"Legislation Needed for Sustainability of Regulatory Cost Management System"

[Asia Economy Reporter Park Sun-mi] As the government is pushing for a plan to offset twice the cost of newly established and strengthened regulations through the abolition and relaxation of existing regulations, voices have emerged that legislation is necessary for the regulatory cost management system to function properly and maintain sustainability.

On the 29th, the Federation of Korean Industries (FKI) stated that in the case of the United States, the regulatory cost management system implemented during the Trump administration achieved clear results, but after being abolished by the subsequent administration due to its basis on a presidential executive order, both regulatory costs and the number of regulations surged.

Shortly after taking office, the Trump administration issued Executive Order 13771, which required that for every new regulation introduced, at least two existing regulations be abolished, and that the costs incurred by the new regulations be offset by the costs of the abolished regulations. Each ministry was assigned regulatory cost reduction targets, and if these were exceeded, new regulations were not permitted. If targets were not met, ministries had to submit reasons for the shortfall, the scale, and plans for achieving the targets, thereby enforcing strong management.

As a result, over four years, the total reduced regulatory costs amounted to $198.6 billion, achieving 2.5 times the pre-announced target. For every new regulation introduced, 5.5 existing regulations were abolished, exceeding the target for reducing the number of regulations.

However, the Biden administration, which took office last year, pursued a policy of strengthening regulations, unlike the previous government. Executive Order 13771, the basis for the Trump administration’s regulatory cost management system, was included among the abolished executive orders.

After the abolition of the regulatory cost management system, regulatory costs and the number of regulations surged within one year. Last year, total regulatory costs reached $201.5 billion, three times the total of $64.8 billion over four years under the Trump administration. The number of economically significant new regulations introduced last year was 69, 1.4 to 3.1 times higher than in the first year of previous administrations, and the plan for new regulations in the second year is 1.5 to 2.2 times higher than in previous administrations.

In South Korea, since July 2016, a regulatory cost management system has been operated based on a Prime Minister’s directive, which offsets the costs of newly established and strengthened regulations with the costs of abolished or relaxed regulations.

According to the Regulatory Reform White Paper, a net cost reduction of 1.37 trillion won was achieved over six years, but due to the lack of reduction targets or incentives for each ministry, it has been difficult to induce active participation from ministries. Moreover, since only regulatory costs were managed, the number of regulations has actually increased.

Accordingly, the current government announced through the new administration’s economic policy direction that it will reform the regulatory cost management system to offset twice the cost of newly established and strengthened regulations through the abolition or relaxation of existing regulations.

Yoo Hwan-ik, head of the Industry Division at FKI, said, “South Korea’s regulatory cost management system is based on a Prime Minister’s directive, which raises concerns about sustainability. There are no reduction targets, and the number of regulations is not managed, limiting performance outcomes. When reforming the regulatory cost management system, it is necessary to establish a legal basis to ensure sustainability, manage both costs and the number of regulations simultaneously, and to set targets and provide incentives for each ministry to encourage active participation.”

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