Insights on South Korea’s Public-Private Partnership for Regulatory Reform

Daniel R. Pérez
by Daniel R. Pérez, Policy Analyst
December 21, 2015

Representatives from Korea’s Public-Private Joint Regulation Advancement Initiative (PPJRAI) recently concluded their visit to the United States, where they met with regulatory experts from both the public and private sectors in Washington, D.C. This public-private initiative constitutes an important part of Korea’s efforts to build on its successful history of regulatory reform and improve the market-oriented features of its regulatory system. The GW Regulatory Studies Center met with representatives from PPJRAI to discuss regulatory reform, including its mandate to improve conditions for small and medium enterprises (SME) operating in the Korean economy.

Korea’s Public-Private Joint Regulation Advancement Initiative

The PPJRAI began its work in September 2013. It operates as a task force of the Office of Government Policy Coordination (OGPC), the agency responsible for regulatory oversight, and is housed within the Prime Minister’s Office (PMO). The task force serves as the coordinating body for identifying inefficient regulations that are overly burdensome on small and medium enterprises, improving specific regulations in direct consultation with the pertinent regulating government ministry, and conducting retrospective review to quantify the impact of these changes on Korea’s economy.

Although it addresses regulations on a case-by-case basis, it has achieved significant results, partially due to the fact that statutory requirements direct agencies to respond to requests from PPJRAI within 2 weeks. Additionally, it receives a high level of political support since President Park Geun-hye herself chairs its quarterly regulatory reform meetings.

(In photo on right: Members of PPJRAI with the GW Regulatory Studies Center at the George Washington University, December 11, 2015.)

Currently, it is composed of 26 members—half of these are subject matter experts from each of the regulating government ministries, and the other 13 are private sector members from organizations such as the Korea Chamber of Commerce & Industry (KCCI), and the Korea Federation of SMEs (KBIZ). The task force identifies pertinent regulations in need of reform through its function as a forum for stakeholders and the public to submit petitions for review of regulations via its monthly town hall meetings, through its website, or by phone. Once PPJRAI identifies submissions that could lead to significant regulatory improvements it separates these into two categories based on whether they require attention at the national level or whether local governments are better equipped to enact revisions. The latter are passed on to local governments for consideration; PPJRAI focuses its efforts on drafting suggestions for improvements to regulations at the national level. It then enters into consultation with the relevant government ministry, which must decide whether to publish the changes, reject them, or conduct further review. PPJRAI is also responsible for conducting retrospective reviews of regulations altered through this process in an effort to quantify the relative impact of these revisions.

As of June 2014, a study commissioned by the Korean Association for Public Administration (KAPA) found that PPJRAI had received a total of 2,339 submissions—317 were transferred for consideration to local governments, and 1,233 were considered worthy of attention at the national level and submitted to ministries for consideration. The ministries accepted 255 of these cases, roughly 20%, and entered into a consultation process with PPJRAI to revise existing regulations.

Components of the Initiative’s Success

Three aspects of PPJRAI are likely key to its success in enacting regulatory reform:

  • A high level of political support
  • In-house subject matter expertise
  • Structure as a private-public partnership

The fact that President Park is personally involved in chairing quarterly review meetings signals to ministries that the reforms proposed by PPJRAI are to be taken seriously, since they are a critical part of the executive’s agenda. The task force’s in-house expertise allows it to propose specific regulatory reforms due to its elevated degree of technical knowledge and also benefits from having regulators from the ministries themselves who likely contribute by applying their institutional knowledge for early identification of limits and constraints to reform efforts. Finally, PPJRAI’s existence as a public-private partnership engages the community in the regulatory reform process and is a continued example of Korea’s commitment to expand market-oriented regulatory reforms in contrast to its history of state-led reforms during the 1960s and 70s.

“Lessons Learned” From the U.S. Experience in Regulatory Reform

As Korea continues its focus on reforming competition policy it should make sure that the limited resources of government regulators are focused on creating good quality regulations that work for the entire market without requiring either the excessive use of exceptions for SME or having to disproportionately use resources to monitor larger firms for compliance. Regulation that focuses on allowing competition to increase efficiency will discipline the market with better results than creating regulation that is too industry-specific in an attempt to carve out sectors to grow SME. Although there is an understandable focus on ensuring that regulations do not disproportionately affect small and local businesses, regulation that is too interventionist will produce limited results in the long run.

Regulatory reform efforts could also benefit from formal codification of a requirement for ministries to plan for conducting retrospective reviews for significant regulations they publish. The retrospective analysis conducted by PPJRAI is a valuable tool for regulatory reform, but its effects on the Korean economy are necessarily limited due to the scope of its focus—SME, and the limited resources of the task force relative to those of regulators. Although ministries are currently required to include sunset clauses within many of their regulations as a device to promote retrospective review, more robust consideration by ministries during rulemaking could promote better regulatory outcomes. Regulators would likely more carefully consider the specific problems that a rule intends to address and what metrics would need to be measured in the future in order to identify whether or not a regulation had achieved its intended purpose.

Ministries should also focus on regulating outcomes instead of processes. This is an internationally recognized good regulatory practice that fosters innovation in the economy as companies and individuals are allowed to try different solutions to comply with regulatory requirements.

Finally, Korea should determine if there are sufficient safeguards in place to ensure accountability for ministries to comply with statutory requirements such as considering public comments and conducting good regulatory impact analysis during rulemaking. It might be necessary to add layers of oversight such as strengthening judicial review. Research suggests that judicial review can improve regulation “not because the courts have a particular expertise in regulatory analysis but because agencies tend to take more seriously aspects of their mission that are subject to litigation.” If the courts could invalidate a rule based on failure to adhere to statutory requirements, it would likely “make regulatory agencies more accountable for better decisions based on better analysis.”