The regulatory stockpile
The author is an editorial writer of the JoongAng Ilbo.
President Moon Jae-in is out to remove red flags in Korea. To demonstrate his will, he attended an event in support of internet bankers in August of last year and vowed to address outdated rules and regulations reminiscent of the 19th century’s Red Flag Act. The act set the speed limit on motor vehicles by requiring a man to walk before the car and wave a red flag to protect traditional stagecoaches and the railroad industry. Britain, which had been strict in enforcing the act, ended up falling behind both Germany and the United States in the motor vehicle industry even as they had been the birthplace of the Industrial Revolution. “Speed and timing is crucial for deregulation for innovative growth,” stressed President Moon Jae-in.
His determination has led to an exemption for the online banking sector to which a strict 10-percent cap on industrial ownership in banks was applied — the cap was later lifted to 34 percent. As the new rule took effect last month, fintech company Viva Republica, as well as such IT service providers as SK Telecom, is readying to launch new services for the online banking sector that has currently only two players: K-Bank and Kakao Bank.
During a visit to China last year, President Moon was impressed by the popular use of mobile payments in the streets of Beijing. Going walletless was already common in China; he might have felt things must change in Korea if the country does not want to fall further behind in the march to the fourth industrial age of digitalization. The first examples of the regulatory sandbox, which exempts new technologies and services from existing rules, were allowed this month, enabling the installation of hydrogen fuel charging stations in Seoul.
Despite all the hoopla, red flags remain in Korea. The Ministry of Gender Equality and Family suggested regulating the appearance of idols and entertainers on television, citing concerns about their impact on teenagers. The legislature and government are competing to trot out bizarre new regulations. The National Assembly is at the center of regulation: the incumbent lawmakers have produced 16,000 new bills, doubling the number of their predecessors. Of these, 3,000 are regulations.
Legislation has been respected as the jurisdiction of the National Assembly. Yet it has gone too far in its mass-production of regulations. Government-proposed bills must pass review by the regulatory reform committee. But motions by lawmakers are fast-tracked as they rubber-stamp overlapping regulations without bothering to check for conflicts. Korean companies must compete with multinationals under the ever-increasing regulatory stockpile.
Interest groups have stepped forward to rescue companies and plead to the government on their behalf. Finance Minister Hong Nam-ki and other bureaucrats agreed on the taxation of businesses in the same corporate family. The business groups asked for an exemption on insider trading on proprietary services and technologies. But the exception clause was immediately shot down by the Fair Trade Commission, led by iconic chaebol critic Kim Sang-jo. Companies are inevitably on their own to survive in this society teaming with red flags.
If the liberal administration did not railroad rapid increases in the minimum wage, impose a one-size-fits-all cutback in working hours and start a reckless phase-out of nuclear power plants, all the damage to the economy could have been avoided. A minister who served in the liberal Kim Dae-jung administration said politicians and bureaucrats without credentials would do a favor to the nation by staying at home instead of meddling in state affairs. Policymakers whose actions have further impoverished the poor should humbly listen to their elders’ wisdom. I hope they do their best to get rid of red flags across industries rather than finding new regulations.
JoongAng Sunday, Feb. 23-24, Page 30