Invest KOREA

O n January 31, 2019, the Presidential Committee on Balanced National Development (hereinafter referred to as “CBND”) announced the fourth five-year grand project for balanced national development. The CBND project was thoroughly reviewed by and finally passed at a national cabinet meeting presided over by President Moon Jae-in. A regionally balanced growth in Korea has been one of the most urgent agendas for all previous presidential candidates, but it was President Moon who took immediate action by urging the presidential committee to set up a concrete master plan for the coming five years from 2019 to 2022.

Although it may look magnificently beautiful to outsiders, many rural regions of Korean provinces have suffered from chronic under-development and deprivation for many decades. Some regions such as Gyeonggi-do and Incheon have recently shown robust growth, but almost all other regions are desperately struggling in one way or another to revive their local economies. The deviation or disparity of economic performance in different regions can be vividly illustrated by the statistics. Per capita regional GDP is the highest in Ulsan at USD 58,550 and in Chungnam at USD 45,270, but is less than USD 23,000 for such regions as Busan, Daegu, Gwangju, and Daejeon. In terms of per capita exports, Ulsan and Chungnam showed USD 60,600 and USD 42,600, respectively, but all of the cities mentioned above achieved less than USD 10,000. Some regions such as Gyeonggi-do and Incheon have shown relatively high regional economic growth rates of over 4 percent, but many regions like Daegu and Gyeongnam suffered low growth rates of 1.5 percent, and Gwangju of 1.6 percent. Indeed, except for Gyeonggi-do, Chungnam, Chungbuk and Incheon, all of the other 11 regions showed less than 3 percent growth rates for 2017.

The total budget for the CBND project for the coming five-year period is KRW 173 trillion, and it is almost equally divided into three categories: KRW 51 trillion for human resources development, KRW 66 trillion for constructing spatial infrastructure, and KRW 56 trillion for innovative industrial policies. For human resources development, the plan allotted KRW 51 trillion for providing education services, vocational training, day care, as well as medical and cultural activities in the regions. The plan has also set up an integrated system of infrastructure investment to revitalize rural areas. More specifically, the plan is designed to launch a system to renovate small and medium size cities, enabling them to fit well into technological innovation and cultural changes. For the industrial policies, the plan is geared toward achieving industrial innovation and building competitiveness. Innovating regional industries and building innovative cities are the key objectives of the total budget of KRW 56 trillion.

Through the grand CBND project, each region is designed to develop a specific industry according to its comparative advantage. For example, Gangwon-do will develop the smart-healthcare industry, Daegu will target the cutting-edge medical industries, and Ulsan will specialize in the eco-friendly energy industry. Busan will focus on the cutting-edge bio marine industry, Gyeongnam will specialize in the aerospace industry, while the Gwangju and Jeonnam areas will be devoted to the new energy industry. Jeonbuk will serve as the capital of the agro-engineering industry while the solar energy industry will play the central role for Chungbuk.

So far, as a grand plan is concerned, everything is fine. A more crucial next step is to prioritize the various plans and projects. Even the central government is unable to start all of these tasks at once. The first consideration in prioritization should be given to the current economic situations in the regions. The poorest and most deprived regions should be given prime priority. In this respect, deprived metropolitan cities such as Daegu, Daejeon, Gwangju and Busan should be the primary candidates. These big cities has lost their vigor and vitality for long period of time, losing tens of thousands of people. Old factories in these cities have lost their competitiveness, while new factories were built somewhere else. A renaissance in these cities seems of paramount urgency.

The second consideration in prioritization should be the probability of success. The authorities cannot waste precious resources by investing them into projects with the lowest chances of success. Therefore, innovating traditional industries seems more vital than venturing into unknown, unpredictable projects. In other words, enhancing the competitiveness of traditional industries facing hardship such as automobile or electronics seems more urgent than to support venture projects or investment.

The third consideration should be given to connectivity. Here, connectivity means that the fruits of development in one region should be spread and shared by other regions and industries. An isolated project solely for the sake of one region should be given the lowest priority.

Only with these three principles of prioritization could it be expected that the investment of the grand CBND project into the country’s most deprived regions would not only support economic development in the region, but can also spread quickly to other regions and industries to produce mutual benefits.

By Professor Se Don Shin
Dean, Sookmyung Women’s University
seshin@sm.ac.kr

The opinions expressed in this article are the author’s own and do not reflect the views of KOTRA