Private-led growth starts with deregulation

Cho Ju-hyeon
The author is Vice Minister of SMEs and Start Ups.

Recently, Korea is undergoing multiple crises from so-called Three Highs (high prices, high interest rates, and high exchange rates) related to uncertainties in the global economy. In such times, total factor productivity (TFP) is crucial. With limited contribution from labor and capital markets due to a rapidly-aging society, low birth rates, and high interest rates, the increase of TFP with innovation is the only way for the economy to grow. The Korean government will seek a rebound of the economy and sustainable growth through innovative deregulation.

On June 23, the Yoon Suk-yeol administration designated regulatory reforms as a pan-governmental agenda. Over the next month, with cooperation from the private sector, a task force encompassing various ministries and agencies identified approximately 130 tasks related to improving regulations and presented 50 tasks that can be implemented right away. The announcement was made during the “First Task Force Meeting on Innovation in Economic Deregulation” on July 28.

Specifically, the law will be revised to strengthen restrictions for companies that took part in unjust activities during the bidding process among products from small and medium enterprises (SMEs). This will help ease the burdens related to restrictions for approximately 1,400 SMEs annually, and resolve uncertainties in business management.

The government has been listening to various voices from the field through a comprehensive survey on companies that receive start-up support benefits, on-site visits to regulation-free special zones, and semiars among SMEs and start-ups, not to mention actively taking part in identifying stifling regulations related to small companies and business owners across various government departments.

Over the past three years, the government also has been seeking opportunities to expand the base for regional new industries and invigorate the local economy with the regulation-free special zone system. Over six stages, at least one zone was designated in each of the 14 metropolitan cities that are not in the Seoul capital area.

The system resulted in tangible results, including an investment of 2.7 trillion won ($2 billion), approximately 3,000 new jobs, 95 billion won in related sales, and 239 resident companies. In addition, to spread the effects of the regulation-free special zones, the new administration will aim to improve the convenience of the system and strengthen cooperation among related parties. The special zones with high global growth potential will be designated “Global Innovative Special Zones” for greater regulatory benefits and will receive support in establishing support centers. These zones will be supported in-depth with pan-governmental policies.

Government policies are continuously reviewed to ensure that they do not become unfair entry barriers on site, going against their original purpose. Complex project implementation processes were improved to become more rational, and there are on-site visits to guarantee that the companies will experience the changes from the improvements.

The “SME Regulation Effect Evaluation” will evaluate in advance whether the regulations will give SMEs disadvantages. The results will be used to either stop the implementation of the regulation as a whole or alleviate it. Unjust regulations that are already in effect will be abolished after a discussion on regulatory reform hosted by the Minister of SMEs and Start-ups and joined by government ministers related to regulations.

The need for regulatory reform was underscored by all administrations. This shows how challenging it is to complete the process and how important it is to continuously pay attention to the issue. The Yoon administration has just taken a first step in regulatory reform. Perhaps there is still a long way to go to meet the public’s expectations. All government ministries will come together to review a comprehensive survey, examine the regulations in detail, and make improvements.