Deregulation up as economy stallsThe government is expanding deregulation, proposing 33 new measures to reduce regulatory obstacles for businesses in a bid to revitalize the local economy.
According to the Ministry of Economy and Finance on Monday, local financial investment companies will soon no longer face restrictions on loans to overseas affiliates.
Under current financial laws, financial investment companies with assets over 3 trillion won ($2.5 billion) are restricted from making such loans. The regulation had hampered local investment companies from making active expansions overseas and placed them at a disadvantage against foreign competitors.
The Finance Ministry said the Financial Services Commission will propose legal amendments to the National Assembly by December in a bid to encourage active overseas business activity by the finance sector.
The latest announcement falls under the government’s new headline “innovative growth” policy that seeks new growth engines by helping businesses as Korea struggles with a slowing economy.
It is a marked shift from the government’s past “income-led growth” policy that focused on increasing wage levels to encourage more spending and, in turn, economic growth.
“Under the innovative growth policy, we are focusing on improving economic activity at the moment while […] making preparations for future growth engines in the long term,” said Finance Minister Hong Nam-ki during a senior government meeting at the Government Complex in Sejong.
“We need to lead integration between industries as well as improve old policies.”
Hong discussed additional government plans during the meeting such as support for the auto industry’s transformation into environmentally-friendly and connected mobility platforms.
The government promised to change regulations for the auto industry such as easing strict local safety standards for vehicle traction batteries to international levels and allowing hydrogen charging stations to be built at existing liquefied petroleum gas (LPG) charging stations.
The deregulation announcement also covers changes to rules that have stifled local businesses such as overlapping government inspections.
The government plans to make administrative changes by September next year so that chemical plants won’t have to make separate safety reports to the Ministry of Environment and the Ministry of Employment and Labor. They will instead submit a combined safety and environment report to authorities, cutting back on redundant administrative processes and paperwork.
The policy push to help businesses by removing regulatory stumbling blocks also marks a change toward proactive deregulation.
The government had previously supported the so-called regulatory sandbox program in which it eased select regulatory hurdles requested by businesses under limited conditions.
The deregulation announcement also underscores a sense of urgency to help businesses that have been hit by an economic slowdown.
State-backed think tank Korea Development Institute said in its recent monthly report that Korea’s economy remains stagnant on shrinking exports. Outbound shipments recorded a 10th consecutive month of on-year declines last month.
Meanwhile, facilities investment has remained low compared to 2018, falling 2.7 percent in August from the previous year.
Credit ratings agencies have expressed concern over Korea’s economy this year and next year amid broader weakness in the global economy.
Standard & Poor’s (S&P) projects Korea’s economic growth this year at 1.8 percent, far lower than the government’s target range between 2.4 and 2.5 percent.
Fitch Ratings, another global credit rating agency, has reduced the country’s GDP growth forecast for next year by 0.3 percentage points to 2.3 percent, citing growing trade risks.
The Finance Minister will meet officials from S&P during his trip this week to Washington to take part in the G-20 finance ministers’ meeting and the annual International Monetary Fund and World Bank conferences.
BY CHAE YUN-HWAN [firstname.lastname@example.org]