[Square] COVID-19 and the Economy, the Problem Is Excessive Legislation

Last year, although our economy experienced a negative growth rate due to the novel coronavirus disease (COVID-19) crisis, it performed relatively well by showing the highest growth rate among the Organisation for Economic Co-operation and Development (OECD) countries. This was thanks to the resilience of exports. The export growth rate ranked fourth in the world, following re-export countries such as Hong Kong and the Netherlands. While other countries took extreme measures such as border closures and factory shutdowns, we continued operations, which proved effective. Fundamentally, the manufacturing structure spanning various industries was a strength. Despite difficulties in some sectors, semiconductors, displays, and home appliances continued to grow amid the spread of new global lifestyles such as non-face-to-face (untact) interactions.

Recently, with the expansion of vaccination, the situation is changing. According to Bloomberg, markets in the United States and Europe are expected to see a visible end to COVID-19 as early as the first half of this year, making a V-shaped economic rebound possible. Supported by this, our exports could increase by around 10%. However, if the COVID-19 crisis continues, there is a high risk that domestic demand contraction will persist. In particular, facility investment is likely to be delayed due to expanded regulatory legislation, the broader application of the 52-hour workweek system, and strengthened greenhouse gas and environmental regulations.

With the end of COVID-19, policy efforts to improve the business environment seem necessary. First, vaccination should be expedited as much as possible while being meticulously prepared. Considering foreign cases that have experienced considerable trial and error during the vaccination process, it is necessary to make thorough preparations to ensure that domestic vaccinations proceed without setbacks. This could increase the efficiency and speed of vaccinations.

Given that the COVID-19 virus continues to mutate, it is also important to establish a mass vaccine production system by reinforcing Good Manufacturing Practice (GMP) facilities. It is necessary to have a mass production system not only for conventional vaccines like AstraZeneca but also for new technology vaccines like Moderna. This will enable responses to future variant viruses and foster the vaccine industry as a new growth engine. Early approval from the Ministry of Food and Drug Safety for COVID-19 treatments being developed by our pharmaceutical companies is also needed. In conclusion, according to government announcements, the start of vaccination is expected to be 2 to 3 months later than leading countries, but this is unlikely to significantly shrink our economy this year. This is because the effect of K-quarantine and the development of treatments within sight can compensate. Rather, the recovery of export markets could present new opportunities for key industries such as semiconductors, bio, and automobiles.

The institutional factors appear to be the areas that may pose difficulties for our economy in the future. The average annual number of legislative bills passed by the 20th National Assembly reached 2,200. This is incomparable to 28 in the United Kingdom, 112 in Japan, 193 in the United States, and 88 in France. Overlegislation and hasty legislation continue in the 21st National Assembly as well. The overwhelming production of regulations raises economic uncertainty and risks weakening corporate competitiveness. While focusing on ending COVID-19 in the short term, it is a time when collective wisdom and efforts are needed in the mid-to-long term to eliminate uncertainty.

Jung Manki, President of the Korea Automobile Manufacturers Association (Former Vice Minister of Trade, Industry and Energy)

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