21st National Assembly: Reviving the Economy Comes First

The 21st National Assembly has opened. The newly elected members of the National Assembly are unanimously pledging to “create a National Assembly that works.” This can be understood as a determination to break away from the old-style politics displayed by the 20th National Assembly over the establishment of the Corruption Investigation Office for High-Ranking Officials (CIO) and the election law.

But in fact, if we look at the number of bills finally passed by the National Assembly, the 20th National Assembly, with 8,904 bills, was the “hardest-working National Assembly.” It was the product of an obsession with trying to force every problem that could be resolved by the private sector and the market into the framework of law. What is urgently needed is legislation that competes in quality, not quantity. In other words, what we need is “a National Assembly that revives the economy through market-friendly legislation.”

We must first abandon the complacent perception that the economic crisis facing South Korea is solely the fault of COVID-19. It is true that the shock of the pandemic caused economic vitality to plunge sharply, but even before that, the basic strength of the Korean economy had already been severely weakened by the so-called “income-led growth” policy.

As the number of newly employed has remained below 100,000 for several months, South Korea is facing the most serious employment crisis since the IMF foreign exchange crisis. The gap between the real growth rate and the potential growth rate has continued to widen, and as the real economy has worsened, volatility in the financial market has also increased. Only by facing this reality squarely can we wisely overcome the economic downturn through appropriate policy prescriptions.

To restore vitality to the private economy, what is urgently needed is not “cash welfare” but sweeping “regulatory reform.” South Korea is an unprecedented Galapagos-style regulatory state. The findings of the Asan Nanum Foundation’s *Startup Korea* report, which showed that if the world’s top 100 startups came to South Korea, half of them would be illegal, starkly illustrate the reality of Korea’s regulatory policy.

The OECD’s Product Market Regulation Index also shows that South Korea, at 1.69, ranked 5th among 34 member countries surveyed. Yet far from easing regulations, the 20th National Assembly set a record by proposing 1,200 regulatory bills in 2019 alone. One example was the passage, through bipartisan cooperation, of the “Tada ban law,” which blocked innovation in the shared mobility industry.

The 21st National Assembly must be different. Unless it drastically eases the regulations that are choking the economy at every turn, it will be difficult to find the driving force for economic recovery. What is needed is an effort to shift away from positive regulation, which lists one by one what businesses are allowed to do, toward a comprehensive negative regulatory system, which specifies what they are not allowed to do and permits everything else. Deregulation of capital-region restrictions, including factory location regulations that have been stalled for years, must also be implemented without fail. In particular, considering the unique nature of the COVID crisis, regulations in the medical industry and the digital (non-face-to-face) industry should be reformed as a priority.

What South Korea needs is not “consumer coupons” that provide only momentary satisfaction, but “future-oriented economic policy” that promises long-term prosperity. Courageous legislation is needed to abolish regulations that are stifling corporate investment and employment throughout the market and to dramatically cut taxes. Rather than churning out half-baked bills to build a track record, what is more urgently needed than ever is a National Assembly that, even if only through a single law, revives the economy and increases jobs.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: 21대 국회, 경제 살리기 먼저

Author: Sung-no Choi

Date: 2020-06-08

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=21&idx=22808