South Korea’s presidential office Cheong Wa Dae on Wednesday hosted a meeting with local entrepreneurs to discuss measures to respond to Japan’s export curbs. During the meeting, some businesspeople requested that the government ease restrictions under the Act on Registration, Evaluation, etc. of Chemicals, claiming that they can become obstacles to localizing materials and components. When the law was passed in April 2013, the local business community expressed concerns over it. As Japan restricts its exports of hydrogen fluoride, which is essential in semiconductor manufacturing, the vacuum in South Korea’s materials and parts industries’ caused by the law has become widely visible.
In the wake of the fatal 2010 humidifier disinfectant toxicity case, the government and the local business community drew up a bill regulating the use of chemical on industrial products after holding 17 hearings over a 22-month period. However, the National Assembly ignored the bill and passed a new bill calling for far stricter regulation after holding just one public hearing in just 16 days. The law was so poor that it had not been enforced until it was revised in 2016 and came into effect early this year. Since the law’s passage in 2013, however, it undermined the development of the local materials and parts industries by discouraging businesses from conducting research and development.
The 2015 bill required all businesses to register with the government all new chemicals regardless of the amount. Faced with a criticism that it would prevent companies from conducting research, the law was later eased and imposed on new chemicals whose quantities exceed 100 kilograms. The law was also revised to put a grace period on the registration requirement of companies manufacturing or importing 1 ton or more of existing chemicals while requiring them to make advance reports on several particular cases. However, the law’s severe side effects remained, as foreign suppliers were reluctant to export to South Korea, as it took eight to 11 months for a South Korean importer to do the paperwork and there were risks of information leakage during the disclosure process.
Similarly, the Chemicals Control Act was made in the wake of the 2012 hydrofluoric acid leakage at the Gumi industrial complex in North Gyeongsang Province, increasing the number of safety standards that factories handling toxic chemicals to meet to 413 from 79. As it cost a lot of money to improve facilities to meet the standards, small businesses gave up their localization efforts and choose to import the chemical.
Few other laws demonstrate the side effects of excessive regulation better than the two laws. As local companies have too many restrictions in handling chemicals that are widely used in machinery and electronics products, they could not even try to localize the chemicals’ production but had to depend on imports for the supplies. Now that Japan is curbing its exports of materials and parts to South Korea, local companies are on the verge of suffocating. The two laws have to be revised if South Korea wants to catch up with Japan and effectively implement regulatory reforms.