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Serious about innovation

Reform of existing laws that are not appropriate to innovation needs to be accelerated.
Oct 17,2017
President Moon Jae-in’s administration began without a transition period to prepare a five-year administrative agenda and implementation plan after President Park Geun-hye was impeached. Moreover, as the snap presidential election was held amid unprecedented political turmoil, Moon was burdened with campaign promises that were made without in-depth analysis and the process of canvassing public opinion.

In the first 150 days of the Moon administration, policies like income-driven growth, job creation led by the public sector, the upgrading of non-salaried workers to the permanent payroll, and a significant increase in minimum wage were met with skepticism and criticism by many experts and industries that were affected.

Meanwhile, innovation-based growth has emerged as a new rallying cry from the government. As an administrative objective, innovation-based growth needs to be clearly defined and then it must be executed properly. Hopefully, this goal will get its own road map to be pursued over the next five years through advice from state-funded research institutes and experts, and active coordination among related agencies.

I believe that innovation-based growth in the universal sense is the mission of our time and should be the biggest priority of the Moon Jae-in administration.

There are two major reasons I believe this. First, Korea’s growth potential has fallen to the mid-two percent level, which poses the biggest challenge to our economy. Without drastic enhancement of productivity through innovation, it will inevitably fall to the zero percent level.

Second, we cannot fall behind in the global competition for innovation in the era of the fourth industrial revolution, where existing production systems, industrial and employment structures, living patterns and spending and competition paradigms are all rapidly changing.

Let’s list a number of specific issues that must be taken into account.

First of all, innovation-based growth as a national agenda needs to be reaffirmed as a concept that encompasses not just startups but all existing companies and economic actors. Of course, it is necessary to create an environment that helps innovation by startup companies and small and mid-sized enterprises, which have gotten little support from the previous administration. However, we should not neglect the role of existing conglomerates that can afford technological development that can be the basis of innovation. Their growth can be shared with smaller companies.

Therefore, the so-called “regulatory sandbox” that allows new industries to operate without too much red tape needs to be built, and drastic regulatory reform should be pursued for existing industries. The special act on a regulation-free zone is still pending in the National Assembly. That bill should be considered the first step in the greater goal of making the country regulation-free.

Reform of existing laws that are not appropriate in the era of the fourth industrial revolution, such as laws related to private information protection that hinder the utilization of big data, needs to be accelerated. Until now, the government has been emphasizing creation of jobs for the fourth industrial revolution, but a flexible labor market and education reforms have not been included in the major discussions. Regulatory reform should be the main interest of the Fourth Industrial Revolution Committee.

All these tasks need to be coordinated among ministries and agencies. The supervision, planning and coordination of the ministerial and committee-level action plan should be overseen, planned and coordinated by the finance minister. This is why the finance minister serves as deputy prime minister for the economy.

Giving the highest priority to innovation-based growth means that the president would spare more time and focus on the issue as chief executive of the country. As the fourth industrial revolution committee will mostly deal with innovation-based growth issues, meetings should be held at least once a month, presided over by the president. The ministers should directly report to the president on the progress of regulatory reform coordinated by the deputy prime minister.

Furthermore, as a part of the collaboration required for smooth legal revisions that will promote innovation-based growth, policy directors of the ruling and opposition parties could be invited to the meetings.

The number of people in the president’s office dedicated to employment issues could be expanded and named the innovation-based growth progress board to take charge of the process of regulatory reform and legislation required for innovation-based growth and the creation and loss of jobs that will come about as a result.

The creative economic policies that the Park Geun-hye administration championed and promoted endlessly were drafted without clear definitions or ideas and were carried out inconsistently and sporadically. We can learn from that total failure. In fact, innovation-based growth and a creative economy are twin concepts born from Joseph Schumpeter’s theory.

Translation by the Korea JoongAng Daily staff.

JoongAng Ilbo, Oct. 14, Page 31

*The author, a former finance minister, is an adviser to the JoongAng Ilbo.

SaKong Il