"As there is no sky for a bird locked in a cage, there is no innovation if locked in a regulation.” This is what the Minister of SMEs and Startups said when she announced the designation of seven regulation-free special zones, for the first time in the world in July 2019. It illustrated the Korean government’s determination to create a flexible business environment in the face of the fourth industrial revolution wave. Regulation-free special zones are areas designated to allow firms to conduct business freely without restrictions from regulations, to carry out tests for innovative technologies. Also, innovative firms will be fostered through support measures such as R&D funding and tax breaks.

Seven regulation-free special zones designated are as follows: Gangwon Province, Busan Metropolitan City, Sejong City, North Gyeongsang Province, Daegu Metropolitan City, South Jeolla Province, and North Chungcheong Province. Each city and province was assigned with an industry to focus on. First of all, Gangwon Province was selected to foster digital healthcare. The province will be fostered as a center of the bio-health industry, driven by bio and medical device companies and organizations located in Chuncheon and Wonju. Six regulation exemptions will be applied to telemedicine and monitoring by wearable devices, among others.

Secondly, Busan City was designated as a regulation-free zone for blockchain technologies. Blockchain applications are expected in four areas including logistics, tourism, safety and finance. A total of eleven regulations have been lifted. For example, to resolve the conflict between the undeletable nature of blockchain and the Personal Information Protection Act, an exception will be applied to allow the off-chain method.

BNK Busan Bank, who will take charge of blockchain applications in finance, signed an MOU with Xntree of the U.K. in August 2019 to discover and foster Busan-based unicorns in fintech, blockchain, and smart city.

Third, Sejong City was designated as a regulation-free zone for self-driving. The city aims to grow as the center of Korea’s first autonomous vehicle commercialization through the demonstration of the Bus Rapid Transit (BRT) and commercial buses in urban parks. The city plans to conduct step-by-step demonstration projects, placing priority on safety. To accelerate the development of technologies related with autonomous driving, it signed an MOU with LGU+ in August 2019 to develop and foster connected self-driving cars utilizing the 5G communications network.

Fourth, North Gyeongsang Province was designated as a regulation-free zone for next-generation battery recycling. The next-generation battery recycling industry includes re-processing of batteries produced from electric vehicles, which can be re-used in other industries, or retrieval of key materials through battery recycling. Seven regulations have been lifted, including permission of demonstration to devise the standard for dumping and re-usage of waste batteries. In the future, it is expected to contribute to the localization of materials by extracting lithium and cobalt, the core materials of batteries.

Fifth, Daegu City was designated as a regulation-free zone for smart wellness. Smart Wellness is a compound word of smart, well-being, fitness and happiness. It refers to an industry of next-generation care for a healthy life, including a remote personal PT service utilizing VR technologies and customized 3D printing plaster cast. Seven regulation exemptions, e.g., establishing the world’s first joint medical devices manufacturing plant adopting 3D printers, are in store.

Sixth, South Jeolla Province was designated as a regulation-free zone for electric mobility (e-mobility). E-mobility is a personal transportation means adopting electricity as a motor, including electric kickboards, electric bicycles, electric vehicles, and etc. The industry will be fostered through the development of related safety measures and test driving. It is expected to lead to new industries as transport using ultra-small electric car or car-sharing business become possible.

Seventh, North Chungcheong Province was designated as a regulation-free zone for smart safety control. The province aims to formulate a standard for wireless control, managing the safety gas alarm and shut-off system-which used to be controlled only through wired system-by using AI and IoT. It also plans to take a lead in technology standards by working out wireless control and shut-off standards in the gas equipment sector, for the first time in the world.

Having taken the first step toward the future, the Korean government plans to continue actively and systematically support the Regulation-Free Special Zones. By setting up an institution to comprehensively control and operate regulation-free zones, the government will manage the status of regulation overhaul, etc., while nominating an Ombudsman for follow-up management. As regulation-free zones provide testing grounds for innovation, new industries are expected to grow even further.

                                      
Source: Ministry of SMEs and Startups, Busan Metropolitan City, Sejong Special Self-Governing City

Sohyun Kim (sush1224@kotra.or.kr)
Manager/Invest KOREA