[Issue] July 2014 / Vol 2. No. 6 – In focus, Economy
Should all regulations be considered a malignant disease?
-10 cases of poor regulatory reform-
Director, Economic Policy Team
Last 20th of March, the Korean government held a Minister’s Conference on regulatory reforms and the Public and Private Joint Corporation of Inspection Conference on regulatory reforms. President Park Geun-hye has shown a strong desire to work on regulatory reforms, even labeling excessive regulations as an “archenemy” and a “lump of cancer” that is killing the country. Yet, labeling all regulations as a cancer and recklessly propelling regulatory reform, especially by receiving petitions from corporations without giving them adequate evaluation, is a serious problem. Essentially, regulatory reform should be promoted for the public interest, such as through efficiency gains and fair competition.
The effects and benefits of regulatory reforms should not concentrate on specific groups or particular people, but the whole nation. Seeking to represent the public interest, the Citizen’s Coalition for Economic Justice (CCEJ) has compiled 10 cases typical of the Park Geun-hye administration where deregulation efforts have had a harmful effect. A total of 48 subjects were evaluated and the following are examples of some poor regulatory reforms.
1. Allowing resort-like hotels to develop near schools diminishes the public value. If large hotels owned by chaebol are allowed to be built, it will interfere with the educational authority and harm various historical and cultural interests.2. Abolishing the price ceiling in the housing market favors suppliers, and jeopardizes the pre-construction sales system that was meant to protect consumers. Permitting pre-construction sales by builders will increase speculation in the housing market, drive up prices for consumers, and ultimately threaten the stability of working class citizens and their place of residence.3. Permitting the growth of telemedicine will diminish the quality of medical services because they are less efficient Normalizing telemedicine will increase dependency on drugs when it comes to chronic diseases such as diabetes or high blood pressure, and this in turn can lead to additional side effects and complications with other diseases.4. Allowing for the commercialization of domestic medical corporations unnecessarily relaxes medical institutions. Current health laws strictly prohibit medical institutions from establishing for-profit companies. Abandoning these restrictions will steer most of the profit into private enterprises, and the net result will be that patient care and services decline.5. Deregulating the financial sector (as with PEFs) can further deteriorate the management structure of conglomerates. The majority of non-financial institutions are conglomerates, and without a clear separation between financial and industrial capital, this kind of deregulation will allow the conglomerates to dominate affiliates via privately placed investments (PEFs), directly and indirectly.6. Expanding tax subsidies for small and mid-size family owned companies reduces the reliability of tax policy and legal stability. Allowing for inheritances without taxation also violates laws regarding the equity of tax policy.7. Altering the essence of tax laws related to the investigation of foreign investment companies so as to inhibit the authority of the National Tax Service negatively impacts the nation.8. Increasing the number of tax exemptions degrades equity in the tax code. The total number of outbound tourists each year is around seven million, or 15% of the total population. Thus, 85% of the population receives no benefit from the tax exempt status that these seven million receive.9. Allowing for language study at foreign educational institutions will greatly increase the likelihood that institutions of higher education will be misused for private profit.10. Alleviating the burden of factories at the Yeosu Industrial Complex unduly prejudices the government towards certain areas and issues.
Therefore, the Citizens´ Coalition for Economic Justice is planning to deal with the unintended consequences of President Park’s deregulation, while also promoting fair and proper regulatory reform in order to benefit all of society equally, and not just certain groups or regions.