Qualitative reform of regulations is the key

Home- and room-sharing platforms like Airbnb are restricted in Korea. Under the tourism promotion law, homestays for Korean nationals in cities are prohibited. Only rural homestays and lodging for experience in traditional homes are permitted. Some start-ups have gained exceptions from the regulatory sandbox to offer home-sharing services to Koreans, but they cannot expand their business as they are under multiple conditions. Dajayo, a platform that lends empty homes in rural areas, is restricted to about 50 locations across the country.

Telemedicine is also moving at a snail’s pace. Covid-19 has raised the need and confirmed the efficacy of phone doctoring and prescription in times of crisis. But it was only temporarily allowed during Covid-19 due to strong resistance from the doctor community.

A survey showed that half of 100 global unicorns — unlisted start-ups with valuation of $1 billion or more — would not have been able to expand their business if they were based in Korea. According to the report on start-ups by the Asan Nanum Foundation last week, 12 out of top 100 unicorns could not have started business in Korea and 43 would have been restricted in their business.

Among the most promising up-and-coming ventures in the world, 55 could not have built their enterprises if they were based in Korea. The report in 2017 gave a similar count of 56. Nothing much has changed over the last five years.

Innovative start-ups have been burgeoning across the globe, while regulations have stifled many of them in Korea. Of the 56 who could not have done business in Korea, 23 went public. The 23 with cumulative investment of 60 trillion won ($43 billion) in 2017 commanded the market cap of 497 trillion won at the end of August.

Businesses like ride- and home-sharing and telemedicine remain as restricted as five years ago. Even if deregulations allow ventures in the areas, they would not be able to compete with global platforms.

In a recent interview with the JoongAng Ilbo, Kim Jong-seok, the new chair of the presidential committee for regulatory reform of the private sector, said that what’s more important than simply reducing the number of regulations is enhancing the quality of regulations. The Asan Nanum report cited Chinese Premier Li Keqiang who set the guideline that new industries should not come under outdated guidelines. As a result, China produced 217 unicorns in 2019, more than the count in the United States. The regulatory sandbox system should be rationalized so as not to burden trial businesses by attaching excessive regulations. The government must ruminate whether it still regulates new industries with old standards.