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Gov't should fix regulations hindering job creation

Posted July. 28, 2016 07:26,   

Updated July. 28, 2016 07:33

한국어

Regulations at the Seoul metropolitan area have prompted nine companies to move their manufacturing facilities to local areas and 28 companies to move theirs to overseas since 2009, according to an analysis released at a presentation during the seminar "Issues and Tasks on the Regulation on Seoul Metropolitan Area" hosted by the Korea Economic Research Institute. Over the five years since 2009, 62 companies lost their opportunity to invest in building or expanding their facilities, which led to a loss of 3.33 trillion won and 12,059 jobs that could have been created. The regulation that was first introduced in 1982 to induce economic development of cities other than Seoul has now brought the side effects of sending away companies and jobs to foreign countries.

Korea has been named as not business-friendly due to duplicated regulations written on the Seoul Metropolitan Area Readjustment Planning Act, the Framework Act on the National Land, and the Designation and Management Acts on Development Restriction Zone among others. In the meantime, unlicensed factories have emerged in blind spots of the regulations, worsening the pollution. The government expected that those regulations would increase jobs, but this was another bureaucratic mistake. The government overlooked the fact that factory location is very important to companies.

The Park Geun-hye administration proposed "functional approach that does not differentiate capital and non-capital areas" as a solution to deregulation on capital areas. It is a diversion strategy that does not indicate the beneficiary areas as if only the capital area was limited, other cities would oppose the idea. The Regulation Guillotine System (Dec. 2014), Industrial Complex Licensing Deregulation (July 2015), and Regulation Free Zone (Dec. 2015) are all the same strategy. The result is disappointing, though. When we look at the current economic situation, superficial deregulation has proven to lose both jobs and growth.

Local governments are concerned that if the regulations on the Seoul metropolitan area are alleviated, their economy could suffer. Given gaps between regions, such concerns are understandable. For large industries such as shipbuilding, steel, and automobile, port cities are suitable. Therefore, such aspects should be considered when choosing specializing industries such as regulation free zones. The central government might want to share its licensing right with local governments to compensate for their loss.

It is remarkable that the Minjoo Party Rep. Jeong Sung-ho (Yangju, Gyeonggi) pushed forward deregulation by proposing a partial revision of the Seoul Metropolitan Area Readjustment Planning Act for the first time in 10 years as an opposition lawmaker. This means that he takes the regulations on the capital area not as an ideological matter, but an economic one. Both ruling and opposition parties will have to work together to mitigate regulations on building and expanding factories and then to find a way to share the loss with non-capital regions.