South Korea's Park Marks Year in Office With Reform Push

By Dow Jones Business News, 
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South Korea's Park Makes New Push on Reforms

SEOUL--South Korean President Park Geun-hye marked one year in office on Tuesday with a new push on economic reform, aiming to reduce the country's heavy reliance on exports as a decadeslong growth model sputters.

Announcing a policy package that seeks to boost domestic demand, help smaller companies grow and nurture the underdeveloped service industry, Ms. Park said South Korea had "no future" without major re-engineering of the economy.

At the heart of the package: deregulation aimed at cutting through the red tape that has restrained industries from education to medical services. Among the changes, South Korea will allow foreign-exchange futures to be traded around the clock and set up a task force to regularly check on deregulation.

"We have to make a fresh start. I will boldly remove regulations that remain the biggest stumbling block to investment," Ms. Park said in a nationally televised address.

The country's export-driven economy grew 7% to 15% annually in the 1970s but began losing steam in the 1980s. Last year, the economy expanded 2.8%, up from 2% in 2012.

Ms. Park said she aims to raise the country's growth potential to 4%, the employment rate to 70% and the per capita income to US$40,000 through the implementation of the proposed reforms. Currently the country's growth potential is estimated at about 3.5%, per capita income at about $23,000 and the employment rate at 65%.

Ms. Park took office with a fanfare with a promise of a second "Miracle on the Han River"--a reference to the South Korea's meteoric economic rise from the devastation of war six decades ago, as seen along the river that runs through center of Seoul.

While the economy has picked up gradually, thanks to a recovery in developed markets such as the U.S., Ms. Park's economic reform program has made slow progress.

Recent opinion polls show Koreans feel Ms. Park's government has done well in handling North Korea and foreign affairs, but ratings are mixed on her economic management. The Dong-a Ilbo, one of the nation's mainstream newspapers on Monday likened her administration's economic performance to "a school kid, full of motivation for studying, who works hard but underachieves."

The country's Regulatory Reform Committee, tasked with eliminating the country's red tape, says that number of government rules stood at 15,269, up from 5,114 in 2007. Last year, the government removed 45 unnecessary regulations and created 425 new ones.

Deregulation isn't an easy issue to tackle in South Korea. As is in many other countries, it usually involves not only rules but also long-held practices and interest groups. For example, one of the nation's conglomerates has been trying for six years to build a hotel in a large empty lot in downtown Seoul but has been stymied by regulations banning hotels from school zones.

South Korean policy makers say domestic demand should play a greater role in growth, and Ms. Park has stressed that the key to success is to upgrade the country's underdeveloped service industry.

Services account for 58% of the country's gross domestic product, far below the OECD average of 70%.

Write to Kwanwoo Jun at

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