"Regulatory Special Zones Should Reference Japan's Case with a Clear Control Tower and Inclusion of the Capital Region"

KEF Releases Report on Lessons from Japan's National Strategic Special Zones
Japan Introduced National Strategic Special Zones in 2013
A Total of 16 Zones Including Tokyo and Kansai Regions
513 Business Approvals Granted Under 78 Regulatory Exemptions
"Regulatory Reform Should Be Organized with Reference to Japan's Case"

In order to revitalize the Korean economy by easing regulations in designated areas through the "regulatory special zone system," experts have suggested that Korea should establish a strong control tower and refer to Japan's successful case of creating special zones that include the capital region.

Street scene in a Japanese city

On June 16, the Korea Economic Association (KEF) released policy recommendations to strengthen the effectiveness of the regulatory special zone system, based on a report titled "Case Study and Implications of Japan's National Strategic Special Zones," commissioned from Lee Hyukwoo, a professor in the Department of Public Administration at Paichai University.

According to this report, Japan introduced its national strategic special zones in 2013. This initiative was part of former Prime Minister Shinzo Abe's economic policy, known as "Abenomics," and was implemented with the goal of "creating the world's most business-friendly environment."

As of this month, there are a total of 16 national strategic special zones in Japan. These are distributed throughout the country, including major metropolitan areas such as the Tokyo region (the capital area) and the Kansai region (Osaka, Kyoto, etc.). Within these special zones, a total of 513 business approvals have been granted under 78 regulatory exemptions, demonstrating tangible results.

The report identified three key factors behind the success of Japan's national strategic special zones: a control tower directly under the Prime Minister, the creation of new regulatory exemptions based on user demand, and the inclusion of the Tokyo region.

First, Japan established the "National Strategic Special Zone Advisory Council," chaired by the Prime Minister, and appointed a minister in charge of special zones within the Cabinet Office, thereby securing a strong top-down implementation system at the central government level. The control tower was granted the authority to require relevant ministries, such as the Ministry of Economy, Trade and Industry and the Ministry of Education, Culture, Sports, Science and Technology, to take necessary actions, ensuring both momentum and coordination.

The report also noted that Japan established institutional procedures to create new regulatory exemptions based on user demand. This approach addressed the limitations of the so-called "menu-based exemptions," where only pre-determined exemptions could be selected. In particular, for regulatory obstacles in new industries, Japan utilized the regulatory sandbox system, which temporarily suspends regulations to foster innovation.

The report further explained that the Japanese government designated the Tokyo region as a national strategic special zone, easing land use regulations such as floor area ratio and land use changes, as well as green space ratio regulations for new or expanded factories, thereby enhancing the impact of regulatory reform.

The report emphasized that Korea should benchmark these success factors. Instead of dispersing special zone management authority among individual ministries or committees, such as the Ministry of SMEs and Startups, Korea should establish a clear control tower with the authority to coordinate complex regulatory interests, such as a presidential office-level institution.

The report also argued that Korea should move beyond simple menu-based or demonstration exemptions and proactively resolve regulations necessary for regional development in response to on-site demand.

Furthermore, the report suggested that Korea should refer to the example of regulatory easing in the Tokyo region and include the capital area in major special zone systems to realize growth potential. As Seoul competes with other major Asian cities to attract foreign companies, Korea should leverage the strengths of the capital region by easing floor area ratio and green space ratio regulations.

Professor Lee stated, "Regulatory special zones serve as innovative policy laboratories that can break through deeply entrenched 'bedrock regulations.' The new administration should reorganize the regulatory innovation system to respond swiftly to technological advancements and changes in the industrial field."