The business environment in South Korea has deteriorated despite the country's efforts to attract more foreign direct investments. The World Bank has rated Korea as No. 30 in its latest ranking in the ``Ease of Doing Business 2008'' report released Wednesday. The country's ranking is seven notches down from 23rd last year. This means that the nation has been long on words but short on action to create a more business-friendly environment.
It is no wonder that the Korean economy's global ranking has continued to fall. The country emerged as the world's 11th-largest in the gross domestic product (GDP) list in 2002. But its position went down to 12th in 2004 and 13th in 2006. In short, the country was caught up with by such emerging economies as Brazil, India and Russia because it neglected making it easier to do business here.
According to the World Bank rankings, Singapore is the easiest place to do business, followed by New Zealand, the United States and Hong Kong. Many developing countries are ahead of South Korea. Thailand ranks 15th, Saudi Arabia 23rd, Malaysia 24th, Lithuania 26th, Mauritius 27th and Puerto Rico 28th. The bank assessed highly China, Egypt, India, Indonesia, Turkey and Vietnam for their efforts to improve in the ease of doing business. The bank sent a strong message: ``If you are not reforming, another country will overtake you.''
Korean economic policymakers and business leaders have to humbly accept the report. It is unfortunate that the country's international competitiveness has weakened due to regulations, bureaucratic red tape, labor disputes, soaring wages and land prices, and corruption. President Roh Moo-hyun vowed to improve the business environment when he took power in February 2003.
On the contrary, the Roh administration has failed to push for regulatory reform. The Board of Audit and Inspection, Korea's state inspection agency, said the country has created or strengthened 1,102 regulations over the past three years, while scrapping or easing 486. The backpedaling of the government on its deregulation commitments may well be a consequence of the increased number of civil servants. Critics have pointed out that more bureaucrats usually lead to more regulations.
Looking closely at the 10 sub-rankings of the bank report, we cannot but raise a question: Is Korea really a member of the Organization for Economic Cooperation and Development (OECD), the Paris-based club of rich nations? The country is listed 110th in the ``starting a business'' ranking, down from last year's 101st.
In South Korea, entrepreneurs have to go through 10 different procedures to register a new firm before they can legally operate. The procedures take 17 days on average and cost an equivalent of 16.9 percent of per capita gross national income (GNI). These figures are compared with the OECD average of six procedures with 14.9 days and 5.1 percent of per capita GNI. The nation's ranking in protecting investors and getting credit also went down slightly to 64th and 36th place, respectively. Besides, its position in the worker employment list edged one notch down to 130th.
In light of these circumstances, how can we hope to attract more foreign direct investment to the country? Many local firms have relocated their production lines overseas to seek better business opportunities. It is urgent for the nation to make all-out efforts to improve the business environment by pushing for deregulation and liberalization.