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Korea needs to boost business dynamism, labor market flexibility
Korea stood in 13th place among 141 countries in global competitiveness this year. The country's ranking rose by two notches from last year, and four from 2017. Singapore pulled down the United States to take the top spot in the World Economic Forum (WEF) Competitiveness Index. Switzerland, Japan, Germany and the United Kingdom followed the top two.
It was encouraging that Korea received a better assessment of its competitiveness abroad despite political conflicts and the slowing economy at home. Despite the overall rise in the rankings, however, the falls in business dynamism and the labor market are alarming.
The Geneva-based forum calculates national competitiveness by comparing 12 sectors in four areas ― enabling environment, human capital, markets and innovation ecosystem. Out of the 12 sectors, Korea received the highest points among the 141 countries in two ― macroeconomic stability and ICT adoption. That means the world highly evaluates Korea's sound macroeconomic indicators, and its top-class mobile phone use and broadband internet subscriptions.
On the other hand, the labor market's ranking fell three notches to 51st place and business dynamism dropped three to 25th place. It is problematic that Korea's market and corporate vigor are weakening in contrast to its improvement in the overall environment. This, in turn, confirms the widespread criticism among experts that the nation's labor market rigidity has reached a point where it is having adverse effects on the economy across the board.
Nothing showed this better than the rock-bottom rankings of 130th place for labor-management cooperation, 116th place for layoff costs, and 102nd place for employment-dismissal practices. The situation is not much different in the corporate vigor category. Amid foot-dragging in regulatory reforms and enhanced government intervention in markets, entrepreneurship and market efficiency plunged to 55th and 59th place, respectively.
South Korea needs to raise its entrepreneurial spirit, the WEF report said in its advice to the country. President Moon Jae-in used to express his confidence, saying, "Our economy's fundamental physique is strong." Unless markets and businesses operate smoothly, however, the nation's economic fundamentals may weaken. What's most urgent for the Moon administration is to make efforts to shift to an economic policy that can restore economic vigor.
