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5 Business Organizations
Local Chambers
Industrial Associations
Government Ministries and Agencies
Local Governments
Companies
KCCINational Competitiveness
Council
Speedy Resolution
On-Site Issue Identification
Private-Public Joint Taskforce onDeregulation
(Since Apr. 1, 2008)
1. Deregulation Taskforce: Introduction
Strengthening of Corporate Competitiveness
1 / 23
On-Site issue identification (Inchon, Ansan, Guro, Daegu, Jeonju)
A total of 65 issues were found.
127 issues are currently under review by 23 ministries & agencies.
Participation came from companies, business organizations, Corporate Issue Support Center, industry associations.
3 surveys were conducted among 1750 companies nationwide
1500 companies in both metropolitan and non-metropolitan areas were surveyed on regulatory issues(May, 2008)
150 Manufacturing SMEs were surveyed on business issues (June 2008)
2. Deregulation Taskforce: Activities(April, ’08~ Present)
Survey
Issue Raising
On-Site Inspection Activities
2 / 23
Needs “real” regulatory reform measures for SMEs
Needs to strengthen support service to tenant companies
3 / 23
3. 실태조사 결과
Needs countermeasures to combat rising raw material
price (ex. Extending tax cut period for energy
facilities)
Manufacturing SME Survey on Business Issues (Nationwide Results from 150 Companies, June 2008)
Regulatory Issues
Industrial Complex Issues
(as a tenant)
Managerial Issues
Environment - Labor -
Diagnosis/Inspection -
Administrative Procedures
Raw Material - Financing - Hiring - Sales
Transportation/Logistics -
Environment Facilities - Industrial Complex
Management - Outdated
Facility Status
Delays in foreign workforce replacement
Complicated hiring procedures
Time limitations on foreign workforce hired by foreign-based companies
Inconsiderate and unchangeable interval terms
Excessive obligation on the part of companies
Shortage of training institutes & Inspection authorities
Fragmented support services
Difficulties in expanding factory due to strict rules on Green Space Ratio
Monolithic, rigid regulation
Companies are required to follow standards that are easily breakable & go thru unnecessary inspections
Regulation procedures are inclined more towards administrator convenience
Industrial Complex Management Service
Foreign Labor Utilization
Environmental Regulation
Diagnosis/Inspection & Compulsory
Training
On-site Issues for
Manufacturing SMEs
4 / 23
2001 2007
64%
36%71%
29%
Stand-alone Sites
Industrial Complexes
Stand-alone Sites Industrial
Complexes
<Site Selection for New Companies>
56% of Total Production
79% of Total Exports
44% of Total Employment
Contribution of Industrial Complexes to the National
Economy
1. Fragmented Support Services
2. Close-to-Full Occupancy Rate
3. Manufacturing-centered Services
Lack of Infrastructure Support
Difficulties in Securing Factory Sites
Excessive Regulations on Distribution Function
Current Status & Issues Identified
Significance of Industrial Complexes in Korea
Issues Identified
1. Industrial Complex - Management · Operation
5 / 23
Dispersed Management Function
There are not enough communication channels for unhappy companies.
Meetings among Corporate Support Institutions for Industrial Complex
- Local Gov'ts : Main Roads, Trunk Roads & Public Sewage
- NPA: Traffic Signs
- KEPCO: Electricity
- KICOX: Other Support Functions
- To produce an institutional framework for managing Industrial Complex
- To collectively eliminate corporate difficulties
Under review of MKE, Oct. 2008
Maintenance and repair expense for road, parks & electricity connection in Industrial Complex is passed on to tenant companies
Complaint
* NPA: National Police Agency
* KICOX: Korea Industrial Complex Corp.
case
* MKE: Ministry of Knowledge Economy
Measures for Improvement # 1
Industrial Complex-related Issues
Current Status Measures for Improvement
1. Industrial Complex - Management · Operation
6 / 23
Review measures for effective management of Industrial
Complex - To establish one-stop complaints
handling system for tenant companies
Tenant companies of the apartment-type factory can only sell what they produce within that building
Frequent dispute between tenant companies and the management over violations like the sale of non-tenant company products
Expand the range of saleable products within the apartment-type
factory - Allowing sales would benefit the producer as well
More space for supporting facilities within apartment-type factories
Under review of MKE, Oct. 2008
* MKE: Ministry of Knowledge Economy
Current Status Measures for Improvement
Flexible Application of Regulation on Tenant Companies in Urban Industrial Complex
Measures for Improvement # 2
Space for supporting facilities (ex. sales space) within the apartment-type factory is limited to 20% of the total building space
- Survey result on 3,879 of the Seoul Digital Complex tenant companies suggests that 1470(37.9%) tenant companies have violated aforementioned regulation(2003~2007).
- Allow a variety of industries to move into the Industrial Complex
1. Industrial Complex - Management · Operation
7 / 23
Close-to-full occupancy rate - Expansion is not easy
“Green Space Ratio” can be reduced, but authorities are passive towards changing it (on the grounds of “Collective Instruction for Industrial Location Development Projects”).
Flexible application of “Green Space Ratio”
<Industrial Complex Vacancy Ratio >- Where on-site expansion is absolutely
necessary given the unique industry requirements, the ratio will be brought down by 2%
Establishment in another location will incur massive additional cost
Description 2001 2003 2005 2007
No. of Industrial
Complexes499 541 587 646
Vacancy Ratio (%)
6.3 3.7 3.1 1.5* MLTM: Ministry of Land Transport and Maritime Affairs ME: Ministry of Environment
<Exceptions for Application of Green Space Ratio>
Through Consultation with MLTM, ME and Local Governments
Measures for Improvement # 3
Resolution of Difficulties in Expanding Factory
Current Status Measures for Improvement
- Where public green space is located within 200m from the complex
- Where green space is deemed necessary given Industrial Complex characteristics and location policy
1. Industrial Complex - Management · Operation
8 / 23
In case of new factory construction or extension : Exemption of registration and acquisition taxesIn case of factory reconstruction or repair : Imposition of registration and acquisition taxes
Reconstruction or repair : no tax
MOPAS, 2008
A single company is not required to establish a master plan, but some local governments require its submission.
No obligation on establishment of the Management Master Plan
Authoritative interpretation will be delivered to the relevant local governments
MKE, Effective Immediately
9 / 23
* MOPAS: Ministry of Public Administration & Security
Measures for Improvement # 4
No Obligation for “Management Master Plan in Single-Location Industrial Complexes”
Tax Cuts on the Reconstruction or Repair of factory
Current Status
Current Status
Measures for Improvement
Measures for Improvement
1. Industrial Complex - Management · Operation
1. Monolithic Regulation
2. Regulation for Administrative Convenience
Expansion is prohibited regardless of pollution treatment capability
Authorities are more interested in violation detection and improving their raid results.
Administrative cost incurred in the process is passed on to companies.
Global Warming
Quality of Life
Environmental Pollutants
Increased Environmental Awareness
Corporate Spending on Environmental Protection
0
17.5
35.0
52.5
70.0
2001 2006
3.9
(Unit: 1 Trillion)
6.1
10 / 23
Current Status & Issues Identified
Why We Need Environmental Regulation
Issues Identified
2. Environmental Regulation
Monolithic regulation is imposed on environment-related industries
Allow companies to set up or expand factories in Industrial Complex when pollutant emission level is within the permissible rangehas impeccable treatment
technology, but is not allowed to expand or relocate its factory facility.
Establish new Industrial Complexes that are dedicated to serve environment-related industries
purchased land for factory expansion, but is prohibited from utilizing the lot, even for storage purposes.
<Industries Not Allowed in Industrial Complexes>Industrial
Complex Restriction (Industry)
Namdong Plating, Casting, Recycling
Asan Basic Chemicals, Fertilizers, Synthetic Rubber
Seongseo Plating, Leather, Paper Making
Compan
y A
11 / 23
Compan
y B* MLTM: Ministry of Land Transport and Maritime Affairs
ME: Ministry of Environment
Measures for Improvement # 1
Factory Expansion and Relocation Allowed to Environment-Impacting Industries, Under Special Conditions
Current Status Measures for Improvement
2. Environmental Regulation
- KCCI & MKE, local gov’ts will carry out ”Corporate Demand Survey”
- MLTM & ME will help developing sites
- MKE & ME will review the requests.
Integrated approach is desired for environmental guidance and violation detection.
Integrate inspection approach
- Allocate more points to integrated
inspection approach when evaluating the local gov’ts.- Violation detection is carried out
independently, by central government, local autonomous bodies, prosecution and police.
- ME-designated Environmentally Friendly Companies are subject to guidance and violation detection activities by local governments.
Authorities are more interested in violation detection and improving their raid results.- Activities do not necessarily lead to a
positive impact on environment itself.Relevant Regulation will be revised (ME 2008)
12 / 23
Measures for Improvement # 2
Integrated Approach for Environmental Guidance & Inspection
Current Status Measures for Improvement
2. Environmental Regulation
Provide more information to local gov’ts
Publicize best practices
SMES feel excessive cost burden.- Installation Cost : 200~300 million Won (per unit)- Annual Operation Cost : 20 million Won (per unit)
It is not reasonable to pass admin. monitoring cost onto companies.- In comparison, car speed detectors are
purchased by NPS.
<Telemonitering System (TMS)>
ㅇ Objective : To monitor air polluting activities 24/7, and use the results for administrative data for administrative disposition, etc.
ㅇ Target : 1,123 chimney stacks in 462 business sites, of which SMEs account for 200 chimney stacks in 130 sites.
13 / 23
* NPA: National Police Agency
Share the cost needed to install and operate TMS with between gov’t and SMEs
Current Status Measures for Improvement
Telemonitering System (TMS) - Relief Measures for Installation and Operational Cost Burden
Measures for Improvement # 3
Exempt the Basic Emission Fee on facilities with TMS installed(ME, 2009)
2. Environmental Regulation
1. Jobs are not filled immediately when a foreign laborer leaves the company to be replaced by another.
2. Hiring process is complicated.
3. Time constraint is imposed to overseas-hired foreign workers when they have to receive training in Korea.
Shortage of domestic labor in 3D sectors can be resolved by foreign workforce.
Labor cost burden will be relieved.
Foreign Laborer Employment Status (As of April 2008)
Total 377,032
General Employment Permit System (Foreign Nationals)
116,283
Special Provision for Employment Permit System (Ethnic Koreans with Foreign
Passports)
260,749
14 / 23
- Reduced cost will help put a break to manufacturing exodus to overseas locations.
- Reduced cost will help companies maintain their competitiveness.
Current Status & Issues Identified
Why SME Sector Needs Foreign Labor
Issues Identifie
d
3. Foreign Employment
Companies are not allowed to hire a new laborer before the current worker leaves Korea.
Reschedule work permit application period
- Job handover is interrupted.
- Not enough time can be allocated to training the new foreign laborer.
(Current Schedule) '3 months before‘ the existing worker departs Korea
(Changed to) '4 months before'
The new schedule allows one month’s overlapped hiring period between outgoing and incoming workers.
Revision of Employment Permit Administrative Guidelines
(MOLAB, Aug. 2008)
The adverse impact led to work stoppage and further delay in production and exports.
hired 9 foreign workers, but 3 left Korea before replacement arrived.
Companies are restricted from hiring as many foreigners as they would like.
15 / 23
Compan
y A
Measures for Improvement # 1
Minimization of a Gap in Foreign Labor Replacements
Current Status Measures for Improvement
3. Foreign Employment
Dispersed Hiring Administration ⇒ Complicated Procedures
Centralize the Admin. Channels(Foreign Labor Hiring Support Center (MOLAB))- Foreign Labor Hiring Support Center (M
OLAB)- Immigration Office (MOJ)
- Electronic systems between MOLAB and MOJ will be linked together.
Use of Intermediary Service ⇒ Additional Cost
Number of gov’t agencies to visit: 3 -> 1
Number of days: 30 -> 14
MOLAB and MOJ(Dec. 2008)
MOLAB MOJ Training Institute MOJ MOLAB ·MOJ
Company to make efforts to hire a Korean Worker
Company to apply for work
permit of a foreigner
Company to sign a labor contract with the worker
and apply for visa
Job training
Company to takeover the
laborer (certificate will be issued)
Company to oversee the laborer’s
employment and stay in Korea
Authority to select a foreign laborer and issue permit
16 / 23
Measures for Improvement # 2
Improvement of Foreign Labor Hiring Procedure
Current Status Measures for Improvement
3. Foreign Employment
Required period for foreign workers to enter Korea
- For those hired by Korea-invested foreign companies: 6 months after the foreign companies’ normal operation began
- When entering Korea for job training: 6 month of previous work experience
Requirements for Job Trainee: cut 3 month
- normalized operation: 6 -> 3 months
- work experience: 6 -> 3 months
MOJ
Suffered from delays in normalized operation of its foreign entity due to difficulties in securing trainees at an early phase.
Period needed to finish procedure to enter Korea for job training: 6 months
A year is needed for foreign workers to enter Korea after the Korea-invested foreign company is incorporated
17 / 23
Compan
y A
Measures for Improvement # 3
Relaxation of Training Schedule for Foreign Workers in Korea
Current Status Measures for Improvement
3. Foreign Employment
Period needed to finish procedure to enter Korea: cut 3 months
Allow entry into Korea for job training after 6 months from the date the Korea-invested foreign company is incorporated
1. Excessive Diagnosis/inspection
2. Fixed educational curriculum
3. Monopolized services by training and inspection authorities
Unable to address the needs of the recipient companies
18 / 23
Improvements in Various Diagnosis, Inspection and Training Systems
Issues Identified
Social regulations that are
deemed absolutely
necessary for public
livelihood and industrial
safety.
The diagnosis, inspection
and training obligations are
putting too much burden on
SMEs
Survey on the Compulsory Training System
(Results from 129 manufacturers, Jun. 2008)
• 62.8% of the respondents :
compulsory training is too much of a
burden
• Areas that need improvement:
safety(52.1%), fire safety(12.6%),
electricity(8.8%)
Current Status & Issues Identified 4. Diagnosis, Inspection & Compulsory Training
Increased burden on the part of SMEs
Unable to reflect what each company needs to know
Exemplary workplaces will receive an extended inspection schedule (1 year 4 years)
MKE, Aug. 2008
Grace period is limited to only 6 months for all electric equipment items
Grace period will be extended, subject to equipment characteristics.(6 months 1~ 3 years)
- In case of companies in U.S. and Europe: 1~3 year grace period is granted depending on the equipment type.
MKE, Sep. 2008
19 / 23
Companies are required to undergo inspection once a year, irrespective of their safety maintenance status.
Current Status
Current Status
Measures for Improvement
Measures for Improvement
Measures for Improvement # 1
Short Grace Period Granted to Companies that Change Safety Standards for their Electric Equipments
Fixed Inspection Schedule for Boilers
When undergoing the inspection, companies have to stop operating for a week.
4. Diagnosis, Inspection & Compulsory Training
Even IT companies without large-scale facilities are required to undergo Structural Safety Diagnosis
Factories that have low impact on structural safety will be exempted of Structural Safety Diagnosis
Workplaces with more than 2,000 TOE in yearly energy consumption are required to undergo Energy Diagnosis.
Increase gov’t budget for SMEs’ Energy Diagnosis (currently 70% -> 90% by 2009)
(Once every 5 years)
SMBA, 2008
- For example, a factory with less than 10 pyong (33 ㎡ ) in space is obligated to receive Structural Safety Diagnosis for the whole floor (Fee = 80 million Won)
MKE, 2008
20 / 23
* SMBA: Small and Medium Business Administration
Measures for Improvement # 2
Current Status
Current Status
Measures for Improvement
Measures for Improvement
Energy Diagnosis Obligation
Structural Safety Diagnosis Obligation for Venture Accumulation Facilities
4. Diagnosis, Inspection & Compulsory Training
Fixed set of education program is provided to all workplaces, irrespective of specifics of work and hazards.
Review measures to reflect different job specific characteristics into the Occupational Health and Safety Training
- A newly-hired worker needs to receive 8 hours of safety training and 16 hours of special training, regardless of his/her job responsibility.
Under review of MOLAB, 2008
Limited number of training & inspection authorities leads to increased cost and inconvenience on the part of recipient companies.
Review measures to lessen the inconvenience caused by limited number of training & inspection authorities
under review of NEMA, 2008
21 / 23* NEMA: Nat’l Emergency Management Agency
Current Status
Current Status
Measures for Improvement
Measures for Improvement
Shortage of Training Institutes & Inspection Authorities
Monolithic Occupational Health and Safety Education Program
Measures for Improvement # 34. Diagnosis, Inspection & Compulsory Training
InvestmentIncrease
Expected benefits for reducing Green Space Ratio in Industrial Complexes: 0.5 Trillion won (2009~2016)
ProductionIncrease
Expected benefits for minimizing loss in foreign workforce replacements: 12.4 billion won
Expected benefits for relaxing compulsory occupational health and safety training: 40.8 billion won
Expected benefits for extending inspection schedule: 5.6 billion won (Co. A)
Cost Reduction
Expected benefits for allowing factory expansion within environment industry complexes: 70 billion won
22 / 23
When simplifying hiring procedures for foreign workers: 3.4 billion won
When extending financial support the Energy Diagnosis fee for SMEs(70%->90%): 3.1 billion won (for 5 yrs)
5. Expected Results
Strengthening of On-site Inspection
On-site Inspection Annual Plan
23 / 23
Sectoral Deregulation Approach
Deregulation Progress Monitoring & Evaluation
Identify sectoral(ex. Construction, IT, Finance etc.) deregulatory issues and review improvement measures(quaterly)Establish sectoral deregulatory committee and continue performing the onsite inspection
Description Jul. Aug. Sep. Oct. Nov. Dec.
LocationDaejon, Cheongj
uWonju Paju Ulsan Jeju Gumi Yeosu
Dangjin, Seosan
Gunsan Busan
Major Industry
Venture ·Chemic
al
Medical ·Cement
LCD· Printing
Ship- building ·
Petro- chemical
Golf course
Electro-nics
Petro-chemical
Steel· Petro-
chemical
Machinery ·Food
Logistics· Marine
Deregulation Evaluation Team
Company representatives & business organizations, and team heads of research institutes.
The team will evaluate challenges, monitor outcomes and assess needs with regards to deregulation
Member
Roles
Measures Confirmed at this meeting will be followed up and progress will be reported thru out the whole implementation process.Web-based Evaluation System will be introduced for user-oriented evaluation of deregulatory measures.