Research Report
A Study on Balanced Development between Regions for Inclusive Growth
Ⅰ. Background and Purpose
▶ The developments of national land development policy in Korea is a process in which policies and legal systems address the concentration of population and industry into the metropolitan area and the gap between regions.
○ At a national level, the national land development policy is applying to the whole national land extensively and comprehensively, so it is required to be formulated based on the balance and equity.
- Sometimes, support was provided to a certain region depending on choice and concentration.
○ The national land development policy has not been implemented in a systematic manner, notwithstanding its functions as one of the major policies of the nation, largely because of the sporadic implementation of policies by each department.
▶ Korea has achieved a high growth successfully, but its population, industries, capital and educational and cultural facilities are concentrated in the metropolitan area.
○ Overcrowding in the metropolitan area causes issues related to medical service, transportation, environment and housing as well as population leakage and economic downturn in non-metropolitan areas.
○ Overcrowding in the metropolitan area and population leakage and depopulation in non-metropolitan areas deepen the vicious cycle in the national development.
○ Unlike a high growth period in the past, the issues mentioned above continue to expand recently, due to low growth rate and rapid progress in low birth rate and aging population and economic disparities.
▶ In a rapidly changing environment, the Korean Government set “Well-balanced Development across Every Region”as one of five policy goals.
○ The issues related to national balanced development are not limited to the issues between the metropolitan area and non-metropolitan areas any more. It is a time to discuss a new balanced development of regions in order to address low growth rate, low-birth rate, aging population and economic disparity.
- From the perspective of regional balanced development
○ An innovative and inclusive nation means a country where all citizens can live well without undergoing discrimination. Unlike the past, it is necessary to promote balanced development under the banner of inclusiveness where people can live well altogether, without causing negative consequences of quantitative growth.
- That is, policies for national balanced development should be formulated based on the value of inclusiveness.
▶ Inclusive growth means economic growth that advances equitable opportunities for society members and fair distribution of benefits generated from economic growth, thereby reducing income disparities and improving quality of life.
○ Inequality and polarization are inherent to the background of discussing inclusive growth, and thus, there is a rising concern about how to cope with such inequality and polarization.
- As a global phenomenon, it is actively discussed by international organizations like IMF and OECD.
- In Korea, birth rate is rapidly declining and aging population is growing. This accelerates inequality and economic disparities. Therefore, it is urgent for Korea to take a policy-level approach.
○ Declining birth rate and growing aging population lead to decrease of working age population and decline of rural areas, ultimately deepening disparities among large cities, small and medium cities or rural areas.
- Economic polarization can prevent social integration as well as continuous economic growth.
○ To construct socially well-equipped infrastructure, it is necessary to avoid binary thinking which divides the nation into the metropolitan area and other areas.
- Particularly, it is necessary to formulate policies for promoting balanced development among regions at various levels, including addressing disparities within the metropolitan area, disparities among the non-metropolitan areas, disparities between the large cities and small-and-medium cities or rural areas. Against this background, the purpose of this study is to examine relevant legal systems in detail and to seek ways to improve legal systems for realizing regional balanced development.
▶ It is necessary to discuss balanced development of regions and inclusive growth in a comprehensive manner.
○ It is a proper time to integrate and actively respond to regional balanced development, which seeks the integration from the perspective of space class, and inclusive growth, which seeks the integration from the perspective of social class, because construction of space structure is emphasized in an era when Global Value Chain is broken recently due to the emergence of the fourth industrial revolution and the spread of COVID-19. Therefore, it is urgent to establish domestic value chain, which is resilient and sustainable.
Ⅱ. Main Content
▶ Necessity to promote and implement policies for promoting balanced development based on inclusive growth
○ Quantitative expansion, which has been the main development direction of the country, was attributed to creating a vicious cycle of polarization and inequality.
- The policies for balanced development implemented by each administration focused on large scaled development projects, so they have limitations, such as lack of integration among policies.
○ There emerges a necessity to face a paradigm shift for growth as a way to resolve inequality and polarization during the era of slow economic growth.
- In this regard, the Moon Jae-in Administration endeavors to promote economic development through embrace without excluding anyone for achieving inclusive growth, under the vision of “A Nation of the People, A Just Republic of Korea.”
▶ Establishment of legal systems harmonized with ‘Inclusive growth’ and ‘Regional Balanced Development’
○ Korea has implemented various policies to tackle the current status caused by the emergence of a shrinking society, but inclusive growth has formed a new global momentum. This study examines the background for emerging the inclusive growth, such as the reasons for emergence, and seeks ways to harmonize inclusive growth and regional balanced development.
○ The emergence of inclusive growth can be specifically attributed to income inequality and income gap among regions.
- The background of the emergence of a shrinking society and inclusive growth and policies related to overcoming the shrinking society can be provided as an evidence for the necessity of inclusive growth for the balanced development among regions.
○ This study reviews the polices for ‘innovative, inclusive nation’ of this Administration, identifies national tasks relating to the balanced development among regions, which were performed by each department, and finds the redundancy or characteristics of each policy and task, thereby deriving implications for the revision of the Special Act on Balanced National Development.
○ Following a series of process, this study finds that from the perspective of inclusive growth, the balanced development among regions is a responsibility of the government and, thus, the balanced development among regions is a mandatory duty of the government.
▶ Integration of regional balanced development and inclusive growth
○ Promoting regional industries was one of the oldest policies in Korea, and they have been promoted from the early stage of the economic development before the Special Act on Balanced National Development was enacted.
○ In the Korean society, economic development and regional balanced development have been promoted as policy based on space. However, during the pursuit of economic development, more and more people moved to the metropolitan area and policies for space were naturally directed for maximizing efficiency of space use. This was one of the reasons for intensifying the poor distribution of space.
- In the process of developing regions, concentration on the metropolitan area was accelerated and regional imbalance was deepened. Naturally, regional balanced development focused on the advancement and development of the non-metropolitan areas.
- Development plans at a national level, such as National Comprehensive Development Plan, as well as development plans for developing regions and reducing regional imbalance, such as designating innovative cities and industrial complexes, were implemented, but the situation was not significantly improved even after the Special Act on Balanced National Development was enacted in 2003.
▶ Legislation for balanced national development
○ Policies for promoting regional industries have been implemented for different purposes at a different period. In this process, additional bills were drafted in order to provide legal basis.
○ For the Ministry of Industry, which is in charge of balanced development, the Special Act on Balanced National Development, the Special Act on Revitalization and Competitiveness Enhancement of Hub Decrepit Industrial Complexes, the Special Act on Designation and Management of Special Economic Zones, the Foreign Investment Promotion Act, and the Industrial Cluster Development and Factory Establishment Act are relevant legislation for balanced development among regions.
○ Major legislation for national balanced development including the Framework Act on the National Land, the National Land Planning and Utilization Act, the Special Act on Balanced National Development, and the Regional Development Assistance Act were reviewed in this study.
▶ Legislation for regional balanced development
○ Under Article 2 of the Special Act on Promotion of and Support for Urban Regeneration, “urban regeneration” was defined as economic, social, physical, and environmental revitalization of a city which is declining due to depopulation, change of industrial structure, indiscriminate expansion of the city, deterioration of the dwelling condition, etc. by strengthening the local capacity, introducing and creating new functions, and utilizing the local resources.
○ The Urban Redevelopment Act, the Act on the Improvement of Urban Areas and Residential Environments, the Urban Development Act, the Act on the Promotion of Smart City Development and Industry, the Special Act on the Construction and Development of Innovation Cities, the Special Act on the Promotion of Urban Renewal, and the Special Act on Promotion of and Support for Urban Regeneration were enacted for promoting regional balanced development by regenerating decrepit cities and for reducing regional disparities by developing decrepit cities into competitive cities through improvement of residential environment.
○ To this end, this study analyzes the operation and content of individual Acts and provides detailed data.
- A number of problems related to regional communities were not resolved largely due to top-down approach of the central government agencies, lack of actual conditions for settlement of enterprises, and reduction of vitalizations for urban renewal.
▶ Legislation related to Special Economic Zones for strengthening regional competitiveness
○ A technopark is constructed for creating synergy effect on regional development by establishing interactive networks to gather all the organizations related to education, training, research and development, and utilization of science technology, such as enterprises, university research centers, and so on.
○ The term ‘technopark’ was coined from the word ‘technology’ and the word ‘park’ meaning space. The technopark was constructed to seek the development of technology innovation and advanced industry through interactive cooperation among industry, academy, research and government.
○ Its main purpose is to jointly developing technology, facilitating technology utilization, creating jobs and promoting regional economy.
- With the fierce competition of products and the advance of technology in the global market, creating science and technology complexes is recognized as a policy for facilitating the creation and development of new products based on science and technology by strengthening research capability at a national level through close interaction among the government, industry and universities.
▶ Analysis of legislation on regional balanced development in major countries
○ The United States
- In the United States, complaints about society and economy are growing and major causes are income inequality generated from technology development and education tilted to function and fierce competition due to globalization, and wealth inequality due to rent seeking.
- Usually, economic participants earn income based on their productivity. However, technology development tilted to function replaces jobs for middle-income bracket, leading to the reduction of their income. In addition, US workers competed with low-skill labor force of China following the increase in trade with China since 2000. This also led to income reduction of individuals, deepening income inequality.
- In some point, the reduction of educational performance is regarded as one of the causes of inequality. Since 1980, the rate of persons who completed higher education has decreased. Such phenomenon can be one of reasons for deepening income inequality.
- To resolve imbalanced growth among regions, the US Government provides various subsidiaries and tax benefits through designating a Empowerment Zone, Renewal Community, and Enterprise Community. Such programs started from 1993, program for Empowerment Zones was expanded and improved in 2000, and some of them are still in operation.
- Opportunity Zone programs started, following the promulgation of the Tax Cuts and Jobs Act in 2017. Under this Act, individuals and enterprises can defer the payment of Capital Gains Tax payable from capital investment by 2026.
- A Business Improvement District is an area where interested persons like property owners and merchants, and local municipals incorporate a corporation, voluntarily determine policies and provide common services within a certain area in the business district to revitalize businesses in old downtown areas.
- Community Outreach Partnership Center program is created in an effort to increase cooperation between universities and local communities. The role of universities has been emphasized as a knowledge producer of a new industry according to the university-led innovation and change in R&D policies of the US government. Against this background, programs for promoting research cooperation between industry and academy are the basic direction of industry-academy cooperation in the United States, including intensity of competition for input and emphasis on leadership of college management, introduction of strategic management, application for patent of research results and reform of university education considering education consumers.
○ Germany
- In Germany, the common duty of the federal government and the state governments to improve the structure of regional economy is at the center of the regional policies of the country, focusing on facilitating the industry and public investment.
- When a state government implements a policy, the federal government may provide support pursuant to Article 91a of the Constitution of Germany “if such policy has significant impact on the whole society and it is necessary for the federal government to participate in the policy to improve living conditions.”
- Extensive policies for regional industrial structure of Germany ensure continuous and active support within the banner of “Help those who help themselves.” The relevant policies mainly focus on the standardization of budget and economy in the overall states.
- The ‘three circles model’ is a support system for structurally weak areas and is applied based on the fact that an underdeveloped region can overcome its weakness by providing support to the region to have viable economy. This model formulates support policies from the perspective of the regional direction-setting and economic closeness.
○ Japan
- The Comprehensive National Land Plan of Japan was formulated based on the necessity to reform the structure of the national land. It aims to develop a variety of regional blocs, thereby developing the national land in a balanced manner and constructing diversified structures of the national land.
- Notwithstanding the Comprehensive National Land Plan, specific goals and measures to realize the Plan were not presented clearly.
- Recently, Japan’s balanced development plan is facing difficulties at a time when overpopulation is resolved and the total population decreases. At this point, the goal of the national land plan should focus on effective and competitive use of the national land. Japan tries to control the concentration in the large cities and seeks diversified use of land, but such measures do not fit the current status of the country.
- Thus, areas where the population plunges should take measures to revitalize themselves, based on their responsibilities and choice, after fully considering the situation at a broad level in order not to hinder the management of the national land and the provision of living services for residents.
Ⅲ. Expected Effects
▶ Approach to integrating space class of regional balanced development and social cohesion of inclusive growth as one set
○ Now, it is necessary to take an approach to integrating social class unit and regional unit.
○ The emergence of the fourth industrial revolution and the outbreak of COVID-19 are breaking Global Value Chain.
○ As a resilient and sustainable domestic value chain has to be established, it is important to establish space structure. Therefore, it is necessary to actively respond to integrating them.
▶ Recognizing the importance of the speed of economic development as well as its direction
○ As the speed and direction of economic development are globally recognized as important, it is a proper time to propose measures to improve relevant legislation for the purpose of promoting inclusive growth.
- ‘Inclusive growth’ was introduced as a key concept after the outbreak of global financial crisis in 2008. In 2009, World Bank submitted a report on ‘Framework and Application of Inclusive Growth.’ In 2011, IMF conducted research on inclusive growth and suggested it as a way to resolve polarization, which became one of global problems.
▶ Measures to improve legislation on national balanced development
○ The year 2020 is at a crossroad from the era of growth and development to the era of depopulation and low growth. Depopulation and demographic change caused by low birth rate and aging population are affecting the entire national land. This study proposes revision and enactment for national balanced development in terms of space to adv-ance future growth by utilizing new technology development, such as the fourth industrial revolution.
○ Draft amendment to the Framework Act on National Land to establish a direction-setting for national land and to realize short- and mid- term policies
○ Draft amendment to the National Land Planning and Utilization Act to strengthen the characteristics of the basic unit of national land under Urban or Gun master plans
○ Amendment plan for the Special Act on Balanced Nation Development to strengthen policies for national balanced development
▶ Measures to improve legislation on regional balanced development
○ Measures to improve the legal system to operate urban regeneration projects
○ Measures to improve the legal system for integrated operation of urban maintenance projects and regeneration projects
○ Amendment plan for implementing 5-year National Balanced Development plans and tax reduction and exemption under the Special Act on Promotion of and Support for Urban Regeneration
▶ Measures to improve legislation related to Special Economic Zones for strengthen region’s competitiveness
○ Measures to improve the system to induce differentiated strategy for regional core business
○ Proposal for removing obstacle to objective evaluation due to the difference between legal entity and responsible organization in operating the special zone
○ Proposal for reducing confusion in administration caused by the difference between project operator and management organization