The Organization for Economic Cooperation and Development (OECD) on Monday called on South Korea to enhance its transparency in taxes and regulatory policies to better attract overseas investment that can breathe new life into the country's economy.

The Going for Growth 2015 report released by the Paris-based organization said "sustained rapid growth" has brought the country's GDP per capita to within a quarter of the upper half of other OECD members. It, however, pointed out the productivity is only half as high, while working hours are among the longest in the 34-member group of developed market economies.

 "Reforms are needed in part to boost the stocks of inward foreign direct investment, which is the second lowest in the OECD area," the report said.

Improving the efficiency of the tax codes by relying more on indirect value-added tax (VAT) such as taxes levied for environmental protection and assets would benefit growth, while at the same time ease budgetary pressure associated with rapidly rising social spending, it said. South Korea has the second lowest VAT in the OECD.

The organization also pressed for keeping earned income tax rates low and urged for the dismantling of barriers that impede competition.

"Phase out entry barriers for large firms from business lines reserved for small and medium enterprises, which are primarily in the service sector," it said.

The latest findings, based on reviews of reforms measures implemented by all member states from 2013 onwards, claimed the country needs to break down its labor market duality to boost productivity and encourage more female employment.

Labor market duality refers to the difference in pay and job security between regular and non-regular workers in the country.

Specifically, the OECD argued South Korea needs to lessen protection for regular workers while enhancing rights and benefits for non-regular workers. It said more can be done to improve employment training programs.

On greater female economic participation, it suggested encouragement of parental leave and flexible working arrangements, including more part-time jobs.

There should be more affordable, high-quality childcare, it said.

The international agency also said South Korea should further reduce farm import barriers and scale back the high level of support for the sector.

Besides South Korea, the OECD said reforms undertaken by eurozone countries were losing traction, while those outside Europe, North America and Japan, were accelerating to meet various developments of late.

It said all countries need to place key importance on improving labor productivity and build up their skills and knowledge-based capital that can lead to greater competitiveness. (Yonhap)