Land Use Regulations and Efficiency of Seoul's Economy

Abstract

To revitalize Seoul's economy it is necessary for the Korean government to restructure various systems and facilities to make them convenient for businesses. Numerous land use regulations currently retard not only business activities of domestic firms but also foreign direct investments in Korea, most of which are interested in locating their businesses in the Capital Region. This paper concerns mainly three types of land use regulations affecting business activities in the Capital Region: zoning plans, the Capital Region Concentration Control Policy and the Greenbelt. It is recommended to make the zoning plans more flexible and to adopt the spatial pollution charge and the performance zoning system rather than the traditional zoning plans to provide strong incentives for firms to abate the pollution. The Capital Region Concentration Control Policy made firms' optimal locations impossible without contributing to the containment of population and economic concentration in the Capital Region. The paper argues that the Capital Region Concentration Control Policy should be abandoned and instead the congestion and pollution problems in Seoul should be solved by using transportation demand management policies such as congestion pricing, parking space controls, and gasoline price increases. It is suggested that Seoul's Greenbelt should be relaxed greatly. Seoul's Greenbelt has reduced the land supply and so raised land values substantially in Seoul. The resulting increases of land values made Seoul to develop at such high density that parks and other open spaces disappeared in the inner parts of Seoul.