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Regulatory reforms 4

Regulatory Reforms under the Kim Daejung Administration (February 1998 to February 2003)

 

(1) Overview of Regulatory Reforms under the Kim Daejung Administration

Under the Kim Daejung administration, Korea witnessed the strongest drive for economic liberalization and structural reforms in its modern history, which were intended to help the nation overcome external and internal economic hardships (including the foreign exchange crisis of 1997), and to revitalize the national economy. Regulatory reforms formed core features of the new administration’s policy agenda. The foreign exchange crisis invited active interference from the International Monetary Fund (IMF), which, in turn for providing the necessary capital and loans, required Korea to open up its economy, reform its corporate governance, and pursue reform of its economic structure under market discipline. In response, and also with a view to consolidating the market economy through restructuring, the Kim administration simultaneously expanded the scope of the Fair Trade Act and restructured chaebol to prevent the concentration of economic power.

 

The two defining slogans of the Kim administration’s campaign for regulatory reforms were “A Business-friendly Country” and “A Country for Easy Living.” Accordingly, the administration sought to minimize state intervention and interference in the market, and focused instead on maximizing the autonomy and creativity of the private sector. In its early years, the Kim administration pursued deregulation without compromise, seeking to abolish at least 50 percent of all existing regulations. The Kim administration found the benchmark it needed in the OECD’s guideline and case studies of regulatory reforms.[1]

 

The Framework Act on Administrative Regulations, enacted in the last days of the previous Kim (Youngsam) administration, provided the backbone for the powerful deregulation drive under the later Kim (Daejung) administration. Nevertheless, the later Kim administration sought to avoid the mistakes of the earlier administration’s excessively plural and competitive reform implementing system by centralizing major reform measures in the Regulatory Reform Committee according to the Framework Act. Moreover, the pre-screening and review policy, created under the earlier Kim administration, but treated largely as a perfunctory measure, gained substance and the force of law under the new Kim administration. This new administration applied the Regulatory Impact Analysis Act to the newly reinforced screening and review system; examined whether the sunset clause could be applied as well; and updated and managed the new regulations that passed pre-screening and review as part of the Regulation Registration System.[2]

 

(2) System of Implementing Regulatory Reforms under the Kim Daejung Administration: Regulatory Reform Committee (RRC)

As noted, the system for implementing regulatory reforms under the Kim Youngsam administration was marked by the proliferation of implementing agencies in various ministries and departments of the government, including the Blue House, the Prime Minister’s Office, the Ministry of Finance and Economy, the Ministry of Government Administration, and the Ministry of Commerce and Industry. The multiplication of implementing agencies made it difficult to plan deregulation in a systematic manner, leading to a focus on relatively minor regulatory measures in a localized and sporadic manner. In addition to the absence of a far-reaching plan for reform, overlapping jurisdictions and inefficiency were also key issues with the proliferation of reform agencies. Moreover, the absence of clear legal grounds for reforms threatened the stability of the reform measures that were attempted. The pluralization of the reform organization raised barriers and competition among ministries and departments, and the unbridled empire-building behavior of these units also made it impossible to ensure the consistency of the reform measures implemented.

 

 After reflecting on these problems, the Kim Daejung administration decided to launch a deregulation campaign that consisted of first unifying the implementing system in the Regulatory Reform Committee (RRC), under the Framework Act on Administrative Regulations, on April 18, 1998. The administrative body for the reform drive was the newly created Department for Regulatory Reform Coordination (DRRC), installed as part of the Office for Government Coordination in the Prime Minister’s Office. The RRC was the supreme authority on the reform implementing system, co-chaired by the Prime Minister and a civilian, and including 12 civilian members as well as six government officials. The DRRC in the Prime Minister’s Office, which was the main administrative agency of the RRC, had permanent standing under the Government Organization Act, and consisted of three deliberative secretaries and 11 teams. The DRRC was the first-ever governmental organization of public officials specializing exclusively in regulatory reforms. The RRC also worked with 55 research agencies and included 10 or so experts as its members to enhance its decision-making expertise. These organizations and individuals formed the center of the reform implementing system under the Kim Daejung administration.

 

(3) Assessment of Regulatory Reforms under the Kim Daejung Administration

The Kim administration derived the backbone of its regulatory reforms from the Framework Act on Administrative Regulations, enacted in the last days of the Kim Youngsam administration. It was according to this Framework Act that the RRC was assembled in 1998. The RRC handed down reform measures that were meant to help Korea surmount the foreign exchange crisis of the late 1990s. Although the Kim Daejung administration succeeded, to a limited extent, with downsizing the overall quantity of regulations, it failed to establish and complete a strategy for systematic and planned regulatory reforms.

 

First, focused so insistently as the administration was on downsizing the whole body of regulations (by 50 percent), the reform measures under the Kim administration were implemented in a uniform, top-down, and high-handed manner without producing substantial and effective changes. It must be noted that, while the absolute number of regulations declined radically between 1998 and 2000, the number began to rise steadily again in 2001, indicating the force of reaction from interest groups and the bureaucracy against the downsizing-oriented reform drive.[3] The reform campaign of the Kim administration in 1998 was unprecedented in its breadth and depth worldwide, and is now criticized for having been rather overbearing.[4]

 

Next, the Kim administration did introduce a number of operating systems and regulatory reform rules from advanced countries and the OECD. These included the mandatory registration and review of regulatory measures; the analysis of regulatory impact; the sunset law; and the preliminary screening and review of newly created or reinforced regulations. One is hesitant, however, to conclude that these new changes were implemented effectively to help achieve qualitative improvement of the deregulation drive.

 

As a matter of fact, the regulatory reforms of the Kim administration were poorly perceived and failed to command thoroughgoing compliance.

 

Assessment of Regulatory Reforms under the Kim Daejung Administration

 

 

Inadequate

Average

Good

Undecided

Freq.

%

Freq.

%

Freq.

%

Freq.

%

Academics and NGO executives

48

34.0

79

56.0

12

8.5

2

1.4

Central government officials

28

14.9

100

53.2

48

25.5

12

6.4

Source: Quoted in Namgung Geun, Assessment of the Four Years of Administrative Reform under the Kim Daejung Administration (White Paper on Regulatory Reforms), 2002: 503.

 

As Table 2-5 shows, there is a significant discrepancy between how government officials (regulators) evaluated the Kim administration’s reforms and how the private sector and civil society (the regulated) evaluated them. Moreover, the Kim administration’s reforms failed to fulfill the ideology of regulatory reforms, against either the backdrop of neoliberalism ascendant around the world or the backdrop of the Korean context. Specifically, the Kim administration failed to downsize social regulations (especially concerning welfare services) to an extent comparable to the level of economic regulatory reforms.[5] The Kim administration merely suggested the direction for social regulation reform without providing any specific alternatives or frameworks.[6]

 

[1] The OECD-derived reform rules can be summarized as follows. First, the matter of whether to retain existing regulations ought to be decided on the basis of a comprehensive zero-based review so that regulations that limit competition or contradict global standards can be abolished in principle, and standards for social regulations should be rationalized and streamlined so as to enhance the effectiveness of existing regulations. Second, the anticipated impact of new or reinforced regulatory measures must be assessed as part of the preliminary review so as to minimize the multiplication of regulations. Third, all regulations must be based on statutes, and regulations that lack such legal basis should be managed independently of law-based ones. Fourth, a sunset clause or law must be introduced, limiting the terms of regulatory bodies, so that regulatory measures can be reviewed anew in response to changing conditions and circumstances. Fifth, regulatory reforms should be approached in a systematic and comprehensive manner, starting with fundamental and core regulations, and should not be equated with making fragmentary, sporadic changes. Sixth and last, transparent and objective standards and procedures for regulatory measures must be established so as to prevent the abuse of discretionary authority and increase citizens’ participation, including citizens’ suggestions regarding ineffective regulations currently in place.

[2] Choi, 2004: 97-98.

[3] Kim and Lee: 210. In its first year (1998) alone, the Kim administration reduced the total number of regulations from 11,125 to 5,799.

[4] Kim Jongseok, “Tasks and Direction of Regulatory Reforms,” Korean Journal of Regulation Studies, vol. 8, no. 1, 1999: 453-456.

[5] Kim and Lee: 209-210.

[6] Kim Taeyun, “Assessment of Reforms of Social Regulations,” White Paper on Regulatory Reforms of 1999, Regulatory Reform Committee (RRC), 2000.

 

Source: Korea Institute of Public Administration. 2008. Korean Public Administration, 1948-2008, Edited by Korea Institute of Public Administration. Pajubookcity: Bobmunsa.