Land of regulations
The author is a senior columnist at the JoongAng Ilbo.
Regulations are the government’s way of intervening in and controlling the private sector. They are the opposite of freedom.
The former finance minister, Jin Nyum, recently shared an interesting insight. Korean golf players like Park In-bee and K-pop groups like BTS have achieved worldwide status because their fields are outside the boundaries of Korean regulators. If the government offered a hand and interfered, they would have come under multiple unnecessary regulations. The regulations evolve into a norm and hamper enterprising initiatives.
The regulatory ceiling is high. Park Yong-maan, who led the Korea Chamber of Commerce and Industry for five years, said he petitioned the government for deregulation 40 times while in office but did not see any improvement. Over the years, over 800 new regulations have been pushed forward.
The elimination of regulations makes way for jobs. U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe have put their heart into lifting regulations. Korea alone is going in the opposite direction. The service sector and new industries remain dormant, weighed down by a pile of regulations.
Korea is a land of regulations. They are prevalent across business and society. Kim Byung-joon, the interim head of the main opposition Liberty Korea Party, cited a bill to ban the installation of coffee vending machines at schools starting in September as one example. He called it “excessive nationalism.”
The bill undermines the freedom of teachers. Adults can keep students from drinking coffee out of genuine concern for their health, but the government does not seem to trust them and feels the need to enforce a law.
Moon did get some points right. He said it was more difficult to get a license to sell a device in Korea than to develop one. A number of government offices — the Ministry of Health and Welfare, Ministry of Food and Drug Safety, the National Evidence-based Healthcare Collaborating Agency, and Health Insurance Review & Assessment Service — all have a different set of regulations. Getting a permit to sell in Korea is a lengthy and tiring process.
Regulations are invincible, protected by an invisible cartel of bureaucrats, lawmakers and consumer advocacy groups. Regulations stay intact to serve their interests. Many government officials agree on the need to lift regulations, but they cannot depart from the vested power that comes with them.
Regulations are fearless because no deregulation campaign in the past has actually worked. When accidents occur, the cartel moves to strengthen regulations. They blame the accidents and mishaps on loose regulations. The consumer advocacy groups and scholars who make up the voting base of the progressive government prefer to keep regulations in place. They uphold regulations as their ideological faith.
Regulations give enormous power to government officials. Former Finance Minister Kim Yong-hwan said a deregulation drive must take into consideration bureaucrats’ innate resistance to yielding their regulatory power and requires an inventive approach. Kim stood out in the Park Chung Hee administration and was called on by President Kim Dae-jung to form an emergency team to graduate from an international bailout program as early as possible. The president praised him for his excellent policy insights and drive.
When Kim Yong-hwan was the finance minister under Park in the late 1970s, the ministry had a bureau in charge of foreign exchange. There was a regulation requiring Korean nationals to report and gain approval to take U.S. dollars out of the country beyond a certain threshold. The rule made business trips difficult for traders. Kim Yong-hwan found the rule a waste of time and resources. He ordered the work be handed over to banks.
But the regulations did not go away because government officials ignored the order. He took the radical action of sending the bureau head to another division, but his subordinates continued the practice, so he closed down the bureau in the Finance Ministry.
Regulations are addictive. Bureaucrats get a thrill out of bossing around Korea Inc. Future deregulation attempts should Kim Yong-hwan’s approach.
Moon has displayed an impressive will to deregulate, but the campaign requires both immediate and long-term tactics. His income-led growth policy has hit a snag. The president insists that policies which generate income and innovation should be pursued simultaneously. But while the policies themselves can be carried out at once, we cannot expect the achievements to come at the same time.
The devil of economic policy is in the details and triage. Governance should start with prioritizing agendas. Competence hinges on such an ability as well as the courage and will to lead. Deregulation is the answer to Korea’s stagnant economy.
JoongAng Ilbo, July 26, Page 31