"Mandatory Target Setting Also Needed to Achieve Regulatory Reform Results"

US Regulatory Status (Source: Federation of Korean Industries)

[Asia Economy Reporter Changhwan Lee] It has been argued that for regulatory reform in Korea to achieve results, specific targets must be set for both the number of regulations and regulatory costs, similar to the United States, and thorough management of the established targets must accompany this.

The Federation of Korean Industries (FKI) released a report on the 26th titled "Analysis of Success Factors in U.S. Regulatory Reduction," stating that immediately after the inauguration of the Trump administration in the U.S., regulations and regulatory costs were simultaneously reduced, and strict management measures such as prohibiting new regulations if targets were not met were implemented. As a result, unlike previous administrations, there was a clear reversal with decreases in both the number of regulations and costs.

According to the FKI, the Trump administration, which began in 2017, introduced the Two-for-One Rule, which requires the elimination of two existing regulations for every new regulation established, and the Regulatory Cap system, which assigns annual regulatory cost reduction targets to each department, through presidential executive orders. The regulatory costs incurred by new regulations must be offset by the elimination of existing regulations.

Looking at the results over the three years following the introduction of the regulatory reduction system (2017?2019), 7.6 existing regulations were eliminated for every new regulation introduced, and the average annual number of new regulations was 3,204, a 12.2% decrease compared to the previous 10-year average of 3,649. Total regulatory costs reversed from an average annual increase of $10.5 billion over the previous 10 years until 2016 to an average annual decrease of $14.9 billion over the three years (a total reduction of $44.6 billion).

The FKI analyzed that setting specific targets for both the number of regulations and costs, and thoroughly managing the entire process of new regulation establishment, is the key to the success of U.S. regulatory reform.

Regarding the process of establishing new regulations, each department must first submit plans for new regulations and eliminations for the next fiscal year, the main contents of the regulations, and the regulatory cost targets for the next fiscal year to the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget (OMB) under the Presidential Office.

OIRA reviews whether the departments’ plans for new regulations and eliminations meet the requirements of executive orders or laws, and after consultation with the departments, assigns annual regulatory cost reduction targets (Regulatory Cap) to each department.

At the end of each fiscal year, each department must submit to OIRA whether they have achieved the regulatory number reduction (Two-for-One Rule) and regulatory cost reduction targets (Regulatory Cap). If the targets are not achievable, the department must submit reasons for the shortfall, its scale, and plans for future target achievement.

If a department exceeds its assigned annual regulatory cost, penalties are imposed that prohibit the establishment of new regulations in that year. OIRA publicly discloses each department’s implementation performance to the public.

Yoo Hwan-ik, head of the Corporate Policy Office at FKI, emphasized, “As seen in the U.S. case, to achieve results in regulatory reform, it is important to set specific targets for each department based on objective indicators, and to secure enforcement measures with certain coercive power, such as prohibiting new regulations if targets are not met, public disclosure of departmental performance, and submission of plans for achieving targets when shortfalls occur.”

This content was produced with the assistance of AI translation services.