Presidential Council on National Competitiveness
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Presidential Council on National Competitiveness. Background. Technical Regulations - Status and Problems. Measures to Enhance Technical Regulations. Measures to Improve Technical Regulations by Case . Planned Measures for the Future. Background. Background. Ⅰ . Background.

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Presidential council on national competitiveness

Presidential Council on National Competitiveness


Presidential council on national competitiveness

Background

Technical Regulations - Status and Problems

Measures to Enhance Technical Regulations

Measures to Improve Technical Regulations by Case

Planned Measures for the Future


Presidential council on national competitiveness

Background


Background

Background

Ⅰ. Background

Progress Attained

Market-friendly efforts by the current government has led to

substantial progress in regulatory reform.

* Number of regulations registered with the Regulatory Reform Committee:

10,185(’98)  8,084 (’06)  5,088(Aug.’09)

However, the need for improvement of technical regulations remains a thorny issue due to difficulties in dealing with specialties.

Need for Improvement

It is imperative to give a boost to companies by identifying and

overhauling direct and indirect technical regulations hampering technological

development and corporate activity.

Particularly, there is a growing demand for improvement of regulations lagging

behind technological convergence and growth.

4


Background1

Background

Ⅰ. Background

Concept of Technical Regulations

Encompasses technology-related statutory and para-statutory regulations governing business innovation

activities undertaken by companies ranging from technology development, product manufacturing to sales & marketing

→ Triggers economic losses resulting from delays in commercialization and market entry

Technical

Regulations

Technical Regulations

Input of Funds

Delay in

Commercialization

Delay in

Market Entry

Technical

Regulations

Sales/Marketing

Technology

Development

Product

Manufacturing

Process of Corporate Activity

Location

Qualifications/prices

Regulations on establishment of

research centers

Examples

Business start-up

Certification, testing/analysis

Clinical tests

Technology introduction

Public purchasing system

Technology finance

Imports/exports

Production/item permits

5


Presidential council on national competitiveness

Technical Regulations – Status and Problems


1 overview of the assessment of technical regulations

1. Overview of the Assessment of Technical Regulations

Ⅱ. Technical Regulations - Status and Problems

First complete enumeration of major laws related to technical regulations with corporate surveys and corresponding interviews

: March ’09~August ’09(6 months)

Period

Items

: Assessment of status by stage of corporate activities/type and

purpose of technical regulations

Target Laws

: 18 government agencies and 94 laws related to technical regulations

: August 17, ’09~August 28, ’09

Period

: Large enterprises, enterprises of middle standing, SMEs and venture

businesses(480 in total)

Participants

Items

: Experience, intensity, burden, cost, grievances, recommendations, etc. regarding

technical regulations

: August 14, ’09~September 4, ’09

Period

: 19 corporate CTOs(3 from large enterprises, 6 from enterprises of middle standing,

10 from SMEs and venture businesses)

Targets

Details

: Actual grievances from companies arising from

technical regulations

7


2 status of technical regulations

2. Status of Technical Regulations

Ⅱ. Technical Regulations - Status and Problems

Findings from Complete Enumeration of Laws

About 4,000 provisions presumed to be technical regulations were identified:

- 1,643 Acts, 982 Enforcement Decrees, 1,838 Enforcement Rules

Distribution of Technical Regulations

Among different stages of corporate activity, “product manufacturing” accounts for about 60% of all technical regulations.

- In terms of a breakdown of technical regulations by type, production/item permits (37.1%), business

start-up’s (20.3%) and certifications (17.6%) comprise a large portion.

(Unit: number of cases, %)

Production/Item Permits

37.1%(1,658)

Business Start-up’s

20.3%(907)

Certifications

17.6% (784)

Product Manufacturing

59.7% (2,663)

Sales & Marketing39.0% (1,742)

Technology

Development 1.3% (58)

8


3 problems inherent in technical regulations

3. Problems Inherent in Technical Regulations

Ⅱ. Technical Regulations - Status and Problems

Excessive Invisible Technical Regulations and

Discretionary Authority

Among the central government, local governments and managerial authorities, respondents

selected the managerial authorities as the most common enforcer of technical regulations.

- According to survey results, 33.4% of the 480 companies experienced such regulations(STEPI, Aug.’09).

A distinct possibility exists for unclear standards of technical regulations to allow a party with

executive authority to arbitrarily implement such regulations.

There exist overlapping/conflicting regulations on a single item according to different

purposes such as quality control, efficiency, safety, environmental protection and distribution.

Failure to Reflect Unique Features and Cope

with Environmental Changes

Regulations not taking into account unique characteristics of different companies and industries impede activities related to corporate innovation.

There has been a delay in formulation of new regulations required to adequately respond to rapid changes in the global environment.

- (Example) Although it is the world’s second largest developer of nano products (114), second only to the

US (426) (Nanotechnology Oversight, 2008), Korea lacks a safety and hazard verification system.

9


3 problems inherent in technical regulations1

3. Problems Inherent in Technical Regulations

Ⅱ. Technical Regulations - Status and Problems

Dampened Enthusiasm for Technology

Development and Entrepreneurship

Overlapping competent regulatory authorities and procedures push up costs.

* According to the survey results, large-sized companies and enterprises of middle standing respectively disburse

KRW24.6 billion and KRW1.9 billion as compliance costs on average. In addition, it take 17.7 months on average to

respond to technical regulations.

The larger a company is, the more acutely it feels that Korea’s technical regulations are more

stringent than those of industrialized nations.

High Entry Barrier and Market Fixation

Korea imposes a heavier regulatory burden than industrialized countries, with its regulatory

level in business start-up gradually decreasing.

- Its ranking in business environment assessment (business start-up category): 110('07)→126('08) →53('09)

Comparison of Business Start-up Costs and Procedures (Source: World Bank“Doing Business in 2010” ,183 countries in total)

Korea

8stages

14days

14.7%

OECD Average `

5.7stages

13days

4.7%

Start-up Period

Start-up Costs vs Per Capita GDP

Start-up Procedures

Even a developer of a new product finds it difficult to enter the market owing to monolithic

technical standards, etc.

- (Example) Commercialization in no-power multi-person escape apparatus for high-rise buildings has been delayed

as a result of a lack of pertinent regulations in fire service laws.(amendment underway).

Overbearing technical regulations raise corporate costs and compromise corporate competitiveness.

10


Presidential council on national competitiveness

Measures to Enhance Technical Regulations


Action plan

Action Plan

Ⅲ. Measures to Enhance Technical Regulations

Detecting Invisible Regulations and Incorporating Technical

Regulations into a Database

1

Detecting Invisible Regulations

Incorporating Technical

Regulations into a Database

Targets

Over 4,000 regulations already detected+

regulations additionally identified

Methodology

Establishment of a database by newly inserting

“technical regulations” in the Regulatory Reform

Committee’s classification system by agency/nature.

Targets

1. Subordinate regulations including directives,

established rules, and public announcements/

notification

2. Municipal ordinances of local governments

3. Internal standards, regulations, guidelines, terms

and conditions, etc. of public corporations

12


Action plan1

Action Plan

Ⅲ. Measures to Enhance Technical Regulations

Integrating and Enhancing Similar Technical Regulations and Managing

Relevant Schemes in Reflection of Unique Characteristics

2

Integrating/abolishing similar regulations based on sub-classification of technical

regulations incorporated into a database- Simplifying overlapping administrative procedures stemming from an excessive emphasis on

documentation and lack of coordination between the government agencies concerned

Operating systems reflecting unique features by industry/company size

- Preferential treatment for green growth industries and new growth engines, support for enterprises of

middle standing differentiated from that for large companies, etc.

3

Producing a Blueprint for Technical Regulations

Formulating short, mid and long-term plans for organized /phased improvement of

technical regulations - Ascertaining regulations inconsistent with the pace of technical development in planning R&D technology

roadmaps for the government and putting forward a blueprint for enhancement of regulations

Presenting guidelines for areas in need of technical regulations including nano technology - Setting market-friendly guidelines for technical regulations governing daily life including infant protection,

health, sanitation, food and housing

13


Action plan2

Action Plan

Ⅲ. Measures to Enhance Technical Regulations

Setting Standards for Establishment of New Technical Regulations

4

  • Presenting principles for establishment of new technical regulations

  • -(Example) Clarity, timeliness, absence of substitutions, appropriateness of level, adaptability, etc.

  • Operating a “sunset law” scheme whereby the effective period of newly established technical regulations is explicitly stipulated - (Example) Exceptional acknowledgment based on a rigorous verification process of extension of any

  • technical regulations subject to the sunset law scheme after five year’s application

Other Action Plans

5

Diversifying the channels for receipt of grievances, etc. related to technical regulations - (At present) Government agencies including each ministry and the Regulatory Reform Committee

- (After diversification) Installation and operation of channels at technology-related institutions including

KIAT and NRF

Preparing a manual on technical regulations - Presenting clear principles for establishment and enhancement of technical regulations by formulating

standardized criteria

Publishing white papers on technical regulations - Providing information on newly established regulations and disclosing the status of regulations and

enhancements

14


Presidential council on national competitiveness

Measures to Improve Technical Regulations by Case


1 integrating and upgrading similar schemes

1. Integrating and Upgrading Similar Schemes

Ⅳ. Measures to Improve Technical Regulations by Case

Integrating New Technology Certification Systems

1

Current

Upgraded

  • 7 certification systems of 5 government ministries integrated into NET (Jan. ’06) and integrated certification methods jointly announced

Integrate certification systems regarding new technology in electricity (Ministry of Knowledge Economy) and in health (Ministry for Health, Welfare & Family Affairs)into NET

  • * NET: New Excellent Technology

  • * Ministry of Knowledge Economy (product manufacturing), Ministry of Environment (environmental applications) and Ministry of Land, Transport & Maritime Affairs

  • (construction methods)

  • - Amend applicable laws and integrated new technology certification methods

Revamp the certification support system by organizing an inter-ministerial “New Technology Utilization Promotion Council”

  • New technology certification in electricity and health being operated separately, triggering public confusion

Promote public and corporate convenience by enhancing trust in certification process


1 integrating and upgrading similar schemes1

1. Integrating and Upgrading Similar Schemes

Ⅳ. Measures to Improve Technical Regulations by Case

Preventing Duplicate Fuel Cell Certification

2

Current

Upgraded

  • Fuel cells required to undergo product inspection (statutory; KGS)and equipment certification (discretionary; KEMCO)

  • 42 overlapping items among 70 (design review) and 51(equipment certification) examination items

Ensure sharing of findings from a single examination concerning items of overlapping inspections

Minimize overlapping inspections by reclassifying items of such inspections

  • Equipment

  • Certification

  • Overlaps

  • Product Inspection

27

43

8

Reduce corporate costs (by KRW12 mil. to 14 mil. per case) by eliminating

overlapping inspection items regarding fuel cells


1 integrating and upgrading similar schemes2

1. Integrating and Upgrading Similar Schemes

Ⅳ. Measures to Improve Technical Regulations by Case

Integrating Certification Standards for Venture and Innobiz Companies

3

Current

Upgraded

  • Different R&D cost calculation standards applied to venture/innobiz certification

Integrate the venture business and innobiz certification schemes

* Venture business: In-house/commissioned technology development costs, costs of compensation for in-service inventions, trademark development costs, etc. (based on preceding 4 quarters)

* Innobiz: Increased development costs on balance sheet, ordinary development costs on statement on the cost of goods manufactured, etc. (based on closing of accounts during the past 2 years)

  • - Formulate integrated calculation standards from a

  • short-term perspective

Stage 2

Stage 1

  • Innobiz

  • Inconvenience stemming from duplicate preparation of materials in obtaining/renewing certifications

  • Integration

  • of Schemes

Integration of Calculation Standards

  • Venture

Reduce corporate administrative expenses and

redress inconvenience arising from dual standards


2 redressing regulations that fail to reflect unique characteristics of technology development

2. . Redressing Regulations that Fail to Reflect Unique Characteristics of Technology Development

Ⅳ. Measures to Improve Technical Regulations by Case

Providing Preferential Treatment to Green Industries in Allocating Personnel

Subject to Alternative Military Service (Enrolled Technical Research Personnel)

1

Current

Upgraded

  • Surplus of persons on alternative military service despite expansion of their allocation to SMEs

  • Preferentially allocate surplus personnel among those allotted to SMEs to green growth industries regardless of company size

Non-exhausted rate: 57.4%

  • 3Q, ’09

  • * Pursuit by the Military Manpower Administration of

  • proposed standards established by related government

  • ministries regarding companies that have obtained green

  • credentials

1,156 persons

Non-exhausted rate: 12.7%

492 persons

299 persons

261 persons

Planned

Actual

  • Planned

Actual

Large Companies

SMEs

Bolster urgent/important R&D competences of green growth industries


2 redressing regulations that fail to reflect unique characteristics of technology development1

2. . Redressing Regulations that Fail to Reflect Unique Characteristics of Technology Development

Ⅳ. Measures to Improve Technical Regulations by Case

Reducing Duties for Imported Raw Materials for New Technology Products

2

Current

Upgraded

  • Simplified Fixed Duty Drawback : Raw material import duty drawback on the basis of average drawback amount during the previous year by item

Simplified Fixed Duty Drawback : Formulate and expand measures to reduce duties imposed on special fields including reduction of duties on appliances and materials related to new renewable energy

 Disadvantageous to companies with a high ratio of imported raw materials including photovoltaic businesses

  • Individual Drawback : Complicated application process and documents

Individual Drawback : Install and operate a dedicated team at customs offices to support individual drawback by small- and medium-sized exporters

  • Some companies relinquishing right to drawbacks

Ease the burden of duties on export-oriented SMEs that import substantial raw materials


2 redressing regulations that fail to reflect unique characteristics of technology development2

2. . Redressing Regulations that Fail to Reflect Unique Characteristics of Technology Development

Ⅳ. Measures to Improve Technical Regulations by Case

Improving the Corporate Matching System Concerning National R&D Projects

3

Current

Upgraded

Uniform standards applied based on categorization of companies into two groups: SMEs and large-sized enterprises

  • Eliminate any disadvantage arising from company size by specifying the scope of middle-standing firms

  • - Placing the ratio of burden for enterprises of middle standing

  • in the range of 35~40%

  • - Illustrative standards for enterprises of middle

  • standing: 300~999 employees, KRW100 billion to

  • KRW1 trillion in revenue

- Burden: no more than 50% for large companies and no more

than 25% for SMEs

  • Enterprises of middle standing required to shoulder a burden on par with large-sized companies without no separate regulations implemented

Expand benefits available to middle-standing enterprises

participating in national R&D projects (over 1,100 enterprises in ’07)


2 redressing regulations that fail to reflect unique characteristics of technology development3

2. . Redressing Regulations that Fail to Reflect Unique Characteristics of Technology Development

Ⅳ. Measures to Improve Technical Regulations by Case

Increasing Autonomy Regarding Lab Safety Control Costs

4

Current

Upgraded

Uniformly limited to no more than 2% of labor costs in budgeting a research task

  • Expand lab safety and maintenance costs from 2% to 5% of labor costs

  • * Accidents at research institute labs during the past 5 years:

  • 70 accidents at 21 institutes

Before

2%

  • Failures to consider unique features of toxic materials, danger of explosion, etc.

5%

After

Create a safe lab environment for high-risk experiments


3 detecting and improving invisible regulations

3. Detecting and Improving Invisible Regulations

Ⅳ. Measures to Improve Technical Regulations by Case

1

1

Increasing Participation in Public Purchasing of New Product Technologies

Current

Upgraded

  • Time-consuming process to have a certificate issued notwithstanding that acquisition of certification has been finalized

  • Introduce a preferred review system for new companies and small and mid-sized venture businesses to shorten the period for issuance of official certificate

  • * KRW63 trillion, out of KRW92 trillion in total public purchasing in

  • 2007, spent in purchasing SME products (68.4%)

소요시간

  • Disadvantage imposed on newcomers because of

  • restrictions on their participation in bidding for

  • public purchasing during the said period

Increase opportunities for small and mid-sized venture businesses to participate

in the public purchasing process


3 detecting and improving invisible regulations1

3. Detecting and Improving Invisible Regulations

Ⅳ. Measures to Improve Technical Regulations by Case

2

Providing Support for Failed Venture Entrepreneurs toward Recovery

Current

Upgraded

  • Invest venture capital from a fund-of-funds (Small and Medium Business Administration) in failed venture entrepreneurs

  • Restructure existing debts through the Credit Counseling and Recovery Service

  • Guarantee opportunities for corporate objection in issuing guarantees for recovery of failed venture businesses

  • Unsatisfactory progress in operation of the “system to render a second chance to failed venture entrepreneurs” which has been in effect since May 2005, which is ascribed to negative views on their ethics, reliability, etc.

  • *Support companies founded within 3 years

  • (Organize 11 associations and KRW 1,100 billion in ’09)

  •  Applications from 12 companies and provision of support for

  • 2 companies during the past 5 years

  • * System to render a second chance: Issuance of guarantees

  • for companies with technological prowess managed by failed

  • venture entrepreneurs who have undergone an ethics

  • assessment and credit recovery process

Grant opportunities for a takeoff to failed venture entrepreneurs


3 detecting and improving invisible regulations2

3. Detecting and Improving Invisible Regulations

Ⅳ. Measures to Improve Technical Regulations by Case

Improving Regulations Governing Research Staff at Company-Affiliated Research Institutes

3

Current

Upgraded

  • Qualifications of dedicated research staff restricted to at least college degree holders in science and engineering

  • Ease qualifications regarding the knowledge service industry

  • - Qualifications: science & engineering major

  •  ordinary department majors

  •  Impossible to acknowledge them as dedicated research staff in the

  • knowledge service industry driven by non-science and engineering

  • majors

  • Complicated procedures in reporting changes in research staff

  • Simplify the procedures to change research staff

  • - Acknowledgement system registration system

  • - Substantially reduce reporting documents

  • (19types of documents currently required)

  •  Limitations on effectively utilizing professional researchers

Foster the knowledge service industry and ease the administrative burden on company-affiliated research institutes (18,551institutes in 2009)


3 detecting and improving invisible regulations3

3. Detecting and Improving Invisible Regulations

Ⅳ. Measures to Improve Technical Regulations by Case

Easing Regulations on the Scope of Participation in Cooperative

Technology Development by Industrial/Academic/Research Institutes

4

Current

Upgraded

Targets of cooperation limited to colleges in the administrative district of the local government concerned in the event of an SME’s participation in a joint technology development project by industrial/academic/research entities

Make gradual improvements to enable industrial/ academic/research entities to engage in collaborative research with colleges in other areas

  • * Ratio of permitted selection of colleges in other areas

10%

’10

  • Pursuit of such cooperative projects rendered impossible if a local college deemed suitable by a company is located in the administrative district of another local government

50%

’11

100%

’12

Induce and expedite substantive cooperation by SMEs, colleges and research centers


4 setting new guidelines reflecting market needs

4. Setting New Guidelines Reflecting Market Needs

Ⅳ. Measures to Improve Technical Regulations by Case

Establishing Essential Systems Including a Certification

System to Promote Nano Product Technology Development

1

Current

Upgraded

  • Lack of a system to test stability/performance of nano technology-applied products

Organize and operate the Nano Technology Stability Committee (first half of ’10)

  • * Plan to develop a program to assess impact of nanomaterials

  • to health and the environment announced by the OECD (’08)

  • - Jointly administered by the Ministry of Knowledge Economy,

  • Ministry for Health, Welfare & Family Affairs, and the Ministry

  • of Environment

  • Concern that companies making inroads

  • into overseas markets may face disadvantages

  • Formulate “Safety Guidelines for the Development and Production of Nano Technology-Applied Products” and introduce a certification system (second half of ’10)

Enhance consumer safety and stability concerning nano technology-applied

products and facilitate the tapping of overseas markets


4 setting new guidelines reflecting market needs1

4. Setting New Guidelines Reflecting Market Needs

Ⅳ. Measures to Improve Technical Regulations by Case

Reducing Burden Arising from Hazardous Substance

Testing & Analysis

2

Current

Upgraded

  • Finished product makers frequently request suppliers to submit analysis and test reports regarding hazardous substances including RoHS certificates without clear standards on their effective period:

Monitor whether finished product makers frequently request renewal of component testing reports

  • Pursue consultation with related government ministries regarding designation of an effective period for test reports on hazardous substances

  • * RoHS (Restriction of Hazardous Substances Directive) :

  • Restrict six major hazardous substances including cadmium,

  • lead, mercury, chromium VI, PBB and PBDE.

Reduce unnecessary testing/analysis costs incurred by component suppliers


Presidential council on national competitiveness

Planned Measures for the Future


Planned measures for the future

Planned Measures for the Future

Ⅴ. Planned Measures for the Future

Pursue Constant Enhancement of (over 4,000) Regulations Identified

Build a database of regulatory provisions already detected and continue to push for the easing of regulations with the Regulatory Reform Committeeunder the Prime Minister’s Office at the lead (year-round)

Expand investigation into technical regulations concerning para-statutory regulations and guidelines of related government agencies (first half of 2010)

Presentation of Guidelines for New Regulations

Devise principles for formulation of new technical regulations governing nano technology-applied products, containment of hazardous substances, etc. (1st quarter of 2010)

Prepare a technical regulation roadmap and manual (first half of 2010)

Diversify Channels that Receive Grievances, etc. Related to Technical Regulations

Install and operate such channels at technology-related institutions including KIAT and NRF (first half of 2010)

Systematic Follow-Up Management

Conduct periodic inspections/control of implementation of technical regulations by each government ministry (year-round)

(Report to the PCNC and Regulatory Reform Committee)


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