[Editorial] Ineffective Investment Aids

“Comprehensive measures for the improvement of the corporate environment” that the government announced yesterday under the names of its 14 ministries can be likened to a shopping mall of unimportant measures for deregulation. Yes, some of the 115 measures are designed to promote investment. Still, they lack big, important “essence,” which makes the government’s plans lose luster. The government belatedly analyzed that high land prices and labor costs, strong regulations and labor shortage are making an unfriendly business environment, resulting in the national economy losing vitality in job creation, establishment of plants and foreign investment. Then, it should be willing to meet demands of companies to make a turning point for the Korean economy.

Strangely enough, however, the government did not even tinker with the ceiling on the equity investment. It failed to propose a deregulatory measure on the location restrictions in metropolitan areas as well. It did not come up with any measures on either Hynix’s Icheon Plant plan to invest 13.5 trillion won and create 6,000 new jobs or the inflexibility of Korea’s labor market, the biggest hindrance to investments by domestic corporations and foreign capital attraction.

True, improving corporate environment for SMEs and in non-metropolitan areas is a meaningful effort. It is equally true, however, that maintaining regulations on big companies that are capable of investment and metropolitan areas is only an infertile policy. We learned from Japan’s experience that vitalized investment is brought on by large companies and manufacturing sector.

The World Bank rated Korea’s business environment this year at 23rd, a figure which does not befit the world’s 12th largest economy. In particular, Korea ranked 116th and 110th in environment for starting a business and employment environment, respectively. Moreover, direct investment overseas by domestic companies this year is projected to be more than double that of the foreign capital attracted to the nation. There are even some analyses that 0.5 percent point of growth rate and 45,000 jobs are lost every year as a result of Korea’s administrative regulations.

Proclaiming to make Korea ‘a investor-friendly nation,’ the Roh Moo-hyun administration has only paid lip service and increased the number of administrative regulations from 7,778 of February 2003 to 8083 this September, during which time the national economy has become mired in low growth. Yet, the government has been focused only on minor issues, announcing publicly that it would devise measures to improve business environment at the government-wide level. Now, no one would buy it if the government says it contributes to vitalizing the national economy.