[The Editors' Verdict] Yoon, Tear Down the Walls of Vested Interests

[Asia Economy Lee Cho-hee, Head of Industry Department] "Is the Yoon Seok-yeol government really different? It just feels like the 'pro-market, pro-business' drive is louder because the Moon Jae-in administration had such a strong anti-business stance over the past five years. Every administration has shouted 'regulatory innovation' early in their term, but it was all talk in the end. (I) don't have high expectations (for this administration) either."

As a senior executive of a large corporation recently said, regulatory reform has been a recurring slogan for new governments over the past 30 years. Whether progressive or conservative, the awareness that 'old and unnecessary regulations must be eliminated' was largely the same. There was no disagreement that creating an environment where companies can invest leads to a virtuous cycle of 'increased employment → wage growth → consumption stimulation → economic growth promotion.'

So why have past presidents repeatedly failed in the 'fight against regulation' despite ordering bold reforms several times? Political leaders tried to change complex and multifaceted regulations too easily and hastily. Every regulation has its reason and justification for existence. Not all regulations are bad. The problem lies with 'bad regulations' that have degenerated into tools for protecting specific groups under the guise of public interest.

For vested interests, regulations are profit, power, and livelihood. Anyone who tries to break their 'profit ecosystem' resists desperately. Bureaucratic administration, which should design in the middle, remains inert, faithful to its self-protection instinct. It's the worst formula. The reason why grand beginnings end in anticlimax.

Then, is the Yoon Seok-yeol government different? According to the Regulatory Information Portal, the number of regulatory bills proposed in the National Assembly during the Moon Jae-in administration reached about 4,100?three times that of the Park Geun-hye administration. In 2018, the top corporate tax rate was raised from 22% to 25%, and a new tax bracket for corporations exceeding 300 billion won was introduced, collecting more money from companies. This was a 'backward step' compared to major advanced countries like the U.S. and Japan. Unprecedented pro-union and anti-business policies such as allowing union membership for dismissed and unemployed workers and introducing the Serious Accident Punishment Act were poured out.

This is the background where President Yoon can only superficially benefit from a 'base effect.' He immediately invited heads of large corporations to his inauguration dinner for the first time and personally served them drinks at the head table. At least it seems he will not follow the Moon administration’s view of companies and the economy, which defined businesses as deep-rooted evils.

Of course, the business community does not fully trust him. This is likely due to a 'learning effect' that once the 'one-season business' ends, companies might again be seen merely as mobilization targets like in past governments. Moreover, he is a former prosecutor president who wielded investigative power over companies.

The conditions are also the worst. He must overcome the wall of a minority government with an unprecedented seat gap. No matter how strong the president’s will, it is not easy to gain the National Assembly’s consent. The ruling and opposition parties are in extreme confrontation everywhere, far from 'cooperation.' The 21st National Assembly’s term lasts until May 2024. Companies, which must fight with weapons amid global fierce competition, are likely to struggle with their hands and feet tied for the next two years.

Currently, the Korean economy faces a triple crisis of high inflation, high interest rates, and high exchange rates, making the future uncertain. The economy’s stamina has bottomed out due to the sharply raised minimum wage and uniform reduction of working hours. Layered bad factors include the COVID-19 pandemic, the Russia-Ukraine war, U.S. tightening policies, high prices, and inflationary pressures.

Regulatory innovation is now a matter of survival. The greater the uncertainty, the clearer the proposition that 'yesterday’s answer is no longer tomorrow’s answer.' Can we say in five years that 'Yoon Seok-yeol was different'? The future of the country depends on it.