Afraid of sharing

Hong Seung-il
The author is the CEO of JoongAng Designworks.

A growth policy pitching innovation to somehow make up for the damage caused by the income-led growth policy hasn’t gone very far. Some question the difference between it and the equally uncompelling creative economic agenda pursued by the Park Geun-hye administration. But the government seems intent on seeing through at least one new industrial realm: the so-called sharing economy. The carpool or ride-sharing segment is seen as a litmus test of whether a new industry can squeeze into a sector dominated by mainstream forces. Smart mobility services epitomize everything about the fourth industrial revolution — clean fuel, autonomous driving, artificial intelligence and big data.

The Moon administration’s fourth industrial revolution committee set the sharing economy as its first mission late last year. But the committee had to close its first year without having a chance to fully examine the policy in the face of strong opposition from the taxi industry. A carpool service by the country’s top chat platform operator, Kakao, could not be launched due to a fierce protest by 250,000 licensed taxi drivers who claimed their livelihoods, as well as those of their 1 million family members, were at stake.

Chang Byung-gyu, CEO of Bluehole and chairman of the presidential committee preparing the country for the fourth industrial revolution, lamented, “We are running, but developed economies and multinationals are flying.” Korea has made little headway in blockchain, fintech, bio and healthcare. Hyundai Motor had to withdraw its 5 billion won ($4.5 million) investment in a local carpool operator after the taxi industry threatened to not purchase Hyundai cars. It had to take its investment to Southeast Asia to get into the ride-sharing industry.

The government at least should have been more fervent if it was serious about revitalizing the economy through innovation. It should fix outdated systems, mediate between old and new industries, and find a way for automation to not jeopardize traditional human jobs. The administration could have proposed to allow carpool services in return for liberalizing taxi fares. But authorities have gotten nowhere on the innovation front because it was anxious not to annoy the taxi industry and consumers. Lee Jae-woong, CEO of car-sharing service SoCar and a veteran of the first-generation of start-up entrepreneurs who created portal site Daum, said, “The future is not that far away. Everything will eventually follow the path of innovation.”

We are moving at a snail’s pace on the innovative front while others are taking flight. Instead, all our resources are spent on public policies aimed at generating growth through income increases, a concept few countries would attempt in the high-tech and highly competitive world. The government now calls its agenda “inclusive growth,” but the ideas behind it remain the same: who would oppose economic growth in a society where everyone lives well and consumer pockets are filled?

But forced increases in the minimum wage have brought a backlash from the market and employers who must pay workers. Companies lose their price competitiveness and exporters suffer. The concept cannot be sustained in an open economy that depends on external trade. Jobs will shrink and the good intentions behind the policy will be forgotten.

In a few years time, foreign ride-hailing services like Uber, Didi Chuxing of China and Singapore-based Grab will likely dominate the Korean market. Many predict unmanned vehicles will replace taxis by 2030. Four out of 10 of the most valuable start-ups around the world are related to sharing businesses. Yet Korea is at the risk of turning into a Galapagos isle, cut off from the evolutionary forces of the sharing economy.

At the Group of 20 summit in Buenos Aires last week, Moon explained that Korea’s inclusive growth policy seeks growth led by income and innovation. But income-driven growth is a highly risky investment. It is uncertain whether the government is equally intent on pushing rigorous investment in innovation. Some sneer that the policies are more suitable for impoverished North Korea.

Yuval Harari — a historian and best-selling author of “Sapiens” — predicted that North Korea could be the first country to allow autonomous vehicles on all roads since the country has no mainstream industries. Kim Byung-yeon, an economics professor at Seoul National University, claimed that if North Korea spent the money currently funding nuclear weapons development on its people, the country could set the first example of succeeding with an income-led growth policy.

JoongAng Ilbo, Dec. 5, Page 31