Sandbox in Korea

A status on Sandboxing in Korea was presented at the Global Innovative Growth forum, GIGF 2019.

The organizers, Ministry of Economy and Finance and the World Bank, had invited Jungwook Kim of Korea Development Institute to give a review of the status of regulatory reform policy in Korea. There have been complaints about the highly regulated business environment in Korea that it is not conducive to introducing new technologies and services. To reduce the lead time of products or services, Korean government decided to change the current legislation. The main principle is Ex Ante authorisation and Ex Post regulations. President Moon Jae-in have been working actively on the issue and last year five specific Sandbox Acts was introduced and came in to effect during this year.

These laws will be in effect for a limited time and their purpose is to provide limited regulatory exemptions to test new technologies, services and methods in a living testbed. Companies that want to take part in this program apply to the relevant sandbox. The government provide companies with information on whether their new businesses collide with regulations within 30 days after the request. If the government does not respond within the deadline, the firms can assume there are no existing rules concerning the new business.  If regulations do exist, the government can give companies exceptions with provisions added, such as requirement to plan for special insurance or clarify liability. However, there is not a one-stop-shop for all sandbox requests but one each for ICT, Convergence Industries and FinTech.

There is also a procedure to take part in the special regulation for Regulation-Free Special Zones. While companies are actors in other technology-based sandbox, under these Regulation-Free Zones, a city or province file an application to the Ministry of SMEs and Startups. Currently, there are 7 such regions and the decided permissions stipulate which specific business area and project is connected to which zone. Autonomous driving, as an example, is designated to the Sejong Regulation-Free Special Zone, and the regulation concerns substantiation on operating an autonomous bus. The Busan zone is reserved for Blockchain and the provision of life-style-block-chain-based services, etc. Korean government expects that this policy would also contribute to make a balanced national development.

Since its adoption in early 2019, 81 projects were processed between until July. Most of them (46 percent) were of the Financial Regulatory Sandbox, 32 percent were of the Industrial Convergence Regulatory Sandbox, and 22 percent the ICT Regulatory Sandbox.

By far, most applications were made by SME’s and Startup’s.  Most of the technologies were app-based and Finance was the most common industry. On average, it took 44 days for companies to receive an official answer since it filed an application.

Other interesting efforts for regulatory reform in Korea include a public petition system www.sinmungo.go.kr, where Koreans and companies are invited to petition for improvements in regulation, andwww.better.go.kr, that provide information on key regulatory reform tasks and development throughout Korea. These were introduced in 2014.

The petition procedure consists of three steps: First, if a petitioner requests the improvement of regulations, the competent administrative agency review the petition and provides a response within 14 days. Petitions that have not been accepted are subsequently sent to the Prime Minister’s Office for a second review conducted jointly with civilian experts to see whether the agency’s response to the petition is reasonable. If a response is found to be unreasonable, the concerned administrative agency is required by the Prime Minister’s Office to conduct a second review of the petition within 3 months. If the second response by the agency is still found to be unreasonable, the petition is brought to the Regulatory Reform Committee (RRC), which issues a recommendation for regulatory revisions to the agency if it deems this necessary.

More time is needed to evaluate how well the Sandboxes are working. But there is no doubt that they are popular as they are often mentioned in discussions about innovation of the 4th Industrial Revolutions Technologies in Korea.

 Authors

Anders Hektor and Seyeong Yoon