South Korea's economy must firmly be led by the private sector if it wants to achieve sustainable growth, a public committee dedicated to formulating the country's long-term growth strategy said Thursday.
The committee, made up of economists from local thinks tanks and government policymakers and co-chaired by Finance Minister Choi Kyung-hwan and Korea International Trade Association CEO Kim In-ho, said rapid changes taking place around the world and stiffer competition from countries like China is making it imperative that Seoul give up past practices.
"In the future, innovation, creativity and flexibility, which are the hallmarks of the private sector, will fuel competitiveness," it said, adding that only by adapting to change can Asia's fourth largest economy generate new growth, and its companies become truly competitive on the world stage.
The committee that outlined measures, which should be taken 5-10 years down the road, said that while South Korea's government-centered strategy had served it well in the past, it is now time for policymakers to reassess their roles. The committee said the future role of the government will be to push for regulatory reform and get rid of unnecessary red tape.
"The government should give up its position as the control tower and become a supporter for the private sector," it said.
It said the country also needs to switch from a fast follower position to that of an innovator, with research and development becoming bottom-up affairs instead of top-down arrangements set by government directives.
On future growth, South Korea must take into account the challenges facing its leading industries such as carmaking, computer chips, petrochemicals, electronic appliances, shipbuilding and steel.
It said while the semiconductor industry has growth potential, others must cope with slowdowns, weaker prices, over capacity and more competition from rivals that can make goods at cheaper prices.
It said instead of striving for more volume, the country needs to switch to quality and find growth potential by becoming part of the global value chain (GVC), with R&D, state policies and management all focusing on finding growth potential within the larger interconnected framework.
The committee said by restructuring the economy to become more GVC oriented, the country as a whole can climb up the value-added chain that can improve the competitiveness of the country's information technology and mobile communication sectors.
Such development can, moreover, make the country more attractive to foreign investors that
Such development can, moreover, make the country more attractive to foreign investors that can prop up growth and create more employment opportunities.
The committee then said that South Korea must consider mega free trade agreements (FTA) like the Trans-Pacific Partnership and Regional Comprehensive Economic Partnership, as well as the FTA talks under way between Seoul, Beijing and Tokyo.
It added that particular attention needs to be paid to the opportunities and risks associated with China.
It said the bilateral FTA with the world's No. 2 economy will allow Seoul to ship more goods to its largest export market, although at the same time, the growing competitiveness of the Chinese economy poses risks.
Policymakers and researchers then said Seoul must aggressively tackle its low birth rate and rapidly aging population.
As of 2014, the total fertility rate stood at 1.21, much lower than the Organization for Economic Cooperation and Development average of 1.67.
It said with the country's population expected to peak in 2030, and with the number of workers hitting the high water mark in 2016, South Korea has to tackle this issue head on by creating a "smart welfare" system that can expand benefits for senior citizens without burdening economic growth.
On the issue of climate change, the committee advised that the country needs to take steps to ensure that the local emission exchange market takes firm root and build up the eco-friendly energy sector. It said Seoul should systematically move to improve overall energy efficiency.
can prop up growth and create more employment opportunities.
On the issue of climate change, the committee advised that the country needs to take steps to ensure that the local emission exchange market takes firm root and build up the eco-friendly energy sector. It said Seoul should systematically move to improve overall energy efficiency. (Yonhap)