Current Status of National CompetitivenessCurrent Status of National Competitiveness

5-Year Vision for National Competitiveness5-Year Vision for National Competitiveness

Policy ImplicationsPolicy Implications

The Way Forward: A Small & Strong Gov.The Way Forward: A Small & Strong Gov.

Current Status of National CompetitivenessCurrent Status of National Competitiveness

5-Year Vision for National Competitiveness5-Year Vision for National Competitiveness

Policy ImplicationsPolicy Implications

The Way Forward: A Small & Strong Gov.The Way Forward: A Small & Strong Gov.

Ⅰ-1. IMD World Competitiveness RankingsⅠ-1. IMD World Competitiveness Rankings

Coverage: 55 countries in 2008

Assessment:

Four factors of competitiveness

Economic Performance, Government Efficiency,

Business Efficiency, Infrastructure

331 criteria (208 statistical criteria, 123 survey data)

* 77 out of 208 statistical criteria are for background information only

2008 Rankings

Korea Japan China TaiwanHong Kong

Singapore

31 22 17 13 3 2

Ⅰ-2. Trend of Korea's National CompetitivenessⅠ-2. Trend of Korea's National Competitiveness

Infrastructure

Overall

BusinessEfficiency

GovernmentEfficiency

EconomicPerformance

Ranking

Year

Ⅰ-3. Sectoral Weaknesses in Korea's CompetitivenessⅠ-3. Sectoral Weaknesses in Korea's Competitiveness

FactorEconomic

PerformanceGovernment Efficiency

Business Efficiency

Infrastructure

Overall Ranking 47 37 36 21

Statistical Criteria

-Cost of living (55)-FDI (% of GDP, 54)-Tourism receipts (% of GDP, 52)

- - -Pupil-teacher ratio for primary

education (50)

SurveyCriteria

-Labor regulations (54)-Immigration laws do not prevent foreign labor employment (54)-Legal and regulatory framework (53)-Public sector contracts open to foreign partners (53)-Price controls do not affect pricing of products (53)

-Labor relations (55)-National culture open to foreign ideas (55)-Corporate boards supervise the management of companies (54)

-Technological regulation supports business development and innovation (55)-University education meets the needs of a competitive economy (53)-Environmental laws hinder businesses (50)

Korea's Weaknesses by 4 factors of competitiveness(out of 55 countries covered in 2008)

Current Status of National CompetitivenessCurrent Status of National Competitiveness

Policy ImplicationsPolicy Implications

5-Year Vision for National Competitiveness5-Year Vision for National Competitiveness

The Way Forward: A Small & Strong Gov.The Way Forward: A Small & Strong Gov.

II. 5-Year Vision for National CompetitivenessII. 5-Year Vision for National Competitiveness

Status Quo : Maintain Current Development Trend

Take-off : Implement Unreserved and Fundamental Reform

Ranking in 5 years

GovernmentEfficiency

BusinessEfficiency

Economic Performance

InfrastructurePotential

growth rate in 5 years

28Gain 5 ranks

Gain 5 ranks

Gain 2~3 ranks

Gain 2~3 ranks

4.2%

Ranking in 5 years

GovernmentEfficiency

BusinessEfficiency

Economic Performance

InfrastructurePotential

growth rate in 5 years

15Gain 30 ranks in

weak areas*regulation, etc

Gain 30 ranks in weak

areas*labor relations,

etc

Gain 20+ ranks

Gain 5 ranks

6~7%

Current Status of National CompetitivenessCurrent Status of National Competitiveness

Policy ImplicationsPolicy Implications

5-Year Vision for National Competitiveness5-Year Vision for National Competitiveness

The Way Forward: A Small & Strong Gov.The Way Forward: A Small & Strong Gov.

III-1. Unreserved deregulationIII-1. Unreserved deregulation

Realignment into a system of‘good regulations’

- Achieve regulatory objective + Reduce regulatory costs

* Total regulatory costs in 2007 (SERI Proj.) : KRW78.1 trillion (8.7% of GDP)

Key regulations by sectors have been reformed until the 4th meeting of the PCNC

- Opening a new business: improved opening process- Financial sector: set basic directions for financial deregulation and

improved entry regulations- Land, sites: reformed regulations regarding industrial complexes,

reduced prices for industrial complex sites- FDI: Promoted FEZs- Foreign labor: Expanded efforts to attract global skilled labor force- Business environment: Alleviated on-site problems of

manufacturing SMEs

• Rule of law is a key factor of social capital → serious effect on economic growth

• Korea's rule of law is at the lowest level among OECD countries: negative effect on the economic growth rate by 1%p (KDI)

• Recent candlelight demonstrations : Direct costs of KRW 570.8 billion, Indirect costs of KRW 1.352 trillion (KERI)

• First, foster a law-abiding environment

• Establishment of a‘good regulations’framework through regulatory reform • An effective conflict management system also needs to be established

• Next, strict law enforcement on illegal actions → Advancement in law and order

* Analysis of Korea's demonstrations and protests(1989∼2003) show that demands through illegal demonstrations (29.1%) were more likely to be attained than through legal demonstrations(25.2%)

→ Incentives for illegal demonstrations remain

III-2. Advancement of Law and OrderIII-2. Advancement of Law and Order

Korea's size of government:

small among OECD members,

but increasing rapidly - Continued pressure for public sector expansion is expected taking into account rapid population aging and increasing demand for welfare

Public sector innovation is essential in establishing a sustainable foundation for economic growth

- Continued devolution of manpower, organization, and functions to the private sector

* Government : Deregulation + Outsourcing → Small Government * Public Entities : Privatization, Restructuring → Enhanced efficiency and service

- Limiting increases in the size of public finance

III-3. Public Sector InnovationIII-3. Public Sector Innovation

Trend of total tax burden ratio (%)

OECD Average

Total Tax Burden (Incl. Quasi Tax)

III-4. Cooperative Labor RelationsIII-4. Cooperative Labor Relations

Corporate social responsibility

- Transparent corporate governance and strengthened noblesse oblige are prerequisites to strict law enforcement and cooperative labor relations

An advanced institutional framework to establish peaceful labor-management culture

- Recently, labor disputes and lost work days are on the decrease

- To foster a cooperative labor-management culture, an law and principle-based environment is needed

Put an end to unfair labor practices Adhere to the‘no work, no pay’principle Institutional advances such as long-term collective agreements

* Duration of collective agreements : Korea(2 years max.), Japan(3 years max.), France(5 years max.), US(2∼3 years)

Labor disputes (no.)

Lost work days

III-5. Strengthened Policy PRIII-5. Strengthened Policy PR

Significance of strengthening policy PR and public communication

* In 2008 IMD World Competitiveness Rankings: Statistical criteria ranking (23) vs. business survey ranking (36) → Overall ranking: 31

Active PR efforts though various channels and methods are needed to reach policy customers

- Increase PR though media such as TV, newspapers, and internet portals

- Strengthen customized PR (Policy Customer Relationship Management)

Current Status of National CompetitivenessCurrent Status of National Competitiveness

National Competitiveness in 5 Yrs: 2 ScenariosNational Competitiveness in 5 Yrs: 2 Scenarios

Policy ImplicationsPolicy Implications

The Way Forward: A Small & Strong Gov.The Way Forward: A Small & Strong Gov.

IV. The Way Forward: A Small & Strong GovernmentIV. The Way Forward: A Small & Strong Government

60 -

50 -

40 -

30 -

------

0.5 1.0 1.5 2.0 2.5 3.0

Current Trend

0.5 1.0 1.5 2.0 2.5 3.0

Target Path

Small & Strong Gov.

① Regulatory reform② Public sector innovation③ Cooperative labor relations

□ Current trend of Korea’s public expenditure and regulation (Yellow Path)

□ Achieving the ’Take-off’(Mid-Expenditure, Low Regulation) Scenario (Red Path)