MoEF Evaluates the Impact of Liquor License Deregulation

Ministry of Economy and Finance Launches First Regulatory Cost Reduction System
How Much Have Convenience Stores Earned from Deregulation?

The Ministry of Economy and Finance has begun assessing how much regulatory costs have been reduced due to the relaxation of the Liquor License Act. This is being implemented under the ‘Regulatory Cost Reduction System’ established by the Yoon Seok-yeol administration, marking the first time the ministry has conducted an evaluation of regulatory costs.

According to a comprehensive report by Asia Economy on the 12th, the ministry is examining the costs and benefits incurred by related companies and small business owners following the amendment of the Liquor License Act enforcement decree in February. The main focus is to calculate how much costs have decreased for the convenience store industry due to deregulation and to gather opinions from numerous companies expected to benefit. Based on this, a regulatory cost analysis report will be prepared and verified by the KDI Regulatory Research Center.

The Regulatory Cost Reduction System requires that when a new regulation is introduced, existing regulations must be abolished or relaxed to an extent equivalent to two to three times the anticipated regulatory costs. Regulatory impact analysis is mandatory when regulations are newly established or strengthened, and the process of abolishing or relaxing regulations is also obligatory. However, the reduction level is flexibly set by each ministry. For the Ministry of Economy and Finance, the reduction target rate for this year is 300%. This means that if the ministry creates regulations that incur costs of 10 billion KRW, it must eliminate regulations equivalent to at least 30 billion KRW in costs.

Currently, the ministry has no new or strengthened regulations, so there are no regulations to reduce. However, with the tax reform plan and budget announcement scheduled and the general election approaching, it is uncertain what new regulations might be introduced. If regulations are suddenly introduced in the second half of the year, achieving the reduction target rate will be difficult, so the ministry appears to be proactively analyzing the costs and benefits of deregulation in advance.

The evaluation target is the amendment of the Liquor License Act. Previously, convenience store operators had to spend considerable time obtaining a liquor brokerage license to handle liquor at new logistics hubs. Typically, securing operational performance took half a year, and it took a total of nine months, including business operator evaluation and permit application, before they could handle liquor. Even large corporations with established distribution networks and management systems faced the same regulations, resulting in annual costs exceeding 20 billion KRW. In response, the ministry relaxed regulations by recognizing existing performance when distributors applied for a liquor brokerage license.

This is the first time the Ministry of Economy and Finance is calculating the effects of deregulation since the implementation of the Regulatory Cost Reduction System. Although the ministry has eased several regulations since the start of the Yoon administration, it was difficult to verify effectiveness and calculate costs and benefits. Due to the ministry’s role in handling taxes and budgets, the subjects affected by regulations are broad, making it challenging to estimate direct and indirect impacts. However, in the case of deregulation of the Liquor License Act, the beneficiary companies are clear, and cost calculation is relatively straightforward, making it a suitable evaluation target.

However, the ministry is not conducting the regulatory cost reduction evaluation internally but has entrusted it to an external firm. This is because to have the regulatory reduction achievements recognized, strict review by the Office for Government Policy Coordination is required. A government official said, “The final approval process by the Office for Government Policy Coordination is not easy,” adding, “It is very stringent and requires extensive preparation.”

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