"Innovation Speed Will Not Slow Down"... New Designation of 4th Regulatory Free Zone (Comprehensive)

Minister Park Young-sun of the Ministry of SMEs and Startups is holding a briefing on the additional designation of regulatory free zones at the Government Seoul Office on the 13th. Photo by Ministry of SMEs and Startups

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[Asia Economy Reporter Kim Heeyoon] Park Young-sun, Minister of SMEs and Startups, stated on the 13th, "We will create a hub for regional balanced New Deal by discovering various items without slowing down the pace of innovation in the operation of regulatory free zones centered on speed, innovation, autonomy, and sharing."

At the 4th Regulatory Free Zone Committee briefing held at the Government Seoul Office on the same day, Minister Park explained, "It has been 1 year and 5 months since the regulatory free zones were established, and the results are good relative to the period. We see the regulatory free zones as the core leading the regional New Deal, which accounts for half of the Korean New Deal."

She continued, "A pilot fund was created for the regulatory free zones, but there is a need to activate capital inflow into the venture market, and I think this is a blue ocean. Recently, liquidity has been flowing heavily into real estate, but the Ministry of SMEs and Startups has proposed efforts to attract market liquidity into regulatory free zone funds, so more effort is needed for this strategy," she emphasized.

On the afternoon of the 13th, the government held the Regulatory Free Zone Committee meeting chaired by Prime Minister Chung Sye-kyun at the Korea Trade Insurance Corporation in Seoul and newly designated three 4th regulatory free zones focusing on the green and digital New Deal sectors. With this, the total number of regulatory free zones nationwide expands to 24.

The Ministry of SMEs and Startups announced that after deliberation on 18 special zone projects, three new zones and one additional project in an already designated zone were finally designated by the Regulatory Free Zone Committee.

The 4th special zones were designated mainly in the green and digital sectors, two core pillars of the Korean New Deal. The newly designated zones are Gwangju's "Green Energy Energy Storage System (ESS) Power Generation," Ulsan's "Carbon Dioxide Resource Utilization," and Gyeongnam's "5G-based Next-generation Smart Factory," totaling three zones. Additionally, the existing zone in Sejong added a demonstration project for "Autonomous Outdoor Robot Operation."

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A total of seven demonstration exemptions are granted in this special zone project. These mainly consist of measures to remove barriers to entry for new businesses, such as allowing power generation and electricity trading using energy storage systems and permitting commercialization of carbon dioxide conversion products that were previously halted due to regulations.

Gwangju is promoting itself as an energy self-sufficient city by creating a self-sustaining regional power ecosystem through Korea's first solar energy integration and direct power trading model. It recognizes power generation through energy storage systems (ESS), which was impossible under the current system, and allows aggregation of individual solar power production to be stored in large-capacity ESS and traded with electric vehicle charging operators, among others. The plan is to diversify the power system structure, which is currently centered on KEPCO, to establish a regional self-sufficient power ecosystem.

Ulsan is being developed as a carbon-neutral city based on carbon dioxide resource recycling. First, recycling of carbon dioxide conversion products (calcium carbonate) is permitted. Special zone operators can capture carbon dioxide emitted from waste incineration plants and sewage treatment facilities to produce calcium carbonate and commercialize it as construction materials (blocks, aggregates, etc.) and chemical materials (paper, rubber, etc.). It is expected that a significant portion of calcium carbonate materials, which have been highly dependent on imports from Japan, can be domestically produced. Ulsan, the city with the highest carbon emissions in Korea, is expected to reduce greenhouse gases (carbon dioxide) and accelerate the carbon-neutral society through this demonstration.

Gyeongnam leads the digitalization of small and medium manufacturing sites by establishing the world's first unlicensed band 5G smart factory. By raising the radio output standards within the factory and applying 5G communication technology characterized by ultra-high speed, ultra-low latency, and ultra-connectivity to smart factories, productivity increase and quality improvement will be achieved, advancing smart factories. Since many automobile parts companies requiring small-lot, multi-product production are located in the Changwon Industrial Complex, it is judged that there will be significant effects on revitalizing the regional economy and spreading to other industries such as shipbuilding and other industrial complexes.

Sejong is advancing as an autonomous driving specialized city where robots deliver food and perform COVID-19 quarantine and security patrols. In addition to the existing autonomous vehicle shuttle service demonstration, autonomous driving robot services in non-face-to-face fields such as delivery, security patrol, and quarantine will be additionally demonstrated to diversify the autonomous driving industry. This demonstration features the provision of integrated services such as integrated control of demonstration robots within the region and development of common charging and driving systems, and it is expected to accelerate the commercialization of autonomous driving through synergy effects utilizing the autonomous driving infrastructure of existing special zone projects.

The Ministry of SMEs and Startups expects economic ripple effects such as KRW 110 billion in sales, 648 new jobs, and 68 company attractions and startups during the special zone period following this regulatory free zone designation. Since its launch, the regulatory free zones have recorded achievements such as about 16% (662) job growth, KRW 316.9 billion in investment attraction, KRW 55.2 billion in venture capital (VC) investment, and attraction of 109 companies.

Investment promotion for innovative companies within the zones will also be pursued simultaneously. The Ministry of SMEs and Startups recently selected a fund manager for the "Regulatory Free Zone Fund" and plans to raise about KRW 35 billion by the end of this year to accelerate the creation of regional innovation performance. Depending on the investment demand of companies within the zones, an increase in the dedicated investment ratio will also be considered.

Minister Park Young-sun said, "The 1st, 2nd, and 3rd regulatory free zones proceeded in a bottom-up manner, but in the 4th round, the 5G smart factory zone was designated in a top-down manner. I think it is desirable for the government to lead new technologies and present the direction through top-down tasks."

She added, "At the Regulatory Free Zone Expo scheduled for the 26th and 27th, we plan to invite venture capitalists (VCs) to connect the venture investment sector with the regulatory free zones," and "The newly designated digital and green regulatory free zones will become forward bases for creating new industries and new services, opening the era of regional balanced New Deal."

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