Korea is rethinking how regional innovation translates into real economic outcomes. The government’s latest reform signals a decisive shift — one that measures growth not by the number of programs launched, but by the impact they deliver. This performance-driven approach could redefine how local innovation connects with national competitiveness.
Korea’s Regional Innovation Zones Enter a New Performance Era
The Ministry of SMEs and Startups (MSS) has unveiled the most comprehensive overhaul in 20 years of Korea’s Regional Specialized Development Zone system, a key policy tool for regional innovation and industrial decentralization.
The reform introduces a performance-based management model and a differentiated support system that ties government backing to tangible results. By integrating private-sector participation and measurable outcomes, the initiative aims to make regional innovation zones active engines of entrepreneurship and investment, not administrative titles.
Reform Highlights: From Regulatory Loopholes to Performance Accountability
The new framework restructures Korea’s 2004-era special zone policy into three types of development zones based on local industry scale and strategic potential:
High Value-Added Type
Designed for traditional industries such as agriculture or manufacturing, this model supports collaboration across full value chains — from production to processing, distribution, and sales — exemplified by the Gongju Chestnut Zone.
Convergence Innovation Type
Targets mid-sized emerging industries combining cultural assets and advanced technology, such as Digital Heritage Zones blending VR and AR for tourism and education. Local governments can apply for “individual regulatory exemptions” or expand existing ones by ordinance.
Challenge and Leap Type
Aimed at smaller, depopulated areas, this model empowers local creators and commercial planners to lead public-private consortia, developing place-based business initiatives under professional coaching from regional MSS offices.
Under the reform, zones will undergo five-tier performance evaluations, where excellent and outstanding zones gain additional funding and government program linkages. Underperforming zones — up to 10% of the total — face restructuring or phase-out through “honorary graduation.”
Policy Modernization and Legal Backbone
The Ministry will revise relevant legislation to formalize a 10-year maximum designation period and provide a legal basis for fiscal support tied to commercialization outcomes.
To strengthen coordination, a new Specialized Zone Strategy Council will be launched to connect central agencies, local governments, and private stakeholders. This council will oversee cooperative projects, promote knowledge sharing between regions, and encourage joint innovation programs across similar industries.
Regional SME offices will take the lead in hands-on management, guiding local governments through planning, execution, and evaluation to ensure performance-driven operations.
Stakeholder Perspectives: Building “One-Team” Local Growth
MSS Minister Han Seong-sook emphasized that Korea’s next stage of regional growth requires shared responsibility between government and private innovation actors.
“In the face of the local extinction crisis, specialized zones must serve as catalysts that transform regional strengths into thriving commercial ecosystems. Through this reform, we will build a one-team system between local governments and the private sector, creating a fair, performance-based culture that opens the true local era.”
The ministry also confirmed that these reforms align with the 2025 Regulatory Free Zone Innovation Week, which showcases nationwide efforts to integrate new industries and regulatory experimentation into balanced regional growth.
Why It Matters for Korea’s Startup and Investment Ecosystem
For global observers of Korea’s startup ecosystem, this reform signals a shift from policy-driven to performance-driven regional innovation.
By linking financial support to measurable outcomes, the MSS is reinforcing the direction set under Korea’s Third Venture Boom strategy — where venture investment is shifting from government-led subsidies toward scalable innovation and regionally balanced opportunities.
This reform also complements earlier policy tools such as the regional mother funds, four of which have currently been launched nationwide to channel capital into local startups and strengthen regional investment ecosystems.
The integration of Challenge and Leap zones — which invite private creators, entrepreneurs, and investors to co-develop regional growth projects — suggests a growing openness to bottom-up innovation and cross-border collaboration in underdeveloped provinces.
True Local Era: A Foundation for Korea’s Regional Rise
Korea’s overhaul of its regional development policy marks a strategic step toward building a national startup ecosystem that reaches beyond Seoul.
By blending performance evaluation, legal accountability, and private participation, the reform represents more than administrative restructuring — it is a shift in philosophy.
If successfully implemented, these zones could become a prototype for inclusive growth, linking venture capital, local industries, and innovation talent into one national network.
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