South Korea‘s economy must firmly be led by the private sector if it wants to achieve sustainable growth, a public committee dedicated to formulating the country’s long-term growth strategy said Thursday.

The committee, made up of economists from local thinks tanks and government policymakers and cochaired by Finance Minister Choi Kyung-hwan and Korea International Trade Association CEO Kim In-ho, said rapid changes taking place around the world and stiffer competition from countries like China are making it imperative that Seoul give up past practices.

“In the future, innovation, creativity and flexibility, which are the hallmarks of the private sector, will fuel competitiveness,” it said, adding that only by adapting to change can Asia‘s fourth largest economy generate new growth, and its companies become truly competitive on the world stage.

The committee that outlined measures -- to be taken 5-10 years down the road -- said that while South Korea’s government-centered strategy had served it well in the past, it is now time for policymakers to reassess their roles. It said the future role of the government will be to push for regulatory reform and get rid of unnecessary red tape.

“The government should give up its role as the control tower and become a supporter of the private sector,” it said.

The country also needs to switch from a fast follower position to that of an innovator, with research and development becoming bottom-up affairs instead of top-down arrangements set by government directives, it added.

The economic experts’ meeting, the fifth round of the mid-long term strategy committee, was launched in 2014 to set up a 5-10 year goal to combat the side effects of instant growth, low-growth and low-birth, aging society and carbon emissions.

Regarding fostering innovative businesses, the regulation will turn from the present “preventative, early regulation” to “post regulation,” in developing new products and services. For stronger research and development, the committee decided to support funds for research institutions, and not by individual research projects.

To overcome sluggish exports to China and increasing global economic uncertainties, the committee vowed to move on from the present trade volume-based achievement to value-adding achievement. For lackluster exports to China, the committee recommended focusing on infrastructure and service sectors.

For elevating labor and welfare conditions amid low birthrate and aging society, the committee agreed to set up a control tower to drive structural social change in housing, hiring and education. Wage peak policy, which pushes back retirement in exchange of lower wages, is one of the welfare resolutions of the committee.

KITA chairman Kim said, “The current government is strengthening the overall control functions in its economic drive, yet such a move can only have limited impact when it comes to the abounding complexities and uncertainties.”

“Korea is following the order of market economy, and yet I have to question whether the government and the market are developing a healthy relationship,” he added, urging that “competition comes only from a competition-friendly structure.” 

By Chung Joo-won and news reports (joowonc@heraldcorp.com)