A regulatory powerhouseThe GDP grew a mere 0.4 percent on quarter in the third quarter. At this rate, the economy will grow under 2 percent full year. The only times Korea’s economy grew so slowly were during oil and financial crisis periods. Just 10 days ago, senior presidential secretary for economy Lee Ho-seung claimed the economy was faring well.
The private sector remains lethargic. Facility investment in the third quarter fell 2.7 percent from a year ago and 11.8 percent from the same quarter in 2017. Jobs took a hit. The only additions were temporary work for senior citizens paid for with tax funds. The job crisis led to a protracted slump in consumption and economy in stagnation.
The government blames external factors for sluggish corporate investment. It argues the spread of trade protectionism hurt the export-reliant economy. But unfavorable conditions on the external front are not the only reason behind sagging corporate investment. Korean companies took their money overseas. Foreign investment in the first half reached a record-high of $29.1 billion. What could have been spent here was lost.
A rigid labor market and ever-growing regulations have led to corporate flight. France is enjoying the lowest unemployment rate in 10 years because the president has stood against militant unions and made dismissal easier. Everything in Korea is going backwards. The conversion of irregular workers to permanent status only worsened rigidity in the labor market. The government justifies its supersized budgeting citing the recommendation from the IMF. But it does not pay attention to the IMF’s repeated advice for greater flexibility in the labor market.
The country is a regulatory powerhouse. Ride- and room-sharing or remote telemedicine common elsewhere cannot take hold in Korea. It is no wonder companies are taking their capital and business to foreign soil. Hyundai Motor has spent 99 percent of its budgeting for future mobility in foreign ventures over the last two years. Venture entrepreneurs say if they have a new idea, they pursue it without consulting the government because it would make new regulations to outlaw it.
Park Yong-maan, chairman of the Korea Chamber of Commerce and Industry, calls the economy a “regulatory jungle.” Reforming the labor and regulatory sectors requires greater command and attention. The president must show more willingness to reform labor and regulations. If he stalls further as not to anger the unions, the economic woes will only worsen.
JoongAng Ilbo, Oct. 25, Page 34