Expert: Regulation ‘Strangling’ Economy

In August 2002, the Ministry of Agriculture and Forestry enacted a law governing traditional cow fighting. The law was aimed at “considering the lives and safety of fighting cows as a priority, as well as contributing to the development of rural areas and the livestock industry by spelling out management methods and rules of cow fighting contests in a law.”

Based on this law, the Ministry of Agriculture and Forestry formulated a comprehensive development plan on cow fighting contests. In other words, the government is now managing cow fighting.

According to the Ministry of Construction and Transportation’s 2006 housing plan, 170,000 public rental houses and 350,000 houses for sale will be built this year. The Korea National Housing Corporation and local governments will build 120,000 public rental-housing units, and private housing constructors will build 50,000 public rental-housing units. This plan allows the Korea National Housing Corporation to build public rental-housing units without facing any competition from private construction companies.

Since its inauguration, the Roh Moo-hyun administration has excessively set up national plans leading to “a bigger government” and “implicit regulations,” both of which have hurt the economy.

In particular, as the roles of the government have grown bigger, the number of public officials and labor costs paid to them have also increased. As of last July, the number of public officials increased by 22,422 compared with 2002. Wages paid to public officials increased by 3.6 trillion won from the first year of the Roh administration to 20.4 trillion won this year.

These numbers were based on the data submitted to “the mid-term stocktaking seminar on the regulatory reforms of the Roh Moo-hyun administration” which will be held on March 30 at the Korea Chamber of Commerce being organized by the Korea Society for Regulatory Studies. This seminar is co-hosted by the Korea Institute of Public Administration and the Korea Economic Research Institute, and is sponsored by the Regulatory Reform Committee and the Korea Chamber of Commerce.

According to the data, as of January this year, 17 ministries and agencies have been implementing 618 governmental plans based on 272 laws. Among the ministries and agencies, the Ministry of Construction and Transportation implemented the highest number of plans, 92, followed by the Ministry of Environment (88), the Ministry of Government Administration and Home Affairs (58), the Ministry of Agriculture and Forestry (58), and the Ministry of Commerce, Industry and Energy (53).

A senior researcher at the Korea Economic Research Institute, Cho Seong-bong, will give presentation themed “Governmental Plans as Implicit Regulations” at the seminar. He pointed out, “While some government plans cover essential areas such as national disasters or the management of territory and the environment, many other government plans run against the principles of the market economy because under those plans, the government is intervening in the industrial market, or regulating specific industries or resources at the policy level.”

His logic is that national plans should be only temporarily implemented for specific purposes like the government’s “five-year plan for national economic development” in 1962. He views that if national planning becomes a daily occurrence, it will hinder functions of the market, resulting in ineffective policies.

According to the data, plans whose titles contain words such as: “support”; “promote”; “manage”; and “nurture” often undermine the function of the market. Those plans include: “the initiative to make reading part of daily life”; “the plan to safely manage genetically modified organisms”; “the business plan to promote the development of coal mine areas”; and “the plan to promote museums and galleries.”

The process by which national plans become implemented also has come to assume fixed forms: Laws are enacted, committees are formed, and affiliated organizations of ministries and agencies or public companies are entrusted with administrative work. According to Cho’s analysis, because of this structure, the government thrusts its responsibility on committees, and interested parties undermine the public good because they are mindful of their own interests first.

Government regulations provided by law have also been on a constant increase since 2000.

Lee Ju-seon, a senior researcher at the Korea Economic Research Institute, said, “Government regulations decreased to 7,123 in 1999, but have constantly increased since then totaling 8,040 as of end of March” and pointed out, “The Korean government should remember that in history, a nation that reduced the roles of the market in pursuance of a big government has never succeeded.”

ditto@donga.com