5 Business Organizations Local Chambers Industrial Associations Government Ministries and Agencies Local Governments Companies KCCI National Competitiveness

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

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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

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Needs “real” regulatory reform measures for SMEs

Needs to strengthen support service to tenant companies

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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Management - Outdated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

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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


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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


Flexible Application of Regulation on Tenant Companies in Urban Industrial Complex


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


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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


Resolution of Difficulties in Expanding Factory


- Where public green space is located within 200m from the complex

- Where green space is deemed necessary given Industrial Complex characteristics and location policy


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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


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



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


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


Factory Expansion and Relocation Allowed to Environment-Impacting Industries, Under Special Conditions



- 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


Integrated Approach for Environmental Guidance & Inspection



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.

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* NPA: National Police Agency

Share the cost needed to install and operate TMS with between gov’t and SMEs


Telemonitering System (TMS) - Relief Measures for Installation and Operational Cost Burden


Exempt the Basic Emission Fee on facilities with TMS installed(ME, 2009)


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

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- Reduced cost will help put a break to manufacturing exodus to overseas locations.

- Reduced cost will help companies maintain their competitiveness.


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.

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Compan

y A


Minimization of a Gap in Foreign Labor Replacements



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

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Improvement of Foreign Labor Hiring Procedure



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

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Compan

y A


Relaxation of Training Schedule for Foreign Workers in Korea



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

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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

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Companies are required to undergo inspection once a year, irrespective of their safety maintenance status.

Current Status

Current Status




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


Current Status

Current Status



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



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

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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

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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.

Documents

5 Business Organizations Local Chambers Industrial Associations Government Ministries and Agencies Local Governments Companies KCCI National Competitiveness