The 19th Meeting of the Council for National Competitiveness 2009. 12. 9 2009 Status Report for...

The 19th Meeting of the Council for National Competitiveness

2009. 12. 9

2009 Status Report for Activities to Alleviate On-site Corporate Issues

Table of Table of Contents Contents


2009 Status Report


2009 Status Report

2009 Activity Overview2009 Activity Overview

1. Public-Private Deregulatory Reform System with a Business Focus1. Public-Private Deregulatory Reform System with a Business Focus

Collect regulations deemed unreasonableReceive complaints from businesses Attend to support request

Exchange Information with the applicant company in the consultation processConsider global standards for reference

Report on a monthly basisSpeed up reform process

Check-up every month & every six monthsEnhance Satisfaction level

On-site Issue Collection

Consultation with Relevant

Authorities

Report to the Nat'l

Competitiveness Council

Implementation Progress Check-up

Public-Private Deregulatory

TaskforceJointly established by

the Nat’l Competitiveness Council and ·KCCI

(Apr. 2008)

1

Public-private cooperative system

for fostering a business-friendly

environment

2. On-site Checkup 2. On-site Checkup

Resolution of facility expansion

issues coming from fragmentation of

control zones

Pocheon

Change in the green area ratio at the Yeosu Industrial Complex

Yeosu

Establishment of export support center for shipbuilding materials at the new port

Busan

Extension of temporary construction use period

Ulsan

Order Placement performance not to be the only judgment criteria for public work bids

Andong

Support for replacement of old water pipes

Taebaek

Reduction in charge increase plan for waste disposal

Cheongju

Gwangju

More direct public

procurement on

construction materials

Daejeon

Improvement in acquisition tax

system for oligopolistic

shareholders

Jeonju

More opportunities

for local companies in

the Saemangeum

Project

Incheon

Reasonable improvement

in the fuel use

regulation

New facility expansion to be

allowed within natural

environment conservation

zones

Icheon

2

Visited 30 regions - including 6 metropolitan cities,

Pocheon, Taebaek, Icheon Cheongju, Andong, Jeonju, Yeosu and Changwon

Visited 37 local companies

Found the following characteristics in issues raised by local companies:- Companies in the

metropolitan region typically asked for relaxed regulations on site location and environment control

- Companies outside the metropolitan region asked for systematic measures to improve vitality of local economies and policy support

Elimination of employer payment after medical treatment of industrial accident victims

Changwon

Received issues raised directly to the Taskforce or via relevant authorities

Received issues pertaining to individual companies as well as overall system improvement request for business sectors- Issues related to market

access restrictions on new and renewable energy

- factory-use permits for farmland

- parking and taxing restrictions for courier vehicles

2. On-site Checkup 2. On-site Checkup

3

Held meetings with 19 industries (59 roundtables) including shipbuilding, biotechnology and textile

Companies asked for system & procedure improvements particular to the specific industry needs- Petroleum sector asked for

longer intervals to inspection of LPG pressure vessels

- Shipbuilding industry asked for exemption of temporary sail inspection for pilot-operation vessels

- Biotechnology sector asked for simplified approval procedure with regards to medicine and medical equipment combined products

Collected System improvement proposals and corporate issues raised via economic organizations (KITA, FKI & KFSB)

- KITA: Improvement of import and export systems & infrastructure support

- FKI: Relaxation of regulations on big businesses, land and financing

- KFSB: Reduction in corporate burden related to environment and employment

Received input from 71 regional chambers on regional corporate issues


2009 Status Report

2009 Outcome2009 Outcome

1. Improvement Status 1. Improvement Status

Description Consultation AcceptanceHeld for Mid-to-

Long Term Review

DeclinedAcceptance Rate(%)

2009 (Total) 785 559 71.2 42 184

Jan.~Oct. 656 454 69.2 39 163

Nov. 129 105 81.4 3 21

2008 802 359 44.8 75 368

4

(Unit: Case, %)

Consultation with

Relevant Authorities

785 Cases

Improvement

Measures

559 Cases

Description Total LocationHousing

Construction

Finance & Tax

Environment

Safety Inspection

Labor Others

Recommendatio

ns (cases) 785 98 98 94 79 70 59 287

Improvement measures

(cases)559 78 66 55 57 46 43 214

Acceptance rate (%) 71.2 79.6 67.3 58.5 72.2 65.7 72.9 74.6

Improvement Status by Sector

Improvement

by Sector

were made in the order of location, housing & construction, finance & tax

were taken in the order of location, housing & construction and environment

1. Improvement Status 1. Improvement Status

5

Recommendations


were made in the order of MLTM, MKE,and MOE

turned out to be highest in the order of KFDA, MAF and SMBA

6

1. Improvement Status1. Improvement Status

By Relevant Authoriti

es

Improvement (cases) Acceptance Rate (%)

MLTMMKEMOEMOL

SMBAMOSTMAF

MOHWKFDA

MOPAS

131856052393723181613

KFDAMAF

SMBAMKE

MOHWME

NEMAMOL

MLTMFSC

94.185.281.372.669.269.068.865.064.759.1


Acceptance rate

2. Major Examples2. Major Examples

7

Visits by Local Public ServantsAfter Before

Improvemen

t

Agricultural

Development Area

Agricultural

Development Area

On-site Issues

Agricultural Developme

nt Area

Factory Site

The refrigerator manufacturer was expecting more orders from Sweden and thus needed to expand its facility ASAP.Expansion was disallowed, however, as the site was located next to an agricultural development area.

Company "S" was also prohibited from setting up a temporary construction on its product storage area within the site, for it was designated as an agricultural development area.

Company "S" was given the go-ahead sign to set up a temporary construction on the said site.

- A proposal will be made for amendment of either the Act on Special Measures for Corporate Activities or the Farmland Act before the end of 2009.

※ Company "S" site now serves as a OJT site for local public servants.

Agricultural Development Area within the Factory Site


8

Progress

To foster semi-industrial parks, the same infrastructure rate will be applied.- Road ratio: 10∼20% → 8∼10%- Green area ratio: 15∼20% → 5∼13%

Designation criteria will be relaxed for semi-industrial parks- Current factory space: Over 50% → 40%

104 companies in Hwasung region applied for designation of 7 semi-industrial parks.2 of the 7 parks will begin construction in 1H 2010.

Improvemen

t

On-Site Issues

Semi-Industrial Park System was introduced to improve infrastructure and business environment of stand-alone factory sites. (2007)

Local companies in Hwasung and other regions wish to benefit from the system, but are unable to do so because of strict infrastructure requirements.

Companies request for semi-industrial parks to be applied the same infrastructure facility requirements of industrial parks.

Illegal ParkingNarrow RoadsSmall Factories Jumbled UpHwasung

-Yulam

Region


9

Progress StatusImprovement Measures Issues

When there are no environmental degradation issues, the building coverage ratio will be raised for existing plants in green areas and other environment conservation zones from 20→40%.

Company “M” needs to expand its facility, but in doing so it will exceed facility expansion green area limit for building coverage ratio of 20%.

100 billion KRW will be needed for relocation to a new site.

The Enforcement Decree of the National Land Planning and Utilization Act was amended in Jul. 2009.

Company “M” requested for a change in the building coverage ratio to the Urban Development Plan Review Committee.

Company “M” Located in Gwangju

Combined summation no longer applies to factories established before 2003. Also, additional improvement measures will be devised.

To process more orders, Company “S” needs to expand its facility.

Combined development makes expansion difficult for the company.

The Enforcement Decree of the National Land Planning and Utilization Act was amended to eliminate combined summation method in Jul. 2009.

- Additional improvement measures will be sought before Jun. 2010.

Company “S” Located in Hwasung


10


The order placement-based performance criteria was eliminated as a support measure to construction SMES

Company “C” has to meet an order placement-based performance criteria, of a yearly average of 250 million in previous two years. Non-compliance results in business suspension or surcharge.

Because performance for one year was 70 million KRW, business operation of Company “C” was suspended for 4 months.

Efforts will be made to amend the Framework Act on the Construction Industry before June 2010.

<List of Failed Companies>

Civil Engineering Company “C”

If deemed necessary (given the industry characteristics), local autonomous bodies will make a review to relax regulations for application of fire-resistance treatment.

Because Company “S” manufacture high-tech products that typically have a short lifespan, product release is important.

Company “S” is required 3~4 months to undergo a fire-resistance treatment of the new factory. Vis-à-vis foreign companies that have no such obligations, Company “S” suffers a serious competition challenge.

The Enforcement Decree of the Building Act will be amended in Dec. 2009.

The amendment will reduce 20 billion KRW in construction coast and shorten new product release interval to 3~4 months for Company “S”

Electronic Parts Maker “S”

Nationwide Metropolitan Area

Non-Metropolita

n Area

1,385 478 907

2. Major Examples 2. Major Examples

13


Tax payment system and local tax network will be improved to ensure real-time checking.

Submission of a local tax payment certificate whenever Company “G” makes a bid or receives payment for government procurement deals.

With branch offices all over Korea, it takes from 2~10 days for the local tax service network to load payment details → which brings inconvenience to Company “G” in bid participation or receiving payments from the government.

Integrated Payment Processing System will be established in Dec. 2009

Local taxes will be paid via e-payment system in June 2010.

Public Procurement Vendor “G”

Registration requirement will not apply to special gas containers that will be returned after use, regardless of how long they stay in Korea.

Company “A” needs to import a special gas tanks for semiconductor manufacturing purposes, as they are not domestically-manufactured.

Company “A” is exempted from manufacturer registration requirement only when the containers are returned in less than one year after import.

- Registration fee is high (20~30 million KRW)- Company “A” sometimes returns containers filled with unused gas, in order to avoid the registration requirement.

The Enforcement Regulation of the High-Pressure Gas Safety Control Act was amended in Nov. 2009.

Companies can now save registration fee of 20~30 million KRW.

Semiconductor Maker “A”

11


2009 Status Report

Major Measures Taken Major Measures Taken for Nov. 2009for Nov. 2009

1. On-Site Issue Improvement for Nov. 20091. On-Site Issue Improvement for Nov. 2009

A total of 26 cases including payment of housing site development costA total of 24 cases including exemption of employer payment at the end of medical treatment for industrial accident victims

A total of 35 cases including eligibility requirement for regional credit guarantee foundations

Rationalized Safety & Health Regulations

Relieved Burden of Housing Constructors & Developers

Resolved SME Issues

12

Consultation with

Relevant

Authorities

129 Cases

Improvement

Measures

105 Cases

A total of 20 cases including seeds plantation approval for sea cucumber exports

Alleviated Corporate Burden and Improved Procedures

As-Is Now Improvement Measures

Regional credit guarantee foundations (CGFs) offer services only to businesses registered in their jurisdiction.

Many trucking transporters operates outside their registered region. Thus, they have to make application to a CGF located far away from their business operations.

Eligibility requirement is improved, so that companies can use services of regional CGFs close to their operations.

- Regional CGF are improved so that they can delegate services between themselves for documentation and site due diligence

A special measure will be implemented so that companies can utilize CGFs located in regions outside their business operation addresses. (SMBA, 1H 2010)

Case

[Contract Trucker “S”]

Registered Address : Paju, Gyonggi Province

Business Operation Address: Busan

Company “S” spends extra time and money for having to travel to the CGF in Gyonggi Province.

Gyonggi CGF

Busan CGF

13



As for public housing sites, developers (KLC etc.) operated under a pre-construction sales system, under which they receive payment in advance from housing constructors, after securing more than 25% ownership of the planned site.

- Generally, it takes from 20 to 40 months to use, after sales agreement is signed.

Advance-payment is financially burdensome for housing constructors

For Housing constructors are required to follow a fixed payment schedule, even if construction is delayed by unexpected excavation orders for tangible cultural assets,

Cases

Company “A” financed 23.9 billion in pre-construction sales cost for construction of apartments in Incheon.

Company “B” was burdened by an additional financial cost incurred from excavation of a Koryo dynasty village remains in Daejeon.

Pre-construction sales is now allowed only after the project developer secured more than 50% of land ownership.

The Guideline for Housing site Development Works was revised. (MLTM, Aug. 2009)

For project delays incurred by cultural asset excavations, etc., payment schedule will be deferred accordingly.

Enforcement Decree for Integrated Instruction on Land will be amended (LH Corporation,1H 2010)

14



If an industrial accident victim has to take convalescence from an aftereffect after completion of medical treatment covered by the Industrial Accidents Compensation Insurance, then the cost needs to be paid by the employer. The National Health Insurance Corporation will pay first and file a lawsuit to the employer to recover the cost.

- In principle, if the victim has to take convalescence because of the industrial accident, then the Industrial Accidents Compensation Insurance is responsible for payment. If it is not the case, than the National Health Insurance Corporation has to pick up the bill.

This matter is between national insurance services, namely, the Korea Workers' Compensation & Welfare Service and the National Health Insurance Cooperation. However, they are delegating this problem to the employer.

Case

Company “A” spent unnecessary cost and time because of a legal claim related to an employee who completed medical treatment covered by the Industrial Accidents Compensation Insurance.

15


The two national insurance services are made to follow a consultation procedure, so that they can decide between themselves on who is to pay for the post-treatment convalescence cost, based on medical opinion, overseas cases and claim handling principle, without involving employers.

New guideline on cost handling was given to the National Health Insurance Corporation, effective immediately.

Work guideline for the National Health

Insurance Corporation will be amended in March 2010.


16


Review is underway to allow plantation for sea cucumber seeds that will be exported as a final product.

Plantation approval for sea cucumber import seeds (MAF & NFRDI, 1H 2010)

Facilitation measures for sea cucumber farming will be sought

Sea cucumber farming will be promoted (MAF, 2H 2010)

* Special measures include sea cucumber farming effect survey, facility support fund and mud flat farmland projects.

Currently, import of sea cucumber seeds for plantation is disallowed.

- Companies cannot utilize the Chinese seeds, competitive both in supply volume and price

Companies cannot realize the full potential of sea cucumber products as a strategic industry export item.

* Current sea cucumber production volume: 1.5% of China - Korea (2,900 tons) vs. China (200,000 tons)

* Korean seeds are 5 times more expensive than Chinese seeds.

- Korea (750 KRW) vs. China (150 KRW)

CaseCompany “H” located in the Jeonnam region plans for a large-scale sea cucumber farming to export to the Greater China region. However, sea cucumber seeds are short in supply.

17

3. Other Improvement Measures3. Other Improvement Measures

Major Examples

include Major Examples

include

Performance test frequency will be reduced from the current 9 times to 1 (Mar. 2010)

For a single individual that lost the bid: 25% → 35% of the basic design cost

For more than two individuals that lost the bid: 30% → 40% of the basic design cost (cascading down by 10% per each rank)

Visa permit restriction period will be reduced for companies found to have employed illegal migrant workers. (Measures already taken on ’09.11.20)

Segments of the farmland in Ulju-gun that are utilized as a de-factor industrial zone will be reclassified as planned control zone (Feb. 2010)

Reducing In-door performance test frequency of a multi-purpose geo-thermal heal pump unit system

Reducing In-door performance test frequency of a multi-purpose geo-thermal heal pump unit system

Increasing proposal cost compensation for private investment projects

Increasing proposal cost compensation for private investment projects

Relaxing visa permit restriction as a penalty to employing illegal migrant workers

Relaxing visa permit restriction as a penalty to employing illegal migrant workers

Changing land zoning for lawfully developed farmlandsChanging land zoning for lawfully developed farmlands

The scope will be reduced from “accidents that require more than 4 days of medical treatment” to “a serious accident” (Opinions will be gathered for an improvement measure before Jun. 2010)

The inspection scope will be minimized to ensure the ship’s sale capacity and site inspection will be exempted when the shipbuilding company presents a self-test result. (Measures already taken on ’09.11.24)

Adjusting reporting scope for industrial accidentsAdjusting reporting scope for industrial accidents

Improving temporary sail inspection systemImproving temporary sail inspection system

18

3. Other Improvement Measures3. Other Improvement Measures

Major Examples

include Major Examples

include

Residential common facility space will not be included in floor space ratio calculation for residential-commercial apartments with less than 300 residential units. (1H 2010)

The confirmation cost incurred in import and export will be reassessed (Currently 2 KRW per every dollar) and maximum ceiling will be reduced (Currently 3 million KRW) (Feb. 2010)

In apartment housing projects, indirect cost from the total cost in calculating the deficit-repair cost deposit. (Measures already taken on ’09.11.15)

Urban-style housing projects will be relieved of school site cost burden (1H 2010) and National Housing Fund support will be given (Measures already taken on ’09.11.4)

Excluding residential common facilities in assessing floor space ratio for residential-commercial apartments.

Excluding residential common facilities in assessing floor space ratio for residential-commercial apartments.

Reducing export-import requirement confirmation cost for radiation equipments

Reducing export-import requirement confirmation cost for radiation equipments

Improving assessment method for defect-repair cost deposit in apartment housing projects

Improving assessment method for defect-repair cost deposit in apartment housing projects

Relaxing regulations on urban-style housingRelaxing regulations on urban-style housing

Private developers can carry out a joint housing site development with public agencies, irrespective of its land ownership ratio (Currently 50% or above is required) (Proposal was submitted on ’09.11.16)

When a business city project developer takes up a certain amount in the infrastructure facility establishment cost, the developer will be designated as the provider of the said infrastructure facility (1H 2010)

Easing bid requirement for housing site development projects

Easing bid requirement for housing site development projects

Reviewing integrated project for business city development and infrastructure provision

Reviewing integrated project for business city development and infrastructure provision


2009 Status Report

Evaluation and Future Evaluation and Future PlansPlans

1. Evaluation from Businesses 1. Evaluation from Businesses

19

The Government’s strong commitment to deregulatory reform

Active efforts to identify issues by means of site visitations, etc.

Fast responses enabled by speedy consultation with relevant authorities

Respondents are Satisfied with

Further improvements in public servants’ attitude to deregulatory reform

Speedy follow-up measures

Continued identification and resolution of on-site issues

Respondents wish for

Deregulatory Reform Satisfaction Survey shows a 4 times improvement from 5 years ago KCCI survey: (Nov. 2004) 9.1% -> (Oct. 2009) 38.9%

9.1%(’04.Nov. KCCI)

16.9% (’05.Nov. FKI)

27.1%(’09.Mar. FKI)

26.8%(’09.Apr. KCCI)

38.9%(’09.Oct. KCCI)

Deregulatory Reform Satisfaction survey

2. Future Plans 2. Future Plans

Strengthened On-Site

Monitoring

Strengthen on-site monitoring activities including site visits and roundtables (36 occasions for 2010 or 3 events per month is planned)

Continue efforts to resole industry issues (60 cases for 2010 or 5 cases per month is planned)- With a special focus in new growth engine industries (energy &

biotech) and regional industries (textile and shipbuilding)

Diversified Progress

Checkup Method

Measure and evaluate the follow-up response time by relevant

authorities measures (1H 2010)

Promote communication with issue-raising companies and check their

satisfaction level (Occasionally)

Improved Quality of Deregulation

Review relief measures for individual regulatory damages on

Promote best cases of deregulatory reform, identify and award exemplary public servants.

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The 19th Meeting of the Council for National Competitiveness 2009. 12. 9 2009 Status Report for...

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