Product market competition and economic performance in Korea
Product market competition and economic performance in Korea
South Korea should improve competition policies
On the premise that increased productivity and thus economic growth depend to a large extent on healthy market competition, the study analyses competition policy in South Korea. As a result of Koreas government-led development strategy, state intervention has dominated its economic policies. As this report argues, this has led to a dualistic economy, divided between highly competitive, export-oriented manufacturing and a much less dynamic, domestic demand-oriented sector. This structure, it is argued, may prove detrimental to Korea’s future growth prospects.
Analysing a number of sectors where policies to strengthen competition can be expected to have particularly large benefits, the paper makes the following policy recommendations:
- generally, South Korea should reduce entry barriers and regulations that limit competition
- with regards to promoting international competition, South Korea should: reduce tariff levels and harmonise standards with international norms, lower the high level of agricultural protection and encourage inflows of foreign direct investment
- with regards to strengthening competition law, South Korea should grant the Korea Fair Trade Commission (KFTC) compulsory investigative powers and make the threat of individual sanctions more credible
- with regards to professional services, South Korea should eliminate unnecessary constraints on entry (e.g for law and accounting), and abolish restrictions on competition encouraging competition between professional associations
- the electricity, natural gas and telecommunications sector should be fundamentally reformed in order to boost competitiveness.