Policy Issues
National Spatial Strategy for Balanced Development
An approach to enhance regional competitiveness and
secure sustainable growth potential across South Korea
1. Outline of the strategy for regional development
The Korean government announced its strategy for regional development following the
first meeting of the Presidential Committee on Balanced National Development on July 21,
2008. This strategy aims to achieve a better balance of social, economic and physical
development between regions. By doing so, it will enable every part of the country to
grow to its potential, enhance the quality of life of the public and stimulate job creation.
The strategy consists of five pillars; first, achieving maximum growth potential through
balanced development across the country; second, creating a spatial vision specific to
region through the fostering of new growth engines; third, strengthening decentralization
by transferring administrative and financial authority to municipalities; fourth, fostering a
win-win approach to the development of the Seoul-metropolitan area and provincial
areas; and fifth, drawing up complementary plans for “innovative cities” and the multifunctional administrative city which were put forth by the administration of former
president Roh Moo-Hyun.
To implement this strategy, the Ministry of Strategy and Finance unveiled its plan to
enhance the competitiveness of each region through diverse policy tools such as financial
support, tax incentives, and regulatory reform.
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2. National Spatial strategy
Under its regional development strategy, the government divided the country into three
groupings - basic livelihood areas, seven metropolitan economic areas, and four
megalopolis areas.
First of all, basic livelihood areas are designed to connect 162 local cities and counties
with medium and small cities, towns, and surrounding rural areas, co-developing urban
and rural areas. By doing so, these areas could set the foundation for developing
secondary and tertiary industries and promoting tourism attractions, as well as improving
living environments including education, medicine, and culture.
Secondly, seven metropolitan economic areas consist of five areas with a population of
more than 5 million people - the Seoul metropolitan, Chungcheong, Honam, DaeguKyungbook and the South East area - and two areas with a population of about 1 million
people - Gangwon and Jeju. Each area is encouraged to adopt its development projects
and create new growth engines regionally, while the government provides financial
assistance. In particular, new growth points designated in each area are linked to the
existing “innovative cities,” the multi-functional administrative city and free economic
zones, which will serve as hubs for fostering talented people and creating high quality
and knowledge-intensive jobs.
Thirdly, megalopolis areas include four belts - the South, East and West coast belt areas,
and the border belt near the Demilitarized Zone. As part of key development projects,
these areas will have the full financial support of the government.
Megalopolis areas
South coast belt
Development Vision
To create new growth points and develop them as hubs for the
infrastructure industry, logistics, and tourism in the Pacific Rim
East coast belt
To create energy clusters including new and renewable energy
and develop tourism/leisure destinations
To nurture key industries including next-generation IT services,
West coast belt
automobiles, steelmaking, and logistics which would vie with
those of China in the Yellow Sea Rim
To preserve ecological resources, and establish inter-Korean
Border belt
exchange complexes in an effort to guarantee permanent peace
on the Korean Peninsula, as well as to promote inter-Korean
exchanges
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In principle, the strategy will be driven by the government, but a consortium which
consists of government agencies, municipalities, and private experts, will be formed to
discuss and cooperate with each other. Infrastructure for megalopolis areas such as
traffic networks will be constructed mainly by the government, while private investments
will be channeled into profitable businesses in tourism and leisure.
3. Political tools
(1) Financial support
Under the strategy for regional development, the Ministry of Strategy and Finance
decided to scale up the existing special budget for balanced development (about US$ 7.6
billion, as of 2008) into a special budget for regional and metropolitan area development
(about US$ 9 billion), which will be applied from 2010.
The special budget for regional and metropolitan area development includes regional
accounts of US$ 4 billion and metropolitan ones of US$ 5 billion. The regional account will
be used to integrate 210 detailed projects into 20 business groupings in order to promote
local government-led development and enhance the autonomy of municipalities. Local
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governments can freely decide how to develop and run a specific business within the
scope of the goals and resources of the 20 business groupings. Post-evaluation and
feedback on the results will be sought.
On the other hand, the metropolitan account aims to invest in developing strategic
industries and fostering local major colleges, in an attempt to improve the
competitiveness of the metropolitan economic areas. This account will be used as a way
of harmonizing local government-led development projects with resource allocation by
the central government.
(2) Tax incentives
Tax incentives for regional development will be introduced to improve the financial
capability of local governments through regional development. In case the effort to attract
corporations at the regional levels cause local governments to pay more corporate and
value-added taxes than an average increase rate of those taxes, the surplus tax paid will
be given back to municipalities in the form of incentives.
In addition, tax support and streamlined procedures will be provided for the existing
growth points such as “company cities,” free economic zones, and the Jeju special selfgoverning province.
(3) Regulatory reform and institutional improvement
First of all, regulatory authority will be transferred to the heads of local governments
accomplishing a one-stop approval system. Setting up a regular “City/Province Economic
Conference” could serve as a channel for regulatory reform. Moreover, a stimulus
package for economic growth in each region will be developed and implemented, to
counteract the effects of rising oil prices and other causes of economic downturn. The
package includes the development of local financial sectors, improvement of the quality
of education, and revitalization of traditional markets.
4. Way forward
To implement the strategy for regional development, detailed measures will be developed
in stages. In the first stage, the special budget for regional and metropolitan area
development will be created, and tax incentives for regional development will be
introduced. In the second stage, tax breaks for “company cities” and free economic zones
will be extended. The relevant bill will be submitted to the National Assembly in 2008 and
the legislation will come into effect in 2009. In the third stage, measures for regulatory
reform and institutional improvement will be drawn up in the second half of this year after
discussions between relevant government agencies for implementation in 2009.
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