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Korea pushes for drastic change to regulatory scheme

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Published : 2014-08-19 21:24
Updated : 2014-08-19 21:24

The Cabinet on Tuesday approved a bill to comprehensively revise the regulation law for the first time in 16 years, as part of its efforts to remove obstacles for business activities and to spur corporate investment.

The regulatory reform bill calls for introducing a “cost in, cost out” system, which would allow ministries to introduce new regulations only if they can abolish existing ones that are more expensive to implement. Through the bill, the government also seeks to adopt a negative-list approach in writing new regulations, as well as a “sunset principle” that would make regulations that have no clear reason to exist automatically expire in five years. The government said it would submit the bill to the National Assembly within this week.

“Drastic regulatory reform is the only way to promote investment, create jobs and to revitalize the economy,” Park said at a weekly Cabinet meeting. The president also urged ministers and officials to seek ways to encourage public servants to play an active role in replacing unnecessary, old-fashioned regulations with efficient ones.

The bill also requires each ministry to respond within three months to complaints filed regarding the regulations it enforces. It also calls for a new system in which companies receive a government notice in advance to check whether they will face any regulations or not when starting a new business. The system, modeled after Japan’s “Gray Zone Removal System,” will be applied not only to enterprises but also to individuals starting their own businesses, officials said.

The bill, however, is expected to receive mixed reactions from the ruling and main opposition parties as it stipulates that lawmakers’ legislative proposals will be subjected to regulatory impact assessments. Currently, only government-proposed bills are subject to such evaluations.

The ruling Saenuri Party said it would agree with the government’s plan, claiming that too many regulations are being created through legislative bills without proper tools to check if they are too costly to implement.

The main opposition New Politics Alliance for Democracy opposes the plan, as it views it as an attempt to restrict lawmakers’ legislative authority.

The government’s push for regulatory reform came seven months after President Park Geun-hye declared war on regulations. In her New Year news conference, Park announced a three-year economic innovation plan, stressing deregulation as a key strategy.

Since then, the president has frequently expressed her determination to implement a drastic reform of regulation laws, calling unnecessary regulations “an enemy that must be crushed” and “a tumor that needs to be removed.”

In March, she even presided over a seven-hour marathon meeting with 160 government officials, businesspeople and scholars to gather various opinions and check on conflicting ideas over regulations. Cheong Wa Dae said Sunday that the president would hold a second meeting soon to come up with better ideas on a deregulation scheme.

Park’s determination for regulatory reform came amid fears over the country’s slowing economic growth and corporate investment. Consumer spending sentiment has weakened since May due to the Sewol ferry disaster. Corporate giants saw their yearly profits fall due to the strong appreciation of Korean won, which is feared to freeze corporate investment. To curb the negative economic outlook, the Park administration announced a 41 trillion won stimulus package late last month. The macroeconomic policy includes measures to implement financial, tax and regulatory reform.

The burden of government regulations has also often been cited as an obstacle to the country’s efforts to alleviate its global competitiveness. In the regulatory burden category in the World Economic Forum’s annual Global Competitiveness Reports, Korea was ranked 117th among 142 countries in 2011, 114th among 144 countries in 2012 and 95th among 148 countries in 2013.

By Cho Chung-un (christory@heraldcorp.com)

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