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Helping the creative economy

Dec 21,2018
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Under the government, new enterprises are killed before they can take off because of rigid and heavy regulations. President Moon is calling for deregulation, but there hasn’t been any progress. [NEWS1]
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Yi Jung-jae
The author is a columnist of the JoongAng Ilbo.

Online used-car auction site Hey Dealer offers a good case study in how a deregulatory move can save a new enterprise and help it grow.

The business started in 2015 and quickly generated revenue of 500 million won ($443,853) a year by arranging deals worth 30 billion won in the first year. But in January 2016, in its second year, the company was forced to suspend business after a new law took effect. A revision in the Motor Vehicle Control Act requires online car dealers to have a parking area of at least 3,300 square meters (35,521 square feet) as well as 200 square meters of auction space. A lawmaker from the Gangseo district in eastern Seoul — home to Korea’s car auction firms — promoted the bill to aid brick-and-mortar dealers threatened by online competition like Hey Dealer.

Consumers and media were outraged by the move that went against the so-called “creative economy” slogan of the Park Geun-hye administration. Then Transport Minister Kang Ho-in met with Hey Dealer CEO Park Jin-woo. Kang promised to stop regulations that get in the way of the government policy to promote innovative and creative economics, and reduce the gap between public administration and innovation. The ministry fixed the regulation so that online dealerships can arrange car auctions without brick-and-mortar space. The minister met with legislators and offline dealers to persuade them. In just 52 days, Hey Dealer was able to resume its business. By June this year, it had arranged more than 500 billion won worth deals.

The liberal Moon Jae-in administration pursues innovation, but uses a different slogan: “innovation-led growth.”

Under the government, new enterprises are killed before they can take off because of rigid and heavy regulations. President Moon is calling for deregulation, but there has not been any progress. The biggest upset was in the ride-sharing business. Three start-ups last year and one this year could not launch their carpool businesses due to transport regulations. The ministry disallowed the ride-sharing business due to fierce opposition from the taxi industry. But we have not seen Transport Minister Kim Hyun-mee make time to meet the business leaders. The industry is disgruntled that the lawmaker-turned-minister is too concerned about irking taxi drivers and losing their votes.

It may be unfair to compare the Hey Dealer case with the ride-sharing business. Car dealers in Korea are fewer than 10,000, whereas taxi drivers number more than 250,000. Uber in 2014 and many others since then have failed to win over taxi drivers in Korea. About 30 percent of taxi drivers are aged 65 or older. They are reluctant as they have little to lose. A taxi driver lit himself on fire last week. The ruling party rushed to calm drivers. It is ready to roll out a multi-billion-won aid program. The minister is in no rush to change the law to enable a ride-sharing service any time soon.

Meanwhile, car-sharing has become commonplace elsewhere in the world.

According to a study by the MIT Computer Science and Artificial Intelligence Laboratory, a carpool option can reduce the number of taxis on the road by 75 percent, and a pool of 3,000 four-passenger cars can serve 98 percent of taxi demand in New York City with an average wait time of only 2.7 minutes. Travel time also can be reduced by 20 percent. Cleaner air from reduced traffic and fuel emissions is a plus.
Another valuable trade-off is road information. Cars delivering more than one passenger at a time can generate big-data assets. The information can become useful, not only for traffic policy, but also for urban development, retail and entertainment.

While Korea drags its feet, it will one day find its roads dominated by foreign ride-sharing names like Uber and Lyft, as well as loss of sovereignty over geographic intelligence.

A death can change many things, but it cannot reverse a trend. We cannot go back to the pre-motor vehicle days. Ride-sharing is here to stay, both now and in the future. The problem involves complexities in capital, regulations, reform, new and old technologies, and interests. How the authorities solve the issue will define their governance philosophy and skills. The ride-sharing versus taxi match has put the administration to the test.