Comparing Competitiveness of Current Economic Policies With Those from Two Years Ago

Ever since the current government came to power, the applicability of government economic policies to changing international and local environments has sharply diminished.

In addition, according to a survey, businesses’ sympathy to the government’s policy direction has fallen, and laws and institutions have turned out to be major culprits in the fettering of the country’s competitiveness.

Competitiveness Valuation International (CVI), headed by Chairman Chung Jin-ho, announced these results to the public yesterday as part of a report, “2004 Valuation on the Country’s Competitiveness,” presented before the International Institute for Management Development (IMD) in Switzerland in May. The CVI is Korea’s partner with the IMD.

Of 77 indexes measuring the level of the government’s efficiency, the CVI analyzed 41 indexes separately, which were surveyed by 650 CEOs in both local and foreign companies in Korea. The result is 32 indexes, or 74 percent, have decreased, comparing to before 2002, when the current government came into office.

Economic policy’s applicability to changing economic conditions scored 4.17 out of a 10, a decline from its score of 5.38 in 2002. The nation’s rank also plunged by 17 steps, from 15th to 32nd place.

The degree of corporate sympathy for the government’s policy direction also decreased, from 4.58 and a ranking of 32 to 3.25 and a ranking of 54. As a result, Korea now ranks among the lowest of the 60 countries surveyed.

The degree of efficiency of policy implementation fell from 4.18 and 30th place to 3.76 and 40th place; the flexibility of labor-related regulations, such as the habitual practice of employment and dismissal, fell from 3.74 and 35th place to 3.17 and 44th place. The degree of harmlessness of the law and the institutional framework for the country’s competitiveness fell from 4.19 and 35th place to 3.92 and 40th place.

The indexes that showed the likelihood of influencing economic policies also showed a decline: “The positive effect of the central bank’s policy to economic development” plunged from 6.25 and 32nd place to 6.13 and 38th place, and “the degree of political parties’ understanding of impending economic challenges” fell from 3.42 and 36th place to 2.42 and 54th place.

In particular, “the degree of the unlikelihood of political instability” fell from 2.69 and 37th place in 2002 to 3.75 and 55th place, indicating the current government’s worsening political stability.

In this survey, the indexes that actually increased compared to the 2002 survey included those that ranked the government’s transparency, level of bureaucracy, and the degree of fair justice in society.

Ki-Jeong Ko koh@donga.com