Regulatory Reform in Korea : Institutional Framework & Operation February 2001 Daeyong Choi Director for Regulatory Reform Office of the Prime Minister, Korea Tel :

Background of Drastic Reform 1.1 Economic crisis in 1997 ◆ Reconsideration of a state-led economic development ◆ National consensus for comprehensive and drastic reform 1.2 Inauguration of the new government in 1998 ◆ Guiding principle : “Democracy and Market Economy” ◆ Four key reform areas including structural adjustments Financial sector Corporate sector Public sector (Regulatory reform, Public sector reform) Labor sector 1.3 Past reform experience ◆ Build-up reform capacities with public participation focusing on red- tape and deregulation ◆ Dispersed approach by several bodies on an ad-hoc and advisory basis ※ To reinforce this weakness the Basic Act on Administrative Regulations(BAAR) was enacted in 1997.

- 2 - Financial Sector Regulatory Reform (Laws & Systems) Corporate Sector Public Sector Labor Sector

Institutional Framework of Regulatory Reform 2.1 Coverage of BAAR ◆ General terms of objectives, principles and legal authority. ◆ Rules dealing with making new regulation, including the use of RIA, sun-setting, review by the Regulatory Reform Committee (RRC) ◆ A comprehensive regulatory improvement plan, requiring that all existing regulation be reviewed by agencies in conjunction with RRC. ◆ The establishment, membership and functions of RRC ◆ Regular reviews of progress and publication of an annual white paper. 2.2 Central role of RRC ◆ Basic direction of regulatory policy and research and development on the regulatory system ◆ Review of new and strengthened regulations. ◆ Review of existing regulations and annual plans of regulatory clearance submitted by ministries. ◆ Registration and publication of regulations ◆ Collecting and responding to public opinions on regulatory improvement. ◆ Monitoring and evaluation of regulatory reform efforts of agency.

Principles of regulatory reform “Business Friendly Country, Life Friendly Country” ◆ Eliminating, in principle, all anti-competitive economic regulations. ◆ Improving the efficiency of social regulations such as environment, health and safety. ◆ Shifting methods of regulations from ex ante control to ex post management. ◆ Basing regulations on adequate legal authority. ◆ Benchmarking global standards. 2.4 Strategies for regulatory reform ◆ Examine all existing regulations, under the established guiding principles. ◆ Establish systematic network between the RRC and ministries to facilitate reforms.. ◆ Set targets to concentrate reform efforts. ◆ Establish partnership with the private sector to maximize reform capacities in expertise and participation. ◆ Mobilize available administrative resources to speed up reform implementation.

Organization for regulatory reform Organizational chart President RRC Prime Minister OPM Minister Composition of RRC ◆ Civilian majority with the PM and a civilian as co-chairmen * Appointment by the President 13 civilian members including university professors (co-chairmen), economists, business person, lawyer, press person and NGO representatives. 7 government members from PM, Ministers of Finance & Economy, Industry, Home & Administration, Heads of OPM, Fair Trade Competition and Legislation

Working Channel R R C OPM Ministries Local Governments Assistant Minister for RR Office of Panning and Management MOHA MOE 2.6 Process of Regulatory Reform work * Incorporated into law drafting process Review Process of regulations Vice Minister Meeting State Council Meeting President National Assembly (Checking Review) (Acts) Presidential Decrees Completed Ministries RRC Legislation Ministry (Law Drafting) (Regulatory Review) (Legal Review) Public notification (Administrative procedure)

Review of existing regulations Ministries Self Review Working Group Review, OPM Subcommittee Review Full Committee Review First stage Second stage Third stage Process of formulating regulations(laws) Drawing-up Regulation Public Consultation Consultation with other ministries RIA on the regulation Regulatory review by RIA Legal review ※ Why eliminate existing regulations? - Outdated regulation incompatible with market-driven economy - Excessive regulations of command and control ways coupled with a state-led development

Achievements 3.1 Review of existing regulations on a zero basis * Across-the- board approach with targets set by the strong political leadership ◆ Vigorous, remarkable work to reduce the number of regulations by half ◆ For implementation : 364 bills revised at the National Assembly ◆ 1,242 subordinate rules revised 3.2 Tackling packaged regulations complicated with multi-parties ◆ Planning and targeting regulations for economic recovery and market-driven economy. Year Regulatings 11,125 6,820 Eliminated 5,430(49%) 503( 7%) Modified 2,411(22%) 570( 8%) Remaining 5,695 6,

- 9 - ◆ Ways of handling these items led by the RRC Planning item-selecting Research entrusted to experts Drafting reform proposal Discussion and decision on proposal Consultation with interested groups and ministries ◆ Examples of regulations handled by RRC Regulations on foreign investment inducement Regulations on market entry and exit Regulations on venture business Regulations on industrial safety and test Regulations on professional associations Regulations on consumer and environmental protection and so on ※ Currently focusing on a knowledge & information based society Creating regulatory systems for e-government and e-commerce Rearranging regulations workable with ICT

Ex-Ante review of new regulations since June ◆ Utilization of regulatory management systems to control regulatory quality with RIA. ◆ 2,454 cases reviewed: 594 revised 261 declined or withdrawn 3.4 Review of informal regulations contained in guidelines or instructions ◆ Improving regulatory transparency and accountability by removing administrative discretion ◆ 1,840 founded : 1,678 abolished, 162 legitimized 3.5 Enhancement of public consultations and transparency ◆ Checking actual performance of public consultation as compulsory review process. ◆ Incorporating with the Administrative Procedure Act & the Act on Disclosure of Information by Public Agencies. ◆ Establishing central registry of regulation open to the public (

Implications “Korea’s reforms brought the stabilization of the economic crisis and would produce important benefits over the longer term”(OECD) ◆ Regulatory reform would create the foundation for sustainable long term growth by moving toward market-driven economy. - Increase of GDP growth rate by 8.6 % over 10 years ◆ Radical elimination of existing regulations was made possible by the strong political leadership combined with a sound institutional framework. - Central role of RRC with strong political support. - Target-oriented approach coupled with sound implementation capacities in public administration. ◆ Establishment of regulatory reform and management systems as permanent part of the administrative organization based on legislative authority: - Ex ante review for new regulations, RIA, central registration. ◆ Shifting toward regulatory quality suiting for market-oriented economy with structural adjustments. ◆ Giving impact on administrative culture by reducing administrative intervention and control..

Concluding ※ Much progress was made but regulatory reform is not yet completed. ◆ Continuity and responsiveness - Sustaining reform dynamism with strong political commitment - Improving responsiveness to infusing information-based economy ◆ Regulatory quality and Implementation - Improving regulatory quality compatible with open and global economy - Enhancing reform feasibility and tangible benefits - Further abolishing subordinate rules and quasi-regulations ◆ Cultural change and adaptability - Transforming regulatory behavior and public administration transparent and accountable - Changing relations between the state, market and civil society