Research Report
Legislative research for continuous operation of Opportunity Development Zones
I. Background and Purpose of Research
○ Although many policies and systems have been implemented and laws have been enacted and revised for balanced regional development, it is true that the current atmosphere regarding balanced regional development in Korea is more concerned than expected.
- In the past, top-down regional development policies led by the central government did not properly reflect the characteristics and circumstances of each region, and although they may have achieved quantitative growth for the entire country, there were limitations in resolving the gap between regions.
- Due to excessive concentration in the metropolitan area, relatively neglected areas lost the driving force for revitalizing the local economy, which led to a rapid slowdown in the local economy.
- In the end, in order to solve these realistic problems and achieve balanced development of the entire country, it is necessary to move away from developing policies based on central government-dependent perspectives and thinking and implement regionally-led policies that take regional characteristics and resources into consideration. Confirmed again.
○ Oneof the problems with our current regional balanced development policy starts from imbalance.
- Various regional balanced development policies that have been proposed in the past without proper recognition of regional imbalances are so different from the starting point that it is difficult to achieve results by supplementing the general legal system, but it is also difficult to meet the expectations of the people.
- The 'tilted playing field' of the metropolitan area and the local area is causing polarization of the region, industry, and economy, increasing the sense of loss for local residents and facing an environment where spatial justice is difficult to find, so balanced regional development in the future is an option. It must be a policy based on focus.
- In that sense, the current government's “Opportunity Development Zone” is clearly different from the existing regional balanced development policies that have been operated so far, and can be said to be a region-centered policy that has been differentiated from its starting point.
○ In a situation where the sense of crisis over local extinction is increasing nationwide and the concentration in the metropolitan area is still deepening, there are limits to overcoming the imbalance between the metropolitan area and local areas with limited public resources alone, so the government is taking advantage of the private investment vitality to dramatically promote local investment. To promote this, a new local investment attraction system called Opportunity Development Zone was introduced.
○ The purpose of this study is to suggest legislative improvement measures to ensure continuous support and operation of special opportunity development zones.
- To this end, the general content and characteristics of opportunity development zones and the financial support system under the current law are summarized, and similar cases of major developed countries that serve as models of opportunity development zones are introduced and analyzed to derive implications.
- In order to ensure the effectiveness of opportunity development special zones, we intend to conduct a legal review of regulations related to support and operation of opportunity development special zones, ways to secure autonomy and responsibility of local governments for continuous operation, and derive differences in other special zone-related laws.
Ⅱ. Contents
▶ Concept and characteristics of Opportunity Development Zone
○ The concept of Opportunity Development Zone
- Opportunity Development Zone (ODZ) is a special zone where local governments that know the local situation best can take the lead in designing and operating the special zone, and realize spatial justice and a resurgence of the national economy through local development. As a core policy tool, it can be called a ‘decentralized and autonomous special zone’.
- Unlike the existing special zone system, local governments designate areas in consultation with investment companies as special opportunity development zones, and when local governments select leading industries, tax benefits are provided to attract large-scale investment by companies in local areas. ㆍIt can be said to be an area that comprehensively supports an unprecedented level of incentives provided in a package such as financial support, regulatory special provisions, and improvement of residential conditions.
- Opportunity Development Zones are an area where, despite the continued balanced development policy since the participatory government, the phenomenon of concentration in the metropolitan area and the growing sense of crisis of local extinction, local youth moving to the metropolitan area in search of education and job
opportunities, and the failure to actively utilize the diversity, autonomy, and creativity of local areas. Considering the limitations of the centrally-led promotion method, regionally-led decentralized balanced development can be said to be a new attempt and paradigm shift for national development.
○ Characteristics of Opportunity Development Zone
- The Opportunity Development Zone is a development model to increase the level of spatially harmonious regional balanced development by revitalizing private investment in relatively underdeveloped areas, referring to the Opportunity Zone system that has been implemented since 2017 as a measure to promote investment in underdeveloped areas in the United States. It can be said.
- Opportunity Development Zones are expanding the tax benefits of American-style Opportunity Special Zones, and in addition to capital gains tax, they are also considering inheritance tax and gift tax reductions when reinvesting inherited and gifted assets, and corporate tax reductions for invested companies. In addition to tax reductions, special regulatory freedom zones We are also providing industry-related special benefits.
- Opportunity development zones that value the autonomy of local governments commonly provide tax benefits, rationalize the education system to supply essential human resources for the success of special zones, and eliminate regulations requested by local governments. It can be said that the current government's decision is to spare no effort in providing possible support to ensure that the economic revitalization measures attempted in special opportunity development zones are successful.
▶ Differences between the existing special zone system and opportunity development special zones
○ Special opportunity development zones are different from existing free economic zones and special zones for foreigners in that they offer unprecedented support.
- We plan to provide tax benefits that are significantly different from the existing tax support of local governments and customized regulatory special cases, rather than uniform regulatory special cases, in line with local growth strategies. In particular, it is expected that special opportunity development zones can play a central role in leading the balanced development of the region, in conjunction with tax support for individuals and companies, as well as revitalization of key universities, active attraction of educational institutions, and housing supply.
○ Special Opportunity Development Zones are different from other special zone systems in that the authority necessary for special zone planning is transferred to local governments, and the content submitted by local governments in their own planning and design is designated as special zones through a minimum deliberation process.
○ While the existing special zone system focuses on fostering specific industries, opportunity development special zones focus on dispersing the average population density.
○ In order for special opportunity development zones to take root as intended, the formation of a strong governance capable of pushing policy measures must be established as soon as possible.
- Active participation of local governments that will take the lead in the special opportunity development zone system, search for efficient operation, and raising awareness of balanced regional development among individuals and corporations can be said to be important success factors. The central government must provide strong institutional incentives to stimulate this awareness, and local governments must exert interest and effort to achieve the purpose of the system.
- There is a need to improve related systems not only for companies wishing to invest in special opportunity development zones, but also to establish the special opportunity development zone system in the future, and to strengthen planning capabilities to identify and support the needs of investment companies.
Ⅲ. Expected Effects
○ The Opportunity Development Zone system will be the first step toward securing a local growth base led by local governments. This is expected to be an important policy in resolving the inefficiencies caused by unipolar centralization in the metropolitan area and opening a regional era in which people can live well anywhere.
○ The significant expansion of tax support is expected to play an important role in motivating corporate investment.
- Of course, there is a need to simultaneously take measures to address the tax revenue shortage caused by local tax reductions, etc. Local governments with weak financial independence will need to make efforts to find a balance between the economic effects, such as expansion of jobs and increased local consumption, that can be achieved by attracting corporate investment in special opportunity development zones, and the lack of tax revenue due to tax reductions.
○ Strengthening the leadership of local governments and their special zone management capabilities
- In relation to special zone management, continuity, stability, and expertise are required, and in this regard, it is emphasized that there is a need to establish cooperative governance with the private sector within local governments.
- We would also like to emphasize that for the sustainability of special opportunity development zones, it is necessary to secure the responsibility of local governments. At this time, accountability means communication and cooperation between the head of a local government and the local council, and measures at the level of autonomous legislative authority will also be necessary for this.
- Securing local growth bases and driving forces is an important policy at the national level and has a structure that is left to the capabilities of local governments. Therefore, the expansion of autonomy of self-governing organization rights that can support capacity building within local governments and the central government's There is a need to build a system that can support expertise.