[Editorial] Deregulation Is the Answer

The government has repeatedly stressed its commitment to creating as many jobs as possible. The creation of jobs must be preceded by vibrant investment activities in the private sector because spending taxpayers’ money can bring about only a limited number of jobs created “in a public way.” Moreover, taxes levied on businesses could dampen their investment sentiment. The best way to both “add decent jobs” by encouraging investment and “relieve citizens of tax burdens” is “deregulation.”

In a recently published report, “How to Encourage Employment in Service Industries,” the Federation of Korean Industries warned, “Korea’s service industries have not reached maturity. They have yet to prove their ability to absorb surpluses of workers in non-service industries. As demand for services overseas increases, the ability of domestic service industries to create new jobs is further hampered.” As pointed out in the report, Koreans turn to overseas markets for services while domestic service industries are hiring less than satisfactory number of workers. In fact, these are largely attributable to the government’s over-regulation.

Take an example of high-end service markets in medicine, education and leisure. If the government deregulates these markets to a large extent, the deregulation will lead to more jobs and greater competitiveness of domestic service industries. Korean consumers will no longer have to go overseas to enjoy high-end services. The net result will be the achievement of both growth and equitable wealth distribution because more money is spent within the country.

The reasoning underlying the deregulation option is so simple. But instead of offering incentives to investors, potentially a strong boost to competitiveness, the government has maintained and even strengthened regulations to the point where the Fair Trade Commission, a government agency, expressed its frustration over layers of regulations imposed by multiple government ministries.

Under such layers of regulations, Korea’s dependence on foreign service providers in high value-added markets has been on the rise. When it comes to services, the country has been running a deficit. Last year, in education and medicine, the deficits were 3.4 billion dollars and 400 million dollars, respectively. In contrast, in 2001, Japan eased the rules for private market players who are willing to open day-care centers. As a result, the year 2004 saw a 49-percent increase in sales in day-care services compared to the year before. In addition, sales in home health care services jumped 20 percent.

By stressing that service industries are part of the growth engine for the economy, the government only states the obvious. Words must be backed by action, which is deregulation aimed at developing that growth engine in this case.