Korea needs new reforms to boost productivity, employment and growth
16/5/2016 - Korea needs to boost productivity, increase employment and stoke economic activity as part of efforts to reverse current trends toward slower growth and low inflation, according to a new report from the OECD.
The latest Economic Survey of Korea, presented today in Sejong by Randall Jones, Head of the OECD’s Korea/Japan Desk, underlines that further reforms will be needed to boost the country’s growth rates, which have slowed versus historical rates, although remaining above the OECD average. The Survey projects GDP growth of 2.7% this year and 3% in 2017.
Recent reform proposals delivered to the G20 - as part of the government’s Three-year Plan for Economic Innovation - have great potential for boosting productivity and employment. Swift and full implementation of the reforms could add up to 3% to GDP within ten years, the Survey said.
Korea’s productivity growth has slowed markedly in recent years, curbing the rise of incomes and limiting advances in well-being. This calls for ambitious reforms to strengthen competition, raise efficiency in low-productivity services and overhaul the SME sector, where policies aim to ensure the survival of small firms, rather than higher productivity and growth.
The gains from Korea’s high level of investment in R&D are limited by structural weaknesses in the innovation system. Regulatory reform, relaxation of the barriers to trade and investment that and strengthening the R&D links between academia, business and government are all required, the Survey said.
The Survey discusses a range of policies for addressing the challenges of increasing employment and improving social cohesion. Removing the substantial obstacles to the employment of women, youth and older people will be key to sustaining the size of the labour force as the working-age population peaks in 2016.
Labour market dualism is the major cause of Korea’s wage and income inequality and high relative poverty. Breaking it down, and expanding the social welfare system, would improve social inclusion, the Survey said. In particular, the Basic Pension should be focused on the elderly with the lowest incomes to reduce poverty.
An Overview of the Economic Survey, with the main conclusions, is freely accessible on the OECD’s web site at: www.oecd.org/korea/economic-survey-korea.htm. You are invited to include this Internet link in reports on the Survey.
For further information on the Economic Survey, contact the OECD Media Office (+33 1 4524 9700).
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