Deregulation holds the key
The author is an editorial writer of the JoongAng Ilbo.
Jung Yoo-shin, dean of Sogang University Graduate School of Management of Technology, is an expert on venture investment and the Chinese economy. He headed an angel investment fund devoted to promoting venture start-ups and, starting in 2015, a fintech center under the Financial Services Commission. He recently authored the book “China is Winning,” arguing that this is a grand transitional era in which the economy is shifting from analog to digital.
The digital market is approximately 20 percent of the total economy, while the analog one is about 80 percent. A decade from now, the share will be 50:50. Jung claims that we are at a juncture where the world is moving from the analog to the digital, from the third to the fourth industrial revolution, and in which global hegemony is moving from the United States to China. As those who accept the transformation upon sensing a gigantic seismic shift survive, the future of a nation will depend on its ability to read the great changes ahead and make headway, he said.
So where is Korea at this critical stage? Chang Ha-joon, an economist at the University of Cambridge, said Korea was in a state of emergency as its key industries are crumbling from a critical lack of investment and new technologies over the last two decades. Lee Jae-woong, founder and CEO of car-sharing enterprise SoCar, says that the country is at risk due to slow progress in innovation. He recently resigned as the co-head of a joint state-private initiative devoted to promoting innovative growth.
An increasing number of people are becoming pessimistic about the Korean economy given the country does not have competitive technology or competitive industry other than semiconductors, which can fuel the future growth amid demographic challenges from a low birth rate and an aging population. The government is well aware that innovation is the answer. Last week, President Moon Jae-in said, “We can no longer delay and avoid the task of reforming the manufacturing sector to generate growth through innovation and jobs.” The question is how.
Car-sharing has tested the government’s will on innovative growth. The market would have gained trust in the government’s stance toward the future and in its capacity to cope with the new era if it had persuaded the die-hard taxi industry to accept ride sharing. Carpooling is here to stay. Just as motor vehicles replaced carriages, cars will one day be shared instead of being owned. U.S.-based ride-sharing service provider Uber is now worth 134 trillion won ($120 billion). Its Chinese counterpart Didi Chuxing is valued at more than 56 trillion won, double Hyundai Motor’s market cap of 25.3 trillion won.
While car-sharing cannot grow due to regulatory bottlenecks in Korea, China’s sharing economy is expanding quickly. According to the State Information Center of China, the sharing-economy market in China expanded 43 percent year-on-year last year to $715 billion. The center estimates that the sharing economy market would continue to grow more than 40 percent annually and account for 20 percent of the gross domestic product (GDP) by 2025.
Korea must not delay jumping on the bandwagon of fast-expanding future industries. Otherwise, it will find itself under the influence of foreign players and predators in the digital age. Regulations and conflicts of interest in mainstream industries are blocking the way.
Telemedicine, big data, drone and other future industries are stifled under multiple layers of regulations. Without the dramatic removal and destruction of outdated regulations, the country cannot expect either innovative growth or survival in the fourth industrial revolution. Taxi drivers could be harmed in the transitional period. To minimize the harm is the duty of the government and politicians. The social security net should be strengthened and the labor force of traditional industries should be retrained to adapt to the digital economy. There is not much time left. Korea is lagging far behind the United States and China in artificial intelligence, big data, cloud, satellite and other advanced technologies.
The government, enterprises and individuals must retool themselves to survive in the new era. A country has no future if the young only seek out comfortable traditional jobs like teachers, government employees and doctors.
Individuals must not fear failure or taking repeated risks to make their communities both creative and vibrant. The president and policymakers of this country must remove regulations and advise their children to start their own businesses for the Korean economy to fly again, said Lee Kwang-hyung, a professor of bio and brain engineering at KAIST.
JoongAng Ilbo, Dec. 31, Page 27