"Economy Blocked from New Growth by Regulations... Need for Bold Systems like a 'Mega Sandbox'"

KCCI Holds Forum on "Direction of Regulatory Reform under the New Government"
Time to Seek New Growth Opportunities after Two Periods of Rapid Expansion
"To Escape the Trap of Low Growth, Regulations Must Be Removed First"

There have been suggestions that, as the Korean economy is currently in a period of stagnating growth, it is necessary to dramatically improve regulations in order to overcome this and achieve new growth.

Song Seungheon, Managing Partner of McKinsey & Company Korea Office, diagnosed the current state of the Korean economy at the "Direction of Regulatory Reform under the New Government" forum held at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul on July 14, saying, "We have to cross a high mountain, but the sun is setting and a huge rock is blocking our way." He added, "After the growth periods of the 1960s-80s and 1980s-2000s, we have failed to generate new growth over the past 20 years."

At the forum, Song pointed out that "not only are leading companies underperforming, but capital, talent, and innovation invested in venture companies are also stagnating. In addition, the service sector, self-employed businesses, and small and medium-sized enterprises are unable to create added value due to low labor productivity." He identified the rigid environment that makes it difficult for entrepreneurship to flourish as a cause of low growth.

He said, "We are in an era where we must respond flexibly to changes in the domestic and international environment, but current regulations are excessively uniform and lack flexibility. Once a regulation is established, it is almost always strengthened, making it difficult for companies to adjust their strategies in response to changes. This leads to a vicious cycle of poor performance."

He also emphasized that, in order to create new growth, it is now time to acknowledge regulatory failures and remove the biggest obstacles first. "While it is important to address hundreds of regulations one by one, we must focus on resolving core regulations that restrict the will to do business, such as capital market regulations, labor regulations, and venture investment regulations," he said.

Song added, "Regulations may have had reasonable backgrounds when they were first created, but today they act as factors that make innovation and challenges difficult for everyone, including large corporations, foreign companies, domestic and foreign investors, and venture entrepreneurs. This is not a matter of ideology but of implementation, and it is a challenge that society as a whole must bear and resolve from a long-term perspective, rather than a choice between growth and distribution or between the left and the right."

The forum was hosted by the Korea Chamber of Commerce and Industry. Previously, the Chamber had released reports such as "Private Sandbox in Numbers" and "Trends and Implications of G20 Goods Export Dependence," and this forum was held as the third part of the new growth series.

At the forum, Lee Jeonghee, a professor at Chung-Ang University, suggested a model of "test first, implement later," noting that "the regulations we face now can take years just to discuss." For example, he proposed that regulations should be eased by applying region-specific special exemptions, such as flexibly adjusting inheritance taxes within certain areas or allowing flexible work arrangements in R&D special zones.

Choi Haeok, a research fellow at the Science and Technology Policy Institute, also argued for the necessity of risk-based regulation and an artificial intelligence (AI) sandbox. He said, "In the case of electric vehicle batteries, regulatory design must consider risks throughout the entire lifecycle, and a system linking private certification with academic evaluation is needed." He added, "When designing regulations for advanced new industries such as AI, we need to approach them as an organic system rather than a single law, establishing a technology-friendly and reliable flexible regulatory framework. We also need a laboratory to experiment with how much to relax regulations on personal data."

Meanwhile, Kim Taenyeon, a lawmaker from the Democratic Party of Korea who attended the forum, said in his congratulatory remarks, "Regulations must now be designed to unlock Korea's potential. For the technology-driven growth pursued by the current government to be realized, it is essential to create an environment where companies can boldly take on challenges and invest."

Cho Baesook, a lawmaker from the People Power Party, also emphasized in a video message, "The root cause of structural problems such as regional extinction, youth outflow, and declining economic vitality is excessive regulation. Now, the government must remove entry barriers and create an environment where companies can freely take on challenges and grow."

Park Iljun, Executive Vice Chairman of the Korea Chamber of Commerce and Industry, said, "This is a time when the National Planning Committee, central government, and local governments are all coming together for bold regulatory reform. I hope that regulatory innovation will lead to bold investment and generate new growth, creating a strong virtuous cycle that results in quality job creation, balanced national development, and higher birth rates."

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