The Ministry of SMEs and Startups (Minister Oh Young-joo, hereinafter referred to as the Ministry of SMEs and Startups) announced that it held the 15th Regulatory-Free Special Zone Committee and deliberated and decided on the designation (plan) of three new regulatory-free special zones and three global innovation regulatory-free special zones (hereinafter referred to as global innovation special zones).
Regulatory-free special zones are a system that grants regulatory exceptions to specific regions for a certain period of time after consultation with regulatory ministries in order to foster regional strategic industries and innovative projects, thereby enabling the demonstration of new technologies and new industries.
The Ministry of SMEs and Startups has designated a total of 39 regulatory-free special zones over nine rounds from 2019 to 2024 and supported 89 demonstration projects, thereby contributing to the creation of a foundation for regional growth by creating economic outcomes such as ▲corporate relocation ▲investment attraction ▲job creation ▲sales increase to special zones where new industry demonstrations are possible along with deregulation of new technology and new business sectors.
In the case of the Gyeongbuk Battery Recycling Special Zone (Phase 1, '19.8~'23.8), it is developing into a regional innovation cluster by attracting large-scale investments of a total of 5.7 trillion won, including the establishment of a battery recycling plant, and hiring about 130 people. In addition, the Jeonnam e-Mobility Special Zone (Phase 1, '19.8~'23.8) has laid the foundation for revitalizing the regional economy by attracting investments of 110 billion won, including the establishment of an ultra-compact electric vehicle production plant within the special zone, and achieving exports worth 11.3 billion won to the Southeast Asian market after the end of the special zone period.
The Ministry of SMEs and Startups has been designating additional global innovation special zones that are more advanced regulatory-free special zones to focus on supporting overseas expansion of local companies since 2024.
▲In cases where it is difficult to allow regulatory exceptions domestically and verification is difficult, ▲In cases where the main purpose is to develop products that meet overseas demand and enter overseas markets, ▲In cases where there is a lack of specialized research infrastructure domestically, a global innovation special zone is designated to support not only regulatory exceptions but also verification and certification overseas.
'For the first time in 24 years, four special zones were designated, including AI Healthcare (Gangwon) and Advanced Regenerative Bio (Chungbuk), and the Special Zone Committee decided to designate three additional zones.
The three newly designated 10th Regulatory-Free Special Zones and three 2nd Global Innovation Special Zones this year are as follows.
◆ 10th Regulatory Free Zone Newly Designated (3 Locations)
- (Daejeon Space Technology Research and Utilization Special Zone) High-pressure gas components for space propulsion are core components of space vehicles such as launch vehicles and satellites, but the current related laws are based on general industrial use and are not suitable for application to space and aviation components. Accordingly, this special zone establishes separate technical standards for high-pressure gas components for space propulsion and verifies testing, manufacturing, and use of the components.
Participating companies will have the autonomy and flexibility to design, test, and certify high-pressure gas components for space propulsion, and if the standards are legislated in the future, a foundation for the growth of the private-led space industry is expected to be established.
Through this special zone designation, Daejeon, which was designated as a space industry cluster along with Jeonnam (launch vehicle) and Gyeongnam (satellite) in 2022, is expected to strengthen its function as a 'research and talent development' hub in the space industry. In particular, through the special zone project, it is expected that the transition to a civilian-centered space transportation system will begin in earnest as it will be the first in Korea to have a legal and technical system that enables the commercialization of high-pressure gas components for space propulsion. - (Ulsan Ammonia Bunkering Special Zone) Ulsan will promote bunkering (TTS) technology development and demonstration projects to supply fuel to medium and large-sized ammonia-powered ships by utilizing Ulsan Port, the No. 1 liquid cargo handling port in Korea, and its shipbuilding and chemical industry base.
In the Ulsan Special Economic Zone, a special provision will be granted to allow the supply of ship fuel (ammonia) using mobile tankers, and after going through stage-by-stage verification under thorough safety management, the relevant law, the 'High Pressure Gas Safety Management Act', will be promoted to establish standards, etc.
With ammonia expected to account for 44% of eco-friendly fuels in the shipping industry by 2050, Ulsan plans to establish preemptive standards for ammonia-powered ship fuel supply systems and domestically produce key equipment to build an eco-friendly shipbuilding industry ecosystem. In particular, since many capable companies in free economic zones are participating in this project, economic spillover effects are expected through cooperation in commercialization between regulatory-free special zones and free economic zones. - (Jeonbuk Functional Food Special Zone) The functional food industry is a rapidly growing field due to the advent of a super-aging society and the increase in K-food exports. In the special zone, safety and application standards and specifications are verified to expand functional raw materials applicable to general foods, and a health functional food sharing factory is operated to verify the production of functional raw materials and health functional foods.
Currently, among the 68 functional raw materials notified by the Ministry of Food and Drug Safety, only 29 types of raw materials can be added to general foods to indicate their functionality. However, through this special zone designation, verification for establishing general food application standards and specifications for an additional 11 types in addition to the 29 types will be permitted, enabling the development and production of foods with functional indications. In addition, verification exceptions for shared factory operation that allow multiple companies to produce health functional foods in one manufacturing facility will also be applied.
As the designation of special zones expands the general food market utilizing functional raw materials and enables the production of health functional foods through shared factories, it is expected that the functional food market will diversify and the market entry of small and medium-sized food companies will be promoted, thereby forming a high value-added food market and strengthening the competitiveness of K-food.
◆ Newly Designated 2nd Global Innovation Special Zone (3 Locations)
- (Daegu AI Robot) Daegu is promoting AI robot technology innovation by utilizing existing AI robot-related infrastructure such as advanced manufacturing zones (Daegu Technopolis, national industrial complexes, etc.) and AI innovation zones (Suseong Alpha City) and easing AI-related regulations. In addition, through strategic collaboration with companies in free economic zones, etc., it is supporting the overseas expansion of special zone companies by demonstrating products that meet overseas demand.
In Daegu, through this special zone designation, filming, collection, and processing of videos containing personal information of AI autonomous robots without the consent of the data subject are permitted for research purposes only. In addition, AI autonomous robots can be demonstrated on the road for a certain period of time in a specific area for the development of road work robot technology.
Through the designation of special zones, we will support customized overseas verification for overseas demand sources, and from the product planning stage, we will also support overseas certification for conquering overseas markets such as the US and Europe, and international joint R&D to secure innovative technologies from excellent overseas companies and research institutes. In addition, we plan to lead rapid commercialization and international standards by improving unreasonable regulations and establishing preemptive standards in the field of new AI robot technologies. - (Gyeongnam Next-Generation Advanced Satellite) Gyeongnam plans to designate the space industry as a regional strategic industry and establish a space development cluster by 2028. In addition, in order to transform the satellite development system from state-led to private-led, procedures for developing private satellites will be established through private-led (ultra)small satellite development, and verification of additional missions in space, such as space object observation and self-destruction, will be promoted using the developed satellites.
In Korea, there have been no regulations related to access and servicing of space objects such as satellites in space orbit, verification systems for satellite development processes, or safety verification procedures for space components. Through this special zone designation, the establishment and verification of such procedures will be permitted, thereby strengthening the accessibility of private companies to the space industry.
In the special zone, we will work with the United States, which has extensive experience in the development process of private satellites, to establish satellite development procedures that are not available domestically, and conduct overseas verification joint R&D with British universities that have specialized personnel in space environment testing infrastructure and equipment utilization technology that are lacking domestically. Through this, we expect that space industry special zone companies will acquire advanced overseas technology know-how and strengthen their global competitiveness. - (Daejeon Synthetic Biology-Based Advanced Bio-Manufacturing Special Zone) Daejeon aims to become a leading city that revitalizes the local advanced bio-manufacturing industry by developing and producing candidate substances using genetically modified organism (LMO) technology for various purposes such as food and cosmetics.
Currently, when genetically modified organism (LMO) technology is used for multiple purposes, risk assessment must be conducted separately for each purpose, but through this demonstration, we plan to promote demonstration that simplifies the risk assessment procedure when the purpose of the candidate substance is changed from industrial, food, agricultural, forestry and livestock use to healthcare use.
Daejeon plans to expand the commercialization stage of special zone companies overseas by utilizing Singapore's relaxed regulatory environment and collaborating with local universities to conduct joint research and development and product market testing. It is expected that this will be an opportunity for the domestic ecosystem to advance to the next level by cooperating with overseas countries that are more advanced than Korea in genetically modified organism (LMO) technology, biofoundries, and product markets.
◆ Strengthening of linkages between special zones and empirical results, etc.
- By applying the high-pressure gas components for space propulsion developed in the Daejeon Space Technology Research and Utilization Regulatory Free Zone to Gyeongnam’s next-generation advanced satellite, the establishment of a three-way system for the space industry cluster will be solidified and the domestic space industry value chain will be strengthened.
- The Ulsan Ammonia Bunkering Regulatory-Free Special Zone will utilize the achievements of ammonia-related ship equipment and materials developed in the Busan Ammonia Eco-Friendly Energy Regulatory-Free Special Zone (designated in 2021) and the Gyeongnam Ammonia Co-fuel Propulsion System Ship Regulatory-Free Special Zone (designated in 2022) to quickly promote verification and prevent overlapping financial support between special zones.
In addition, by forming a cooperative body led by private businesses participating in the three special zones to discover regulations in the eco-friendly shipbuilding industry and establish a technology cooperation system, we plan to establish an ammonia-based eco-friendly shipbuilding industry value chain and take the lead in international standardization. - The Jeonbuk Functional Food Regulatory Free Special Zone plans to establish a cooperative system with the Ministry of Agriculture, Food and Rural Affairs, the food industry promotion agency, while also cooperating with the Gyeongbuk Cell Cultured Food Regulatory Free Special Zone (designated in 2024) and the Gyeongnam Fishery By-product Recycling Regulatory Free Special Zone (designated in 2024) to strengthen the competitiveness of K-Food.
Minister of SMEs and Startups Oh Young-joo emphasized, “In order to take the lead in new industries, it is important to operate flexible laws and systems to support them and secure the technological competitiveness of companies. Regulatory innovation is an effective policy tool to increase corporate autonomy and encourage investment.”
He also said, “In a situation where external uncertainties are increasing due to tariff disputes and restructuring of the global supply chain, we will actively support regulatory-free special zones and global innovation special zones so that they can serve as useful policy tools to lead local innovative growth, such as overseas expansion and scale-up of our companies.”
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