Regulatory Reform for Economic Turnaround

Deputy Minister for Regulatory Reform Kang says these reform efforts have paid off

The Lee Myung-bak government has recognized regulatory reform as one of the key tasks to help the nation overcome the current economic crisis since its inauguration. In the latest move on Feb. 1, the government pinpointed 1,071 regulatory reform tasks it will implement this year. Deputy Minister for Regulatory Reform Kang Eun-bong of the Prime Minister’s Office said, “The current government has been aggressively trying to revamp such core policies as the abolition of the ceiling on conglomerates’ investments into their subsidiaries, which have been singled out under political considerations and public sentiment rather than based on economic rationale.” He continued, “It is focusing on not just revamping each law for regulatory reform, but also fundamentally pursuing institutional reform through the reengineering of implementation processes and organizations.”
“These regulatory reform efforts have been found to have effectively contributed to helping the nation overcome the economic difficulties, as is shown by surveys by domestic institutions,” he said.
The following are excerpts of an interview between NewsWorld and the Deputy Minister for Regulatory Reform at the Prime Minister’s Office, who touched on the direction of regulatory reform and tasks in the mid- and long-term perspective.
Question: What is the background and purpose of the regulatory reform tasks the government will carry out this year, which were announced on Feb. 1?
Answer: This year is projected to see the national economy enter the recovery phase thanks to an improving global economy and domestic demand turnaround, but private investments and consumption are still not on a full-fledged recovery path. Now that a recovery of private investments is essential in order to stay on the recovery path of the national economy, the government needs to push regulatory reform so as to remove hindrances to investments, which can induce private investments. As the economic recovery is too slow to impact on those in the low-income bracket, institutional reform is required for easing the burden of low-income earners and marginal merchants. Institutional reform for upgrading the nation’s standing is also called for by advancing systems in order to proactively cope with the restructuring of the international economic order in the post-crisis era and eliminating outdated systems and conforming them to international standards.
Given these conditions, this year’s regulatory reform focuses on boosting investments, stabilizing the livelihood of low-income earners and bracing for the future. In an effort to invigorate investments, the government is striving to aggressively remove obstacles so that the private sector can make investments as planned. Efforts will be made to help low-income earners and small business proprietors lessen their operating burden so that an economic recovery can stabilize their lives. Guidelines on building a platform for future growth will be arranged and regulations that turn out to be outdated when compared with international standards will be overhauled.
The government is striving hard to implement the 1,071 tasks it announced on Feb. 1 while trying to unearth more tasks for overhauling regulations.
Q: Will you tell us about regulatory reform for boosting investments?
A: We’re out to ensure regulatory reform to the extent that the rebounding private investment sentiment can be supported and it may proliferate into SMEs. Here is a look into plans to give the green light to the establishment of resort-type accommodation facilities and hospitals within tourism complexes and ease lending terms of loans extended to lower-end accommodation facilities as well as to ease regulations so that sports stadiums can install a variety of profitable facilities, including movie theaters and shopping centers and expand the permissible investment portfolio of venture capital firms to include accommodation and restaurant establishments.
Excessive environmental regulations will be ameliorated on land sites for the construction of new factories and existing factory expansion in order to ensure a stable supply of land. The construction of large-sized single factories or sporting facilities will be possible only with the approval of city and provincial urban planning committees without establishing plans on zoning districts, which takes four to six months. The scope of the areas for protecting military installations will be changed to such key facilities of military bases as ammo dumps and petroleum storage facilities, instead of outside fences of military units, virtually reducing military protection zones. Currently, factory sites are categorically not allowed within nature preservation zones, but they will be permissible if factories treat and manage wastewater in a way that will not have an impact on water quality control.
Q: What about regulatory reform for stabilizing the livelihood of low-income earners?
A: We’re devoting ourselves to ensuring a stable life for those in the low-income bracket when they may not sense any turnaround of the national economy. Health insurance subscribers will have insurance co-payments lowered for treating serious burns, and the scope of medical services covered by health insurance will be expanded to include medicines for curing cancers and rare diseases and aid for the disabled as part of efforts to lessen the medical fees of the poor. The scope of financial support for purchasing or renting houses will be expanded to include all cities and counties in the Seoul metropolitan area including Yangju, Osan and Dongducheon to ease their housing costs.
The scope of vocational rehabilitation for helping the unemployed return to work will be expanded as part of efforts to provide support for job creation for the poor.
Q: Will you elaborate on regulatory reforms for building a foundation for future growth engines?
A: The government plans to push institutional overhauls in order to ensure regulatory reform for nurturing new growth engine industries in the future. Given the necessity for the smooth development and distribution of technology in the emerging markets of new growth engines, we have focused on making technology standards and safety guidelines while determining the latest regulatory reform tasks. For instance, the approval standards for changing an internal-combustion engine car into an electric car remained unclear, but the standards and process for the structural and equipment change has been set in a bid to brace for the commercialization of electric cars. The government plans to make preparations for the full-fledged supply of hydrogen fuel cell cars by introducing a pricing system for charging plug-in hybrid cars and setting safety standards on filling stations for hydrogen cars.
Q: What steps are in place to improve systems according to international standards and eliminate inconvenience in the general public’s life?
A: As Korea is scheduled to host the G-20 Summit this year, the government plans to eliminate systems outdated according to international standards as well as ones that cause inconveniences to people’s lives.
It is striving to overhaul discriminatory systems in keeping with a more multicultural, open-door society. Transgender persons will be allowed to correct records on their immigration, a system will be improved to pave the way for the handicapped to use Hi-pass lanes as part of efforts to provide assistance to minorities of society.
Registration of automobiles will be done via the Internet in a paperless, one-stop service without bothering to make visits to public offices as a step to minimize the inconveniences that people experience during their daily life. The move could save approximately 450 billion won in economic costs, and the number of the required documents will be reduced from the current 76 to some 50 in 2010 and nine in 2013.
Q: Will you tell us about the background and missions of the establishment of the Regulatory Reform Office of the Prime Minister’s Office and the Regulatory Reform Committee (RRC) in 1998?
A: In pursuance of the Basic Act on Administrative Regulations enacted in 1998, Korea began systematic reforms with the establishment of the RRC, a regular presidential committee in charge of regulatory reform. The RRC has halved the existing administrative regulations while restricting the issuance of new irrational regulations by introducing a stringent review of newly installed or strengthened regulations. The Regulatory Reform Office of the Prime Minister oversees each ministry’s regulatory reforms while assisting the RRC. Our office takes the initiative in the regulatory reform of each ministry by setting the direction of specific, priority regulations to be overhauled each year. We examine new and reinforced regulations to determine whether they are irrational or not and have such systems as regulation impact analysis, sun-setting and regulation registration in place.
The Korean government is credited with ensuring systematic regulatory reform and management. A report released by the Organization for Economic Cooperation and Development (OECD) last December showed that Korea ranked on the top of the list of OECD countries in the category of regulatory reform and management capabilities with the United Kingdom, Australia and Canada.
Q: Tell us about the achievements your body has made so far.
A: The Kim Dae-jung government revamped half of the individual regulations after reviewing all the regulations each ministry operated since its inauguration in 1998. At that time, it built a foundation for regulatory reform by introducing a regulatory review system into newly installed or reinforced regulations, but failed to focus on quality.
The participatory Roh Moo-hyun government established a regulatory reform corps under the control of the Prime Minister’s Office and revamped lump-sum regulations.
Recognizing regulatory reform, a key task for turning around the national economy, the Lee Myung-bak government put top priority on regulatory reform in carrying out state affairs since its inauguration in 2008. President Lee has taken stock of the direction of regulatory reform and tasks while presiding over a meeting of the Presidential Council on National Competitiveness once per month. The current government is aggressively trying to revamp such core policies as the abolition of the ceiling on conglomerates’ investments into their subsidiaries, which have been singled out under political considerations and public sentiment rather than based on economic rationale. It is focusing on not just revamping each law for regulatory reform, but also fundamentally pursuing institutional reform through the reengineering of implementation processes and organizations.
In particular, the government revamped regulations in a swift and substantial manner last year in order to ensure regulatory reform for overcoming the economic crisis at the earliest possible date. It revamped 963 regulations for the purpose of boosting investments, creating jobs and stabilizing public livelihoods. The government introduced temporary regulation relief (TRR), a system designed to halt or relax for a given period of time the execution of regulations until the national economy is back on track, and designated 280 tasks. It took steps to overhaul regulations on newcomers’ entry and new growth engines to improve economic health and expand growth potential.
These regulatory reform efforts have been found to have effectively contributed to helping the nation overcome the economic difficulties, as shown by surveys by domestic institutions. A survey released by the Federation of Korean Industries showed that the satisfaction degree on the results of regulatory reform surged from 27 percent in February 2009 to 49 percent last August. The World Bank released the Doing Business 2010 report last September, indicating that Korea saw its business-friendly index rising from 23rd place in 2008 to 18th place in 2009.
Q: Will you comment on mid- and long-term tasks?
A: The government plans to focus on regulatory reform for boosting private investments and stabilizing public life during this year in order to solidify the nation’s economic recovery ― eliminating stumbling blocks in a short period of time so that companies with an intent and capability to invest can execute investments and to try to implement tasks for the immediate improvement of the business environment.
In the mid- and long-term perspectives, we need to enhance the national economy’s investment efficiency and productivity by focusing on such R&D, medical, tourism and educational policies and creating quality jobs by nurturing SMEs and the self-employed. Institutional reform is pursued so investment demand can be induced in medical, educational and other services and the emerging new growth engine industries. SMEs with technology and ideas will be given an opportunity to engage in business with ease, and a focus will be on institutional reform for technology R&D and attracting gifted manpower. nw

Deputy Minister for Regulatory Reform
Kang Eun-bong of the Prime Minister’s Office