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Korea Ranks 116th for Business Start-up Environment

Posted August. 25, 2007 03:26,   


Korea has one of the worst environments to start a business due to various regulations. In fact, it is the second worst among OECD member countries, according to a recent report by the Bank of Korea (BOK).

Roughly two-thirds of businesses in the service sector have a legal or institutional barrier that restricts market entry, and the procedures necessary to start a business are much more complicated to those of advanced countries.

According to the “Analysis of the Entry Barriers of the Korean Service Sector,” released by the BOK on Friday, Korea ranked 116th among the 175 countries in the entry barrier category in an analysis carried out by the World Bank in 2006. In particular, Korea placed at 28th among the 29 OECD members, excluding Luxembourg.

Although it takes an average of 12 procedures and 22 days to set up a business in Korea, it takes only five procedures and five days to launch a business in the U.S.

The costs of establishing a business, including the registration fee, are 15.2 percent of the per-capita gross national income, which is more than twice the average of fellow OECD countries (7.5 percent).

Among the 543 types of businesses in the domestic service industry as of June 2006, 366 types, or 67.4 percent, have a legal entry barrier, including the approval process. Registration (28.1 percent), reports (24.9 percent) and permits (21.6 percent) account for 74.6 percent of such barriers. In particular, telecommunications, finance, insurance, education, and health and welfare sectors are subject to strict regulations.

“The government should ease or lift regulations that are believed to be ineffective in order to prevent the side effects of limiting competition, such as high cost and low efficiency systems,” economic experts point out. “The government must remove the entry barriers and encourage competition to raise the standard of the domestic service industry and help the national economy.”

ssoo@donga.com peacechaos@donga.com