[Kim Kyung-ho] Moon lost on path to growth

By Kim Kyung-ho
  • Published : May 23, 2018 - 17:39
  • Updated : May 23, 2018 - 17:39

In view of his publicized remarks, there seems to be no reason to doubt President Moon Jae-in’s will to push for innovation-driven growth by lifting regulations.

On several occasions in the past months, Moon has called for drastic regulatory reforms, describing them as a foundation for innovation-led growth.

Regrettably, his professed will has not led his administration to take substantive action.

Moon expressed his discontent with what has been done so far in a meeting held last week to check the progress in carrying out policies for innovation-fueled growth. He told government officials and business leaders that there had yet to be tangible results that could be actually felt by people.

“It feels like we are walking while our competitors are running,” he said, stressing that speed is more important than anything else.

Moon may well lament about the slow pace of regulatory reforms.

For example, the introduction of a regulatory sandbox, which allows businesses in new industries to remain free of existing regulations for a set period of time, has been delayed since it was promised nearly a year ago.

The ruling Democratic Party of Korea recently put it forward as one of key campaign pledges for the local elections slated for June 13, as though it was a new idea.

In last week’s meeting, government policymakers didn’t go beyond reiterating abstract and vague pledges with regard to regulatory reforms, making it almost certain for Moon to come forward soon again to urge them to accelerate deregulation.

It is hard to be convinced that regulatory restrictions will be lifted across the board by such a statement that the government will “strictly choose regulations that hamper the creation of new industries and services.”

In the eye of some critics, regulatory overhaul has been stymied by the president’s adherence to income-led growth accompanied by pro-labor measures, including the steep minimum wage hike and the reduction of work hours.

His government has pursued income-led growth in tandem with innovation-driven growth, causing criticism it is pushing for a mix of incompatible policies.

The country’s labor market has become less flexible due to a set of steps taken since Moon took office a year ago to get workers to take home more money and enhance their job security.

Labor market flexibility should be secured to facilitate industrial restructuring, which is needed to propel innovation-driven growth.

Pro-labor measures that have increased corporate costs have resulted in reducing jobs and worsening employment conditions rather than creating more jobs and increasing wages.

In an April survey of 800 Koreans aged 19 or above, 26.2 percent said their incomes decreased in the past year, compared with 20.9 percent whose earnings increased. For the rest, income remained little changed.

The survey also found 28.8 percent felt their livelihoods deteriorating over the past year, while only 18.9 percent saw an improvement. And low-income and self-employed people, who are supposed to be the main beneficiaries of the income-led growth policy, are more likely to report a fall in living standards.

The results of the survey betrayed the expectation of the Moon administration that increased household income would help bolster economic growth by encouraging private consumption.

Despite Moon’s pledge to put top priority on job creation, the country’s unemployment has continued to worsen. According to official data, the unemployment rate rose from 3.6 percent in May last year to 4.5 percent in March, with the figure for people aged 15-29 jumping from 9.3 percent to 11.6 percent over the cited period.

Manufacturing output and facility investment have taken a downturn in recent months, casting shadows on the prospect of the economy growing 3 percent this year as predicted by the government.

Moon has recently made little mention of income-led growth. But he has given no signs of rolling back what many economists describe as an experiment doomed to fail.

In a recent survey of 51 local economists, 62.8 percent said economic policies pursued by the Moon administration have made little contribution to boosting growth.

Alarmed by the weakening growth momentum, the deputy head of a presidential economic advisory council last week expressed worry about the current social atmosphere dominated by the “will to divide, not enlarge, the economic pie” and the growing imbalance between labor and management.

The outcome of another recent survey of 8,000 adult Koreans may well have drawn attention from the Moon administration, which seems to be lost in the path to growth.

More than a quarter of respondents cited economic growth as the most important policy task for the government, followed by 20.4 percent who chose job creation. Only 15.1 percent put priority on welfare expansion.

The Moon administration should go in step with the global trend of promoting growth by letting companies take the lead in boosting investment, innovation and productivity.

Corporations-led growth is the most effective way to ensure the creation of more quality jobs and the sustainable expansion of the economy.

Moon’s remarks at last week’s meeting suggested that his adherence to the government’s role in promoting growth will not be easily gone. He said the government and public enterprises needed to boldly expand their demand for new innovative products to help facilitate innovation-fueled growth.

Though well-intentioned, this approach backed by government funds may undermine the efficiency and vitality of private-sector efforts, weakening the focus on deregulation.

Kim Kyung-ho
Kim Kyung-ho is the Sejong-based business editor of The Korea Herald. He can be reached at khkim@heraldcorp.com -- Ed.