This paper first examines determinants of technical efficiency in terms of competition and government regulation (including protection) in Korean industries, relying heavily upon the concepts of X-efficiency and rent-seeking activities. Allocative efficiency (measured as profitability) is then considered with technical efficiency as a determinant. The outcome of the regression shows that both the sheltering of industries from international competition and the financial market distortions strongly affect technical efficiency, and that technical efficiency as well as effective protection rate are important determinants of profitability.