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]

Second Phase of Regulatory Reforms: Improving the Quality of Regulations – Regulatory Reforms under the Roh Moohyun Administration (February 2003 to February 2008)

 

1. Overview of Regulatory Reforms under the Roh Moohyun Administration

Ideologically speaking, the Roh Moohyun administration was opposed to small-government neoliberalism. Contrary to the neoliberal sweep that marked the policies of the two preceding administrations, the Roh administration emphasized such principles as distribution and equity, and carefully weighed the capacities and roles required by the government to provide welfare services in demand, rather than downsizing the government without reflection.^[1] Accordingly, the Roh administration reviewed existing regulations from a zero-base perspective, and focused on abolishing only those regulations that unfairly limited competition or overburdened businesses and individuals. On the other hand, its principle regarding the reform of social regulations was based on rationalizing and improving the instruments, standards and government services necessary to enhance public value in such areas as health, the environment, and safety.^[2]

 

The Roh administration attributed the poor public perception of the Kim Daejung administration’s strong reform measures to the inadequate reform made in core regulations (in such areas as corporate governance, finance, and construction), and the unchanging attitudes and behaviors of the government employees charged with carrying out the regulations. Thus, the Roh administration shifted the overall aim of regulatory reforms from downsizing to quality improvement. Accordingly, it sought more to improve the contents and procedures of existing regulations than to eliminate them, a move aimed at saving the time and expenses of businesses and individuals as they complied with such regulations. Moreover, the Roh administration sought to enhance the ripple effects of regulatory reforms by starting with core regulations that involved diverse ministries and departments, rather than continuing with the fragmentary reforms of relatively minor regulations. Finally, the center of gravity in regulatory reforms also shifted from the supplier to the user under the Roh administration, which worked to improve the perception of and compliance with the reformed regulations on the sites of their implementation.^[3]

 

2. System of Implementing Regulatory Reforms under the Roh Moohyun Administration

Notwithstanding the partial changes made in July 2004, the system for implementing regulatory reforms under the Roh administration inherited much of its shape from its predecessor, the Kim Daejung administration. However, the Roh administration sought to divide the entire implementing system into two parts by organizing a number of regular meetings, such as the Conference for Implementing Regulatory Reforms (CIRR, now chaired by the President himself), the Cabinet Meetings for Regulatory Reforms (CMRR, chaired by the Prime Minister), and the meetings of the Planning Board of Regulatory Reforms (PBRR). While these meetings lacked specific statutory grounds, they operated in parallel to the activities of the Regulatory Reform Committee (RCC).^[4] The CIRR, chaired by the President, gathered the concerned ministries and departments on a monthly basis to discuss tasks of core regulation reform and to review the progress made at various ministries and departments subject to regulatory reforms. The CMRR, chaired by the Prime Minister, was attended by the ministries and departments concerned and occasioned discussions and decision-making on general measures of regulatory review. The CMRR also deliberated on the strategic reform tasks identified and proposed by the PBRR. In an effort to prevent jurisdictional overlapping and confusion rising from this dual structure of reform implementation, the RCC handled only the review of regulations newly created or reinforced, and the review of regulations subjected to the review requirement of the Framework Act on Administrative Regulations. The PBRR focused its attention on devising strategic reforms of only core, bulk regulations which carried implications for multiple ministries and departments.

 

The Roh administration divided the reform implementing system into two levels because it discerned the impossibility of achieving the desired level of reform with the RCC and the Department for Regulatory Reform Coordination (DRCC) only. Reforms always accompany acute conflicts of interest among different stakeholders. Overcoming these conflicts of interest required strong presidential resolve and support, as well as in-depth discussions and the concerted efforts of different ministries and departments under the chairmanship of the Prime Minister. Moreover, ensuring the effectiveness of reform measures required eliminating or mitigating constraints operative on the RCC in terms of human resources, budgets, and expertise. The Roh administration decided that a secondary system of implementation was necessary to address and solve these issues.^[5]

Aside from this system of regulatory reform in the administration, the National Assembly, Korea’s supreme legislative body, organized the Special Committee for Regulatory Reforms (SCRR) in July 2004, the first of its kind ever to be established with support from both the governing and opposition parties. Until June 2005, the SCRR also played a role in implementing regulatory reforms. The SCRR particularly focused on providing reform measures that catered to economic growth and end-users, organizing public hearings and roundtables on policy proposals submitted by nongovernmental organizations representing economic and other interests. The SCRR, however, did not form part of the reform implementing system proper.^[6]

 

3. Assessment of Regulatory Reforms under the Roh Moohyun Administration^[7]

In sum, the Roh administration should be given credit for selecting the means and procedures it did in its pursuance of regulatory reforms. The effects of those means and procedures, however, were limited. In other words, the forms and processes of regulatory reforms under the Roh administration tended to garner more positive reviews than actual outcomes. The Roh administration indeed introduced a number of advanced and efficient measures that enhanced the fairness and transparency of the reform process, including the Regulatory Impact Analysis Act, regulatory maps, and administrative burden measurements. However, the failure to ensure the effectiveness of these new and advanced elements also ended up limiting the benefits and achievements of the reforms attempted.

 

The instruments and procedures that the Roh administration employed in promoting regulatory reforms possessed merits in and of themselves. Yet the Roh administration painfully failed to coordinate and garner necessary cooperation on the reforms it envisioned, while also neglecting the need to boost the expertise of the overall reform implementing system. The decision to allow the Office for Government Coordination (OGC) to launch initiatives and lead the reform implementing process turned out to be rather near-sighted and ineffective. For the OGC fundamentally lacked the power of coordination, while the officials staffing the OGC were individuals dispatched from various ministries and departments on the basis of job rotation. The RCC also lacked experts with practical skills and knowledge. The inadequacy of time and resources allotted to this reform implementing system also served to limit the effect of reforms. While the emphasis on participation that characterized the Roh administration did enhance the transparency of regulatory processes and increase the participation of diverse interest groups in decision-making, the Roh administration gave relatively short shrift to the need to assess and follow up with reform measures once they were implemented. The discrepancy between the official system and its practical use became all the more glaring in the fact that the favorably perceived means of regulatory reforms were not put to use as frequently as hoped.

 

The regulatory reforms of the Roh administration have yet to produce the desired outcomes. Although the Roh administration made great efforts to improve the quality of regulations, the actual level of perception of those efforts remains extremely low as the intended beneficiaries have yet to experience tangible improvements in their lives and operations. Furthermore, the contradiction between promoting an open economy by lowering trade barriers and creating new regulations on market competition also undermined the consistency and comprehensiveness of the Roh administration’s regulatory reforms.

 

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