The government on the 20th of this month approved an amendment to an enforcement decree establishing the legal basis for a "regional preference index." The system divides the country's 229 cities, counties and districts into four tiers, weighing distance from Seoul, level of regional development and whether the area is losing population. The Ministry of the Interior and Safety placed a draft public notice setting out the detailed calculation and operating standards under administrative advance notice from the 21st through November 2.
The government has also applied tier-based differentials to 23 programs in next year's budget proposal, including local-love gift certificates and the Youth Job Leap Incentive. Consolidating regional support standards that had varied by ministry and program into a single framework, and directing more support to struggling areas, is the right approach. But whether the yardstick dividing regions by their circumstances is accurate, and whether that yardstick can actually revive those regions, must be examined separately.
There is some logic to the government's reasoning. In a country where jobs, talent and infrastructure are concentrated in the capital region, distance from Seoul is a disadvantage. The problem is the weighting. According to the Interior Ministry, distance from Seoul is assigned a weight of 1, while socioeconomic indicators bundling 44 measures such as population, industry and jobs are assigned 0.5. In effect, distance carries twice the weight of socioeconomic indicators.
Controversy over the classification results has already surfaced. According to local media, Inje County in Gangwon State ranked 151st out of 167 areas in the Korea Development Institute's assessment of regional underdevelopment, yet was grouped into Tier 2 alongside Chuncheon, Wonju and Gangneung. Even if the two assessments differ in purpose and indicators, an explanation is needed as to whether distance weighed too heavily relative to actual regional conditions. Distance on a map must not stand in for a region's circumstances.
The broad outline of the formula has been disclosed, but there are no figures to confirm why Inje County falls into Tier 2. The government does not disclose individual index values or rankings, citing the need to prevent stigmatization and excessive competition among regions. The point is not to publish the entire ranking table. At a minimum, each local government should be told its own index value and the tier boundary thresholds, and given an opportunity to contest erroneous data or classifications. This procedure should be built in before the public notice is finalized.
There are also limits to how binding the system is. The national subsidy rate for local-love gift certificates does range from 3% in Tier 1 to 9% in Tier 4. But whether to apply the index beyond the 23 programs, and how much preference to grant, is left to each ministry. The enforcement decree merely states that central ministries "shall endeavor" to use the index.
Foreign cases suggest alternatives. The European Union divides regions into three categories — less developed, transition and more developed — and sets maximum project cost support rates of 85%, 60% and 40%, respectively. It does not stop at sorting regions; it also sets support rates by category. Korea should likewise set tier-based add-on rates to the standard subsidy rate for each program, and require ministries that decline to apply them to explain why.
Germany has made support for disadvantaged regions a joint task of the federal government and the states under its constitution. The support rules are set jointly and the costs are split evenly. Selecting and executing projects falls to the state governments. That is a fundamentally different starting point from Korea's system, which asks central ministries only to "endeavor."
Japan, by contrast, has capped enrollment increases at universities in Tokyo's 23 wards and relocated functions of the Agency for Cultural Affairs to Kyoto. Yet the Japanese government has assessed that a decade of regional revitalization policy failed to alter the broader trends of population decline and concentration in Tokyo. Relocating a few institutions and parceling out program-by-program subsidies proved insufficient to overcome the pull of the capital region's jobs and education.
Britain operated three separate regional development funds supporting urban regeneration, transport and local economies. Local governments had to submit a plan for each fund, and some funds involved competitive bidding. The National Audit Office noted that delays in government approvals, compounded by inflation and shortages of specialist staff, left a considerable number of projects struggling to meet deadlines. Britain has since scaled back competitive bidding and shifted toward pooling funding from multiple departments for some metropolitan areas, allowing regions to spend it according to their own priorities.
Korea, too, should bundle jobs, transport, healthcare and education programs at the regional level and fund them over multiple years. The central government should set the principles and secure the funding, while allowing local governments to select and coordinate the programs they need. Disadvantaged areas should receive not only project funding but also specialist staff and planning budgets. Rather than looking only at how much was spent, the government should assess how much the support actually improved jobs, youth retention, and healthcare and education conditions.
The index will be recalculated every year. If tiers shift annually, funding for multiyear projects could be destabilized. Calculations should average indicators over several years. And even when an area improves and moves into a tier with less preferential treatment, support should not be cut sharply all at once. Phasing reductions in is the way to prevent a "support cliff."
The regional preference index is not the answer to balanced development but a starting point. What is needed is a government that does not stop at sorting regions into four tiers, but grants them the authority, funding and opportunity to climb out of those tiers.
