiating collaborative projects and research.
“The gap [the superior in Korean] and eul [the inferior] in the Korean business-bureaucracy system will be flipped from now on,” said Toh Kyung-hwan, head of the industrial policy division at the Trade Ministry. “Regulations will be created or eliminated under the private sector’s lead, while the government will only give directions and help.”
As part of such an initiative, the private sector announced investment plans to foster new export businesses to prepare for the nation’s future and innovate flagship sectors such as heavy industries, petrochemicals and growing sectors.
Eighty-one companies will invest 44 trillion won by 2018 in energy, materials, bio-health, high-end consumer products and Internet of Things-enabled devices. In assistance, the government will spend 11.5 trillion won by next year in their R&D projects to expedite commercialization and inject another 80 trillion won via policy banks to help the companies prepare facilities. As part of such efforts, some 50 companies, including auto and auto parts makers, telecom, IT, battery and materials makers as well as insurers and law firms, launched a business alliance on Wednesday to jointly develop new auto businesses such as electric vehicles, driverless and hydrogen fuel cell-powered cars.
“The alliance will discuss necessary legal, policy and standard certification systems that should be in place before actually commercializing the driverless cars,” said a Trade Ministry official.
Local energy efficiency, renewable energy, builders and engineering companies will gather to create another alliance on the so-called future energy sector within the year.
BY SONG SU-HYUN, KIM JI-YOON, and KIM YOUNG-NAM [email@example.com]