Reasons for Proposal
With the advent of the era of the Fourth Industrial Revolution, technological innovations such as artificial intelligence, autonomous vehicles, and fintech are fundamentally changing the industrial landscape. Countries around the world, therefore, are pursuing drastic investment and regulatory reform at the government level to preoccupy the market by industry.
However, Korea, due to its excessive regulations against business entities who intend to develop technologies and enter a market, has a weak foundation for developing new industries. According to data from the Commission for Regulatory Improvement, as of 2014, the total number of regulations applied to the manufacturing and service industries reached 1,073 and 4,336, respectively. For example, financial, IT, and privacy regulations are being applied to the fintech industry in an overlapping manner because the industry has the nature of both financial service and information and communication service.
While the government was operating the specialized regional development system based upon regulatory exemptions and support of regional specialized businesses, there were systematic loopholes in the policy, such as that the current policy lacks flexibility because only the regulatory exemptions listed in the Act apply and that it does not permit the application of new technologies to regional specialized businesses.
In particular, although the metropolitan area is the center of innovative power, by accommodating about 50% of venture businesses in Seoul and Gyeonggi-do and about 30% of headquarters of ICT SMEs in Gyeonggi-do, it is even harder to make the most of new growth engines in the area compared to other regions due to excessive regulations combined with those of the metropolitan area, and in fact, the regional special zone designation rate in the metropolitan area is less than 16% of the total number of designated special zones.
For Korea to lead the Fourth Industrial Revolution, it is necessary to create a market environment in which enterprises with innovative technologies and competence can invest and grow at their discretion, by drastically reforming regulations and breaking the dichotomous thinking that separates the metropolitan area from other regions. The introduction of regulatory exemption systems, such as the Korean regulatory Sandbox system based upon supporting new industries through regulatory reforms and strengthening the competitiveness of the state and locals, shall be an alternative.
The amendment, therefore, aims to establish legal grounds for granting drastic regulatory exemptions to innovative businesses operated within the zones by introducing a new type of the Special Zone for Regional Innovative Growth System to support innovative growth in all regions of Korea.
Details
A. Change the name of the existing Act to "Act on Special Cases Concerning the Regional Special Zone for Balanced National Development and Regional Innovative Growth" as the Special Zone for Regional Innovative Growth System has been introduced to promote regional innovative growth resources and expedite the connection and utilization of new technologies while revitalizing existing regional specialized development zones
B. Contribute to the balanced development of our nation and regional innovative growth by establishing the basis for a self-sufficient and sustained growth of each region by selectively applying special regulatory exemptions, etc., to regional special zones in accordance with the characteristics of each region (Article 1)
C. Define "Regional Innovative Growth Business" as a business which promotes innovative growth of each region (for the metropolitan area, except for which is not the Special Support-needed Area, the Area around the Land to Be Returned, and the border area) by utilizing regional innovative growth resources and new technologies, proposed by the Mayor and Do Governor and pursued under the special zone for a regional innovative growth plan approved by the Minister of SMEs and Startups pursuant to Article 76 (Article 2 12)
D. Define "Special Zone for Regional Innovative Growth" as a zone which is subject to regulatory exemptions for supporting regional innovative growth businesses in City/Do designated and published by the Minister of SMEs and Start-ups pursuant to Article 76 (Article 2 13)
E. Require the Mayor or Do Governor who intends to be granted the special zone for regional innovative growth to establish a plan for the special zone for regional innovative growth jointly with private enterprises, etc., and apply for the designation of the special zone for regional innovative growth to the Minister of SMEs and Start-ups; and obligate the Minister of SMEs and Start-ups to approve the special zone for regional innovative growth plan after the deliberation and resolution of the Special Zone for Regional Innovative Growth Committee in consideration of the opinions of the heads of relevant central administrative agencies and the Chair of the Presidential Committee for Balanced National Development (from Article 73 to Article 76)
F. Establish the Special Zone for Regional Innovative Growth Committee, which is chaired by the Prime Minister, to deliberate and resolve matters concerning the approval of the special zone for regional innovative growth plan and the designation of the special zone for regional innovative growth (Article 78)
G. Establish the committee for regulatory exemptions, etc., of the innovative zone, which is chaired by the Minister of SMEs and Start-ups, for the preview, etc., of the deliberation and resolution by the Special Zone for Regional Innovative Growth Committee; and allow multiple subcommittees to be established under the committee for regulatory exemptions, etc., of the innovative zone for the professional review of the proposal of the Special Zone for Regional Innovative Growth Committee (Article 79)
H. Obligate the Special Zone for Regional Innovative Growth Committee to deliberate and resolve matters related to the basic direction of the operation of the Special Zone for Regional Innovative Growth System, the designation, change and cancellation of the special zone for regional innovative growth, regulatory exemptions, etc., and regulatory improvement for the operation of the special zone for regional innovative growth (Article 80)
I. Apply the exemptions for rapid confirmation, provisional approval, and verification to the special zone for regional innovative growth (from Article 86 to Article 92)
J. Allow the state and local governments to provide tax incentives and deductions of allotments to support regional innovative growth businesses in the special zone for regional innovative growth (Article 96)
K. Allow the state and local governments to provide financial support within their budget to support regional innovative growth businesses in the special zone for regional innovative growth (Article 97)
