[Editorial] All Talk, but No Action on Deregulation

According to a report released by the Federation of Korean Industries, the number of newly constructed plants in Japan increased twofold from 2002 to 2006, whereas overseas factories built by Japanese companies were reduced by over 50 percent. Foreign direct investment in Japan is also on a steady rise, which signals sustainable economic growth and job creation. The Cabinet Office of the Japanese government said in its recent report that 15 years of effort to ease regulations and improve working conditions have brought economic benefits worth more than 18.3 trillion yen or about 146 trillion won to the country.

Japan’s removal of an investment ceiling and regulations on metropolitan area development, land development, and environmental regulations, along with the introduction of a law banning retired public officials from taking high-level seats in public corporations, presents a stark contrast to policies put forth by the Korean government. Deregulation, closely linked to a small government and fewer public officials, is a strategy to maximize creativity and efficiency of the private sector as a growth engine. Like Japan, countries with high growth rates or on a path to recovery, including Ireland, New Zealand, the Netherlands, Britain, Germany, and France, all pursued such strategy.

The cases of advanced countries indicate the significance of improving the business climate. Unfortunately, Korean companies are rushing to move their plants out of Korea, which has been witnessing dwindling foreign direct investment. Even aspirations to build factories are hindered by a number of regulations including control of the metropolitan area development and employment placing too much emphasis on environmental protection.

In its 2006 report, Switzerland-based International Institute for Management Development ranked Korea 51st out of 61 surveyed countries in terms of economic regulations. The World Bank’s 2008 corporate climate report evaluated that Korea ranked 110th in the world, down nine notches from the previous year, in terms of conditions for business incubation.

The National Assembly Budget Office pointed out only less than ten percent of new regulations imposed by the government undergo thorough review with their social cost taken into consideration. A mere eight percent of new regulations had their need for regulation spelled out. All of these attest to the government’s imprudent policy-making without weighing convenience and cost, gains and losses, and the effect of deregulation or no regulation. No wonder companies rush to relocate their manufacturing bases to foreign countries.

Although everyone from a rank-and-file public official to the president talks about a “business-friendly country,” it is all talk but no action. How longer do companies have to bear the government’s complacency?