Seoul played a pivotal role in the urbanisation process — its population was less than 2 million in the 1950s, but increased to more than 10 million in the 1990s. As Seoul grew, its surrounding provinces, Gyeonggi and Incheon, were integrated into a broad region now known as the Capital Region (CR). While the CR accounts for 11.8 per cent of South Korean territory, in 2012 it was home to 25.7 million residents (about half of the country’s population). Economic activity is also highly concentrated in the CR, accounting for 47.1 per cent of South Korea’s total firms in 2010.

In response to this mass migration and the CR’s rapid urbanisation, the South Korean government has enacted decentralisation policies and a nationwide growth management policy since 1982 in an attempt to minimise problems such as traffic congestion, environmental pollution and housing shortages, and to promote equitable development across the country.

Three key pieces of legislation were introduced in the CR to support the growth management plan: the Capital Region Readjustment Planning Act (CRRPA), the Industrial Sites and Development Act and the Industrial Cluster Development and Factory Establishment Act. Importantly, the CR’s Adjustment Committee — rather than provincial governments — had the authority to grant planning permits for land development, including residential development, industrial development and tourism development. A quota for the number of factories allowed to operate in the CR was also introduced, so that the establishment and expansion of factories were strictly controlled. Additionally, new universities could not be established and existing universities could not be expanded in the CR, the construction of public office buildings was controlled, and an ‘over-crowding charge’ was imposed on businesses that caused congestion in the CR, including the owners of retail outlets and office facilities.

This growth management policy has been the source of political debate for many years. While all three provincial governments in the CR oppose the strict regulations, the thirteen provincial governments outside the CR are in support of stricter regulations and disagree with the relaxation of such measures. Of course, businesses demand deregulation as the current policies prohibit them from extending their operations in the CR. They claim that the regulations are ineffective to achieve equitable development across the country. Rather, the regulations stimulate outflows of industrial activity overseas where cheap labour and land can be guaranteed, decreasing South Korea’s global competitiveness. In fact, new IT-related production lines have recently been created — while others have been relocated — in adjacent, low-cost countries like China. The debate surrounding the CRRPA lies between two extreme ideas: nationwide and equitable regional development versus the efficacy of these policies for further economic growth. Thus, policies on urban development have varied depending on the attitude of the ruling party.

Former President Roh Moo-hyun adopted a radical development policy to reduce the gap between the CR and non-CR regions. In 2003–08, his government made a thorough plan to relocate public offices, including 13 ministries and 154 public agencies and public institutions, outside the CR. A new administration-oriented town was constructed and public offices started relocating to this town in 2013. Also, public agencies were to be relocated to ten cities in non-CR regions with support from the government. Although presidents changed, these plans continue.

When the ruling party changed in 2008, then-President Lee Myung-bak employed a strategy to enhance the competitiveness of non-CRs rather than impose stricter regulations on the CR. During his term as president, regulations on industrial location were partially relaxed and quotas for factories were increased. In Seoul, small industrial parks were allowed for advanced technological industries such as cultural production and IT. The current Park Geun-hye government has, for now, continued on with the Lee government’s direction.

The CR is a fundamental part of the South Korean economy, and a wide range of stakeholders are involved in its growth management policy. In order to create an environment that is attractive to businesses and global investors, the current regulations must be reformed. But at the same time, the interests of non-CRs need to be emphasised if South Korea wants to achieve balanced, nationwide growth. The Park Geun-hye government now faces a dilemma that has persisted for more than three decades. A rapid revamp of urbanisation policy and the national economy, therefore, seems unlikely without a powerful political commitment.

Hyung Min Kim is a lecturer at Xianjiaotong-Liverpool University, China.

Kyoung Seok Jang is a legislative researcher at the National Assembly Research Service, Seoul.