OECD Product Market Regulation (PMR) Indicators: How does Korea compare? ___________________________________________________________________________________ Competitive product markets foster economic growth and can improve the living standards of citizens. OECD’s Product Market Regulation Indicators assess the alignment of a country’s regulatory framework with internationally accepted best practices. The Economywide Indicator measures the distortions to competition that can be induced through the involvement of the State in the economy, as well as the barriers to entry and expansion faced by domestic and foreign firms in different sectors of the economy. This indicator is complemented by a set of Sector Indicators that measures regulatory barriers to competition at the level of specific network and service sectors.
Overall PMR Indicator Index scale 0 to 6
Korea
1.71
OECD average
1.38
5 Most competitionfriendly countries 5 Least competitionfriendly countries
1.00 1.82 0.0
2.0
4.0
6.0
Economy-wide PMR Indicators: a breakdown by major components Index scale 0 to 6 from most to least competition-friendly regulation
6
Korea
OECD average
5 Most competition-friendly countries
5 Least competition-friendly countries
5 4 3 2 1 0 Public Ownership
Involvement in Business Operations
Simplification and Evaluation of Regulations
Admin. Burden on Start-ups
Barriers in Service Barriers to Trade & Network sectors and Investment
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. Source: OECD 2018 PMR database.
ECONOMY-WIDE HIGHLIGHTS
Product market regulation in Korea is less competition-friendly than in most OECD countries. The involvement of the government in business activities is high, notably through command and control regulation and price controls, which are more widely used than in most other OECD countries. Even though public ownership is less extensive than the OECD average, the corporate governance of state-owned enterprises could be better aligned with OECD key best practices. Furthermore, the regulatory framework in network and services sectors is not particularly conducive to competition, and there are high barriers to international trade and to foreign direct investments. In contrast, the administrative requirements imposed on start-ups are among the lowest in the OECD, regulatory procedures are straightforward and the assessment of the impact of new regulations is broadly in line with best practices.
Economy-wide PMR indicators: a breakdown by sub components Index scale 0 to 6 from most to least competition-friendly regulation Distortions Induced by State Involvement Simplification and Evaluation of Regulations
Complexity of Regulatory Procedures
6 5 4 3 2 1 0
Interaction with Interest Groups
Involvement in Business Operations
5 Least competition-friendly countries
Assessment of Impact on Competition
6 5 4 3 2 1 0
Price controls
Governance of SOEs
Direct Control
Scope of SOEs
Gov’t Involv. in Network Sectors
Public Ownership
6 5 4 3 2 1 0
5 Most competition-friendly countries
Public procurement
OECD average
Command & control regulation
Korea
Barriers to Domestic and Foreign Entry
Barriers to Trade Facilitation
Barriers to Trade and Investment
Treatment of Foreign Suppliers
6 5 4 3 2 1 0
Tariff Barriers
Barriers in Service & Network sectors
5 Least competition-friendly countries
Barriers to FDI
6 5 4 3 2 1 0
5 Most competition-friendly countries
Barriers in Network sectors
Licenses and Permits
Admin. Burden on Start-ups
Admin. Requirements for Lim. Liab. Companies and Pers.Owned Enterp.
6 5 4 3 2 1 0
OECD average
Barriers in Services sectors
Korea
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. If the blue bar does not appear on the chart for a specific indicator, it means that its value is 0. Source: OECD 2018 PMR database.
SECTOR-SPECIFIC HIGHLIGHTS Regulatory barriers to competition in service and network sectors are much higher in Korea than in most OECD countries. In many network sectors, regulation is not in line with international best practices, and professional services are hampered by strict entry requirements and distortive conduct regulations. Similarly, the regulation framework for the retail sale of medicines is not competition-friendly.
Regulation in network and service sectors PMR Indicators for network sectors Index scale 0 to 6 from most to least competition-friendly regulation Korea 5 Most competition-friendly countries
6
OECD average 5 Least competition-friendly countries
5 4 3 2 1 0 Electricity
Gas
Rail
Air
Energy
Road
Water
Fixed
Transport
Mobile
E-Communications
PMR Indicators for professional services* and retail distribution Index scale 0 to 6 from most to least competition-friendly regulation Korea 5 Most competition-friendly countries
6
OECD average 5 Least competition-friendly countries
5 4
3 2 1
0 Lawyers
Notaries
Accountants
Architects
Professional services
Civil engineers
Real estate agents
Retail distribution
Retail sale of Medicines
Retail trade
* When comparing the indicators across countries, it should be kept in mind that the activities undertaken by specific professions may vary between countries. Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. Source: OECD 2018 PMR database.
OVERALL ASSESSMENT
With regulatory barriers to competition that are higher than the OECD average in several areas, there is scope for improving product market regulation in Korea.
Strengths
Challenges
The number of administrative requirements that need to be fulfilled to set up a new firm, whether a limited liability company or a personally owned enterprise, is among the lowest in the OECD.
Regulatory barriers to competition in professional services are significant in Korea when compared to most OECD countries, in particular for accountants and real estate agents.
Laws and regulations are easy to access and understand. In addition, there are explicit programs in place to reduce the compliance costs for enterprises, which deploy advanced strategies, such as the expost review of the costs of regulation and the use of e-government.
Foreign firms in the service sector, in particular in professional services, face significant barriers to enter the Korean market.
Fees and prices are more regulated than in most OECD countries. Except in the case of monopolies, allowing supply and demand to determine the level prices benefits consumers and ensure effective competition among suppliers.
The framework that regulates the public procurement of goods, services, and public works is in line with most key OECD best practices.
Further information
“What are the 2018 OECD PMR indicators?” PowerPoint presentation on OECD PMR website
Vitale, C., et al. (2020), " The 2018 Edition of the OECD PMR Indicators and Database – Methodological Improvements and Policy Insights", OECD Economics Department Working Papers
Please visit our website : http://oe.cd/pmr Contact us at: PMR2018@oecd.org