Home > Opinion > Columns

Decentralize the regulatory framework

Published: 23 Dec. 2024, 19:04

Koo Tae-eon
The author is an attorney in charge of the TMT (Technology, Media, Telecommunication) Group at the law firm Lin.

We are awaiting the Constitutional Court’s historic verdict on the third presidential impeachment trial. Korea’s 1987 Constitution, underpinned by a single five-year presidential term with extensive executive power, has remained unchanged despite rapid socioeconomic transformations. We have now reached a critical juncture to question whether our decades-old Constitution can sustain economic growth driven by innovative enterprises in the era of AI. In 1987, today’s technologies, including the Internet and smartphones, existed only in imagination and science fiction. Some may question the relevance of the Constitution to new industries, but a constitutional amendment is essential to reform the centralized regulatory system.

Korea’s regulatory framework is entirely government-driven, with various offices overseeing industry-specific rules within their jurisdictions. This government structure remains largely unchanged from the 20th century. Every new service and product become subject to preliminary review by supervisory government offices to ensure compatibility with existing regulations. This rigid framework often results in the rejection of novel products and services. Favoring the interests of traditional industries, the system is inherently hostile to disruptive innovations, acting as a major obstacle to technological advancement. Legal barriers provide strong protection for consumer service sectors like transportation, medicine, hospitality, food and healthcare, where established players dominate.

The centralized regulatory system applies uniformly across the nation. Consequently, new technologies and products that conflict with existing rules are barred from reaching consumers anywhere in the country. Digital transformation in consumer-oriented services such as healthcare, legal assistance, transportation and hospitality is stifled by outdated regulations. This constraint prevents startups from gaining domestic experience and scaling globally. Korea’s sluggishness in fostering innovation has contributed to its economic growth remaining in the 1 percent range last year.

In a federal system like that of the United States, the federal government oversees national matters such as foreign affairs, trade and defense policies, while regulations related to services fall under the purview of state or municipal governments. Regulations, therefore, vary by state and city, allowing innovation-driven companies to gravitate toward regions that encourage experimentation.

This decentralized structure enables local governments to experiment with new technologies and services. Lawmaking at the national level is inherently slow, as it requires Congressional and Senate reviews and coordination between federal and state governments. This time-consuming process naturally fosters a reactive regulatory approach, applying rules only after an industry reaches a certain level of maturity, thus avoiding hindrance to its growth.

The case of Tesla’s advancements in full self-driving (FSD) technology illustrates this point well. Tesla was able to test its FSD prototypes with real drivers without significant legal barriers. The U.S. National Highway Traffic Safety Administration (NHTSA) played a supervisory role, focusing on monitoring and investigating complaints and defects. The agency requested safety-related data and ordered remedial actions when necessary. This flexible approach allowed for incremental regulatory applications based on trial outcomes and industry maturity. Tesla recently launched its supervised FSD software for its fleet, impressing the vehicle community with its sophistication. All of this progress was made possible under the U.S. regulatory ecosystem. Similarly, the slow-paced regulatory environment has positioned the U.S. as a leader in AI development.

The United States’ slow but accommodating regulatory system has fostered experimentation in new technologies and created a diverse innovation ecosystem. This stands in stark contrast to Korea’s “fast” yet rigid regulatory response to innovation. A meaningful transition is achievable through discussions on constitutional amendments. We must redefine the roles of central and local governments, allowing the central government to focus on national-level affairs such as foreign relations, trade and security, while granting regulatory authority for regional and community services to 226 local and district administrations. This redefinition would enable local governments to compete in attracting startups and innovative ventures, fostering an environment for experimentation and the free exchange of ideas with minimal capital investment. Such changes could address pressing social and national issues, including the depopulation and extinction of regional communities.

Translation by the Korea JoongAng Daily staff.