This study suggests ways to reorganize the functions performed by the Korean government and to help the country toward a more advanced and sophisticated economy.
The current global trends in government functions can be summarized as expanding the use of market-type mechanisms in public service provision such as privatization and outsourcing, liberalizing goods and financial markets combined with the introduction of regulation regimes based on an “arm’s length” principle, and limiting discretionary macro-economic policy-making. For social policies, greater emphasis is being placed on both individual responsibility and government/market balance through a provider-purchaser split. The growth strategies that the Korean government had pursued until the recent economic crisis stood in stark contrast with these international trends. The crisis provided an important opportunity for Korea to shift from the previous state-driven growth model to one that was more market-friendly. With slowing capital accumulation, an economy has to rely on higher total factor productivity for sustained growth, which in turn critically hinges on a reinforced capacity for innovation, especially at a stage where the technological catch-up process has been almost completed. This implies that the core tasks facing Korea should be promoting competition in goods markets and developing an innovative financial sector. In addition, the Korean government should focus on establishing and enforcing market disciplines to help the country’s market economy achieve dynamic and flexible growth.
The current policies for small and medium sized enterprises (SMEs) need to be adjusted based on the perspectives of equity and static/dynamic efficiency. Equity requires that SMEs be given more opportunities to compete in markets to compensate for their disadvantages compared to large enterprises. Static efficiency demands that the role of SMEs be expanded under the competition-restricting dominance of large corporations, market distortions coming from incomplete information be eliminated, and externalities from production linkages be corrected. Dynamic efficiency requires dynamic economies of scale be achieved and dynamic information externalities be eliminated. Korea’s SMEs policies must place more emphasis on stabilizing the macro-economy and promoting fair competition rather than providing selective support to SMEs, and channel resources toward start-ups and enterprises seeking new business opportunities. The ultimate goal of SME policy should be developing its market of resources.
2007 국가예산과 정책목표(Reorganizing the Korean government for a more advanced economy)
우리 경제의 선진화를 위한 정부역할의 재정립
|Series Title; No||연구보고서|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||KDI; KDI School|