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APEC DEREGULATION REPORT 2000 - REPUBLIC OF KOREA

APEC Deregulation Report 2000

Republic of Korea

OBJECTIVE

APEC economies will :

1. promote the transparency of their respective regulatory regimes;

and

1. eliminate trade and investment distortion arising from domestic

regulations which not only impede free and open trade and

investment in the Asia-Pacific region but also are more trade

and/or investment restricting than necessary to fulfill a legitimate

objective.

(1) Current Status

 Since the inauguration of the new administration in February 1998, regulatory reform has been a major part of government reform efforts. Along with measures for economic reform and structural adjustments, regulatory reform

has served as a strong engine propelling government reform. It aims to

reduce the government’s role and intervention in order to encourage the autonomy and creativity of the private sector under the principles of market competition and democracy.

 Compared with the former approach to deregulation, the current approach

has been more systemic and comprehensive. One of the most salient traits is that the current approach is based on “The Basic Act on Administrative Regulations” which entered into effect in March 1998. Based on this Act, the Regulatory Reform Committee with the Prime Minister and a civilian as its co- chairmen, was established in April 1998. The Committee has become a

single body with a legal basis to conduct regulatory reform. Thus, the role of former ad hoc bodies concerned with deregulation such as the Presidential Commission on Administrative Reform, and the Committee for Regulatory Reform of Economic Administration has ended.

 The Committee has played a central role in undertaking regulatory reform, by formulating guidelines and standards, and by reviewing proposed plans for regulatory reform. Key functions of the Committee are as follows:

 To review newly established or strengthened regulations in the legislation process within the Executive.

 To clear up unnecessary existing regulations by reviewing each ministry’s regulatory reform plan.

 To select and deal with targeted areas for regulatory reform on a package basis.

 Among these tasks, the Committee has concentrated its efforts on clearing existing regulations with a target of reducing the number of regulations by half in 1998, while at the same time improving the quality of regulations. All central agencies have devoted themselves to drawing up and executing the clearance plan to meet the target. Examining laws and subordinate statutes with the goal of eliminating or revising provisions of regulations therein has

made this feasible.

<ADDED IN 2000>

 Drastic measures for regulatory reform of 1998-1999 contributed to its recovery from the economic crisis of 1997. Deregulation on business

activities provided foreign investors with better market environment. Korea’s

performance in regulatory reform was appreciated by OECD country review

of Korea’s regulatory reform. OECD evaluated that Korea has promoted market-oriented regulations, based on market competition, values of consumer choice, democracy and rule of law. In financial sector, banking regulations have been brought closer to international standards and norms.

(2) Individual Action Plan

Basic Direction

 Review entire existing body of regulations of the central government

 To eliminate regulations relating to economic activities which restrict competition or violate international standards. Number of regulations to be examined: approximately 7,000

 To improve the quality of regulations relating to safety, health and the environment. Number of regulations to be examined: approximately 4,000

 Strengthen ex ante review on newly installed regulations in order to monitor new regulations and further manage the total number of regulations on an agency basis.

 Conduct regulatory reform continuously and drastically to improve the business environment.

 In principle, shift methods of regulation from ex ante control to ex post management and, simultaneously from a positive list system focusing on control, to a negative system with an emphasis on liberalization.

 Establish a systemic relationship between the Regulatory Reform Committee and the central agencies, as well as partnerships with research institutes to handle specific and technical issues efficiently and effectively.

Short term (2000~ 2001)

Establishing the Legal Basis for Regulatory Reform

 There have been continuous demands to launch drastic measures for regulatory reform in the process of carrying out deregulation. As a result, the

“Basic Act on Administrative Regulations” was enacted to meet this demand.

 To strengthen ex ante review on either newly introduced or intensified regulations.

 To conduct a regulatory impact analysis in reviewing all significant regulations.

 To apply a sun-setting rule with a maximum period of 5 years.

 To register and disclose all regulations on an agency basis so as to manage the total number of regulations.

 There has been recognition of important regulatory spheres that need to be handled on an urgent basis in order to enhance national competitiveness and invigorate the troubled economy.

- To facilitate foreign investment: liberalization of restricted categories for foreign investment; deregulation of factory site for foreigners; elimination of regulations inconvenient to foreign residents’ life, etc.

- To eliminate complex regulations burdening business activities: deregulation of land use, industrial site and factory building; regulatory reform of construction, electricity, environment, telecommunications , gas and venture capital industries.

- To enhance sound development of finance, distribution, and trade sectors: lifting anti-competitive barriers in these sectors; encouraging autonomy and creativity; deregulation of distribution, transportation and road haulage industries.

To improve front-line services burdening the general population: reducing regulatory burden in following administrative procedures relating to automobiles, housing and fire service.

- This year the related ministries will discuss ways to simplify the administrative procedure relating to entry and departure of foreigners,

so that they can be completed within two hours of having submitted the

relevant documents.

Deregulation on Foreign Investment

 The scope of liberalization for foreign investment has been continuously expanded to the average level of OECD countries. Regulations discriminating against foreign investors doing business in Korea were eliminated in May

1998.

 Regulations restricting foreigners’ purchase or sale of listed bonds to the stock market only, were lifted.

 Foreigners investing in stocks or bonds may register under a single identification process.

 Regulations prohibiting foreigners from transferring their funds between securities companies and foreign exchange banks were removed.

 Visa services related to foreign investments were improved by extending the sojourn period and streamlining administrative procedures.

Deregulation on Real Estate Market

 Foreign companies and individuals, including non-residents, may now own real estate in Korea. There is no discrimination between Koreans and foreigners in the real estate market. Foreigners were required to obtain approval from the government in order to buy real estate in Korea before July

1998. However, now they are only required to notify the government after

their transaction.

<ADDED IN 2000>

Deregulation on subordinate regulations and quasi-administrative

regulations

The Regulatory Reform Committee has undertaken reforms on subordinate

regulations and quasi-regulations imposing burdens on business and people. All

ministries and agencies are engaged in this reform effort under their jurisdiction. This reform will bring real benefit of reform to business and people.