Drastic deregulation remains elusive

A noticeable part of the 2016 economic policy directions announced by the government in December was the planned establishment of regulation-free zones across the country.

Under the scheme, 14 metropolises and provinces were to rezone areas devoted to developing 27 strategic industries that fit their specific conditions.

Among the selected industries were drones, self-driving cars, the Internet of Things and other segments, which are expected to serve as new growth engines for the Korean economy, which has remained sluggish for years and has recently suffered declining exports and stagnant domestic demand.

The plan to create regulation-free zones is seen as a hallmark of the government’s efforts at drastic deregulation, which economists say is essential to expand the country’s growth potential as other policy tools are nearing their limits.

While she was briefed on this year’s economic policies in January, President Park Geun-hye called for the elimination of all unnecessary regulations. She urged officials to “jettison all regulatory measures and save only what is deemed indispensable.”

The government and the ruling Saenuri Party last week agreed to push for the enactment of a special law on the establishment of regulation-free zones in March, advancing the original schedule by three months. Saenuri officials have suggested they will consult with opposition parties on submitting a joint bill, saying there cannot be differences between rival parties on the need to revitalize the economy through deregulation.

Business circles seem to be pinning high hopes on the envisioned zones, with corporate leaders asking policymakers and lawmakers to act more quickly.

Lee Dong-geun, the vice chairman of the Korea Chamber of Commerce and Industry, noted the success of the project would depend on, among other things, the speedy enactment of the law to bring about tangible results as soon as possible.

“It is also necessary to forge an efficient collaborative system between central and regional governments, and different ministries,” he said.

Given their objection to further easing regulations in the medicine and tourism sectors, opposition parties may not be cooperative enough to pass the bill this month.

The more serious concern for many, however, is that barriers between government agencies and their persistent refusal to let go of regulatory authority may hamper achieving the full-fledged effect of regulation-free zones.

“If a special law is introduced, it should still be sorted out how to apply specific ordinances,” said Yang Geum-seung, a researcher at the Korea Economic Research Institute.

He said it would be necessary to settle possible contradictions between the new legislation and existing laws and overhaul bureaucrats’ tendency to abuse their regulatory power.

Since December, the government has decided to eliminate 79 regulations in the designated zones.

But dozens of regulatory measures that regional governments have proposed abolishing still remain intact due to objections from central government officials. For example, the Agriculture Ministry has opposed changing a rule requiring a company or an organization to fill more than a third of seats in its boardroom with farmers if it is to own farmland.

A government official, speaking on condition of anonymity, complained about the ministry’s stance, which he contrasted with a case in Japan in which a convenience store chain sells rice grown in a special zone where a firm is allowed to possess farmland if its board includes at least one farmer.

The idea of setting up regulation-free areas here is modeled on the Japanese system of running national strategic special zones.

Earlier last week, the Office for Government Policy Coordination announced that 3,992 regulatory measures were scrapped or improved during the period from March 2014 to December 2015. It said an analysis into a sampling of 200 cases showed deregulation work involving them had resulted in generating 5.71 trillion won ($4.89 billion) in economic benefits.

But many experts say the announcement was meant to just reinforce the impression that the government was making efforts at deregulation. If a serious endeavor has been made, President Park didn’t have to emphasize the need to step up deregulation efforts with the dramatic rhetoric when briefed on policies for this year.

Not many government officials can be expected to follow Park’s instruction in earnest. They are more likely to drag their feet during the remainder of her tenure, which ends in less than two years.

Economic commentators note that it will be more effective for the president to order bureaucrats to cut the regulations, which currently number 14,600, to below a certain level, say 5,000.

(khkim@heraldcorp.com)