By Lee Hyo-sik
Staff Reporter

South Korea should make more efforts to lower entry barriers in the legal, educational and other services sectors to promote competition and nurture them into as next generation growth engines, the Organisation for Economic Cooperation and Development (OECD) said Monday.

In a report titled ``Economic Policy Reforms 2010; Going For Growth,'' the organization suggested Asia's fourth-largest economy reduce entry barriers for both domestic and foreign firms, particularly in nonmanufacturing sectors, through regulatory reform, as well as extend incentives in its free economic zones (FEZs) to attract investments from outside.

``Korea should further liberalize the services sector to promote greater competition, especially in professional services. Additionally, it needs to improve the functioning of the financial sector by strengthening the soundness and the function of the financial system. It should privatize state-run companies, while enhancing the supervision of financial firms, notably for credit card issuers,'' the OECD said.

The Paris-based organization said the nation should reform employment legislation for regular workers. ``Korea should reduce incentives to hire non-regular workers rather than regular ones by easing protection for the latter, and expand the coverage of the social insurance system for the former.''

To decrease producer support in agriculture, the OECD recommended that the government shift the composition of assistance from market price support to direct payments, while lowering the level of assistance, adding it needs to remove existing restrictions on farm size to improve agricultural productivity.

The organization assessed the Korean economy positively, saying that its per capita GDP has converged steadily toward the best performing countries and the rate of labor utilization remains the highest in the OECD.

``However, Korea's income gap remains large due to shortfalls in productivity, which are the largest in the services sectors. Despite significant progress achieved in areas of regulatory reform and promotion of competition, the country should take further action to cut support to agriculture, increase competition in the telecom industry and address factors behind the labor market inefficiency,'' it said.

leehs@koreatimes.co.kr