Deregulation, industrial policy out of focus

In a meeting with business leaders accompanying him on a trip to the US last week, President Moon Jae-in asked them to “trust in the new government’s economic policy, invest more and create jobs.”

Describing himself as both pro-labor and pro-business, Moon said the core of his policy was to forge a fair and transparent environment for competition, which he said would be good for doing business and boost the country’s growth potential.

The gathering in Washington marked the first time Moon had met a group of Korean corporate executives since he took office on May 10.

He promised to meet them again in a more formal setting soon after returning home.

During his election campaign, Moon pledged to push for reforms of the country’s family-run conglomerates, known as chaebol, and protect rights for workers and small shareholders.

But he might have been grateful to big businesses for helping forge an amicable atmosphere for his first summit with US President Donald Trump by announcing plans to invest $12.8 billion in the world’s largest economy over the next five years.

The announcement of investment plans by the business delegation accompanying Moon was seen as a bid to ease Trump’s trade pressure on Korea. The US leader did, however, still repeat his call for renegotiating a bilateral free trade accord between the two countries.

Some observers say Moon’s visit to the US may have served as an occasion for him to gain a broader and more balanced perspective of corporate roles.

But a survey released by a local research institute on Sunday showed many Korean companies remain dubious about the new administration’s policy.

The survey of 104 major Korean firms found more of them were concerned labor-management relations would worsen and corporate activities would wither under the Moon administration.

More than 55 percent expected labor-management ties to be further strained this year as the new government’s labor-friendly stance would likely embolden unionized workers. Only 15.4 percent saw an improvement as likely.

More than 6 in 10 companies said the new administration’s policy focused on corporate reform and economic democratization would have negative effects on business activities.

Only 37.5 percent and 27.9 percent were planning to increase investment and employment in the latter half of this year.

What business circles now want to hear from Moon seems to be a firm commitment to carry out deregulation.

Kim In-ho, head of the Korea International Trade Association, proposed in a meeting with a presidential committee on job creation last month that an electronic bulletin board on progress in deregulation be set up alongside an existing one on employment at the presidential office of Cheong Wa Dae.

“The ultimate providers of jobs are corporations and deregulation is what is required to enable them to create quality jobs,” he said.

Experts indicate regulations should be lifted more urgently in the service sector, which has proved more instrumental in increasing employment.

An analysis by the Bank of Korea found the number of workers newly hired to produce 1 billion won ($871,000) worth of goods in the country amounts to 16.7 in service industries, far above the 8.8 in manufacturing industries.

The service sector’s share of employment stood at 69.5 percent in Korea in 2013, compared to 71.5 percent in Japan, 73.8 percent in Germany and 80.1 percent in the US, according to data from the KITA.

On the campaign trail, Moon emphasized the need to abolish old-fashioned regulations in an era of the fourth industrial revolution and apply a negative system to the regulatory framework for new industries.

Since his inauguration, however, Moon has made no explicit pledge to push through drastic deregulation, while pouring out a string of controversial policies to turn irregular jobs into regular ones, increase the minimum wage at a steep pace and create a massive number of jobs in the public sector.

Experts suggest Moon keeps with the global trend toward boosting the economy through regulatory reforms.

Trump signed an executive order shortly after entering the White House to make it mandatory to do away with two existing regulatory measures when introducing a new one with the goal of cutting 75 percent of regulations in practice.

Japanese Prime Minister Shinzo Abe’s administration has also pushed for regulatory reforms as part of efforts to revitalize the world’s third-largest economy.

Companies polled in Sunday’s survey called on the government to press ahead with deregulation and change the taxation system in a more corporate-friendly direction while implementing expansionary fiscal measures.

Some experts note it may help the Moon administration persuade opposition parties to approve a supplementary budget plan if it prods ruling party lawmakers to withdraw their longstanding objection to a bill designed to promote service industries.

The Korea Development Institute, a state-run think tank, forecast that passage of the bill submitted to the National Assembly by the previous government under President Park Geun-hye would result in creating up to 690,000 jobs by 2030.

Concerns are also being raised about the Moon administration’s delayed work to put together clear and coherent industrial policies.

A temporary presidential advisory board for policy planning, which was formed in late May, is expected to complete its task this month without suggesting a blueprint for strengthening industrial competitiveness and nurturing future growth engines.

On Monday, Moon nominated a professor of engineering regarded as an expert in the field of renewable energy to head the Ministry of Trade, Industry and Energy. His nomination seems connected with implementing the president’s initiative to increase the use of alternative energy sources and phase out nuclear power plants.

Commentators note the scope of the professor’s expertise is too limited to handle a wide range of pressing issues facing the ministry, including corporate restructuring and the renegotiation of a trade deal with the US.

“It is certainly not encouraging that the new administration has put forward no clear-cut vision for industrial advancement while hastening to take new regulatory steps in some sectors such as energy and mobile communications,” said a corporate executive, requesting anonymity.

By Kim Kyung-ho (khkim@heraldcorp.com)