"'Galapagos Regulation' Unique to Han... 184 Commercialization Cases Opened Through Sandbox"

KCCI, Comprehensive Analysis of Sandbox Approved Projects
Including Significance of Regulatory Sandbox and Policy Recommendations

[Asia Economy Reporter Choi Seoyoon] Regarding the sandbox, which has become a testing ground for government regulatory innovation, it has been suggested that projects with significant ripple effects or those with secured grounds for regulatory law revisions should have related laws promptly revised and business implementation conditions eased to enhance global competitiveness.

The Korea Chamber of Commerce and Industry (KCCI) Sandbox Support Center released a report titled “Analysis of Regulatory Sandbox Approved Projects and Regulatory Status” on the 31st. The report conducted a full analysis of 184 projects approved through the Sandbox Support Center from May 2020 to this month and included the significance of the regulatory sandbox along with recommendations.

The regulatory sandbox is a system that grants special exceptions to innovative businesses hindered by outdated laws and systems. Since May 2020, KCCI has acted as a private reception body for the regulatory sandbox for about 900 days, supporting companies in passing the regulatory sandbox process.

Regulatory Barriers Unique to Korea... Business Models Once Impossible, Opened by the Sandbox

The report evaluated the regulatory sandbox as a problem solver that breaks down the “Galapagos regulations” unique to Korea. According to the report, 88% (162 out of 184) of KCCI’s regulatory sandbox approved projects were business models possible overseas but impossible domestically.

A representative example is “non-face-to-face medical care.” Telemedicine, which began mainly in advanced countries such as the United States, the United Kingdom, and Europe, gained global attention due to COVID-19 but was impossible in Korea due to regulations.

Through the regulatory sandbox, telemedicine services by Korean medical staff for overseas Koreans, services allowing testing for sexually transmitted infection pathogens at home using home kits, and smart devices enabling rehabilitation therapy at home have taken their first steps.

In the mobility sector, many cases resolved the “Galapagos regulations.” In automotive powerhouses like the U.S. and Germany, services such as OTA (Over-the-Air) updates for vehicle software and 3D precision map services to enhance autonomous vehicle performance were possible, but these businesses were difficult in Korea. Vehicle P2P services sharing personal vehicles and NEMT (Non-Emergency Medical Transportation) services transporting patients with mobility difficulties to hospitals using private cars, already possible overseas, all began in Korea through the regulatory sandbox.

Mobility, Medical, Sharing Economy Knock on Sandbox... ‘Regulatory Sandbox = Target for Regulatory Innovation’

The report mentioned that the regulatory sandbox opens a “door of opportunity” for new businesses. Analyzing KCCI’s approved sandbox projects, the most were in mobility (37 projects), sharing economy (26), medical (23), energy (20), and smart devices (17). Nearly half of all approved projects were in mobility, sharing economy, and medical sectors.

Especially, startups and small and medium-sized enterprises (SMEs) mainly utilize the regulatory sandbox to launch new businesses. In fact, 138 out of 184 approved projects (75%) were applied for by startups or SMEs. Recently, large corporations’ use of the regulatory sandbox has also increased. The proportion of large corporations rose from about 18% in 2020-2021 to 32% as of October 2022, a 1.7-fold increase.

The regulatory sandbox was also evaluated as a “compass for regulatory innovation.” It indicates where laws or systems need to be changed to ease regulations. Among the 184 KCCI-approved sandbox projects, regulatory improvements were made for 41 projects (22%). Of these, 28 projects had completed revisions, and 13 had partial legal revisions. This is significant as regulations were innovated proactively before the demonstration projects ended.

Many regulatory sandbox-related items were also included in the recent government-announced regulatory innovation tasks. KCCI requested prompt legal revisions for 22 sandbox projects, and the government announced improvement directions for 18 of them.

KCCI Requests ‘Prompt Legal Revisions, Easing Business Implementation Conditions, Strengthening Control Tower Role’

The KCCI report also included recommendations for the sandbox. It identified the development directions for the regulatory sandbox as ▲ prompt legal revisions ▲ easing business implementation conditions ▲ strengthening the control tower role.

KCCI stated, “While the regulatory sandbox has opened the way for commercialization, many overseas cases already have complete legal systems allowing business without regulations. Projects with many sandbox applications, those with significant ripple effects, and those with secured grounds for regulatory law revisions should have laws promptly revised to establish a foundation for global competition.”

Additionally, KCCI sees the need to ease implementation conditions for regulatory sandbox projects. When receiving regulatory exceptions through the sandbox, conditions such as demonstration areas, demonstration scale, and additional conditions before and after business implementation are imposed to ensure public safety. However, there are calls to ease conditions for projects with verified safety or those requiring expanded demonstration scales. In a survey conducted by KCCI in May, over 80% of companies responded that easing business implementation conditions is necessary to vitalize the regulatory sandbox.

The report also emphasized strengthening the control tower role. Regulatory sandbox approved companies often face regulations from multiple ministries for a single business model and must coordinate not only with regulatory ministries but also with local governments. According to KCCI’s survey, difficulties in coordinating with regulatory ministries and local governments were cited as challenges when using the regulatory sandbox. There is a need for a control tower that can support coordination with regulatory ministries.

Kang Seok-gu, Head of the KCCI Research Department, said, “Domestic companies still start businesses under stricter regulatory environments than overseas. The government must promptly revise unreasonable systems that do not meet international standards to support innovative companies so they do not fall behind in global competition.”

This content was produced with the assistance of AI translation services.