Globalization is making economic environments complex by means of borderless network, international trade, FDI, coalition of multinational corporations, and customer-centered market, etc. Particularly, the influence of national level macroeconomic pol...
Globalization is making economic environments complex by means of borderless network, international trade, FDI, coalition of multinational corporations, and customer-centered market, etc. Particularly, the influence of national level macroeconomic policies have been made limited over control and growth of national economy due to international spread of economic policies in the global environment. Also, the traditional policy process based on central authority has revealed limitations in solving complicated issues of regions as an economy has scaled up. As a result, there appeared the tendency of decentralization. So far, many advanced OECD countries have developed local economic policies based on the decentralization system. In Korea, by contrast, local governments’ planning of local economic policies and authorities of enforcement are insufficient. Particularly, lack of authorities and budgets is a primary reason why local governments have difficulty in initiating local-based economic policies. Also, both central and local governments have not made enough efforts to develop local economic systems appropriate for the new global environments.
Regions are primary bases of economic as well as social life. Along with globalization, the emergence of wide-range integrated economy makes region systematic unit of economy. Therefore, local economic policies are required for the sake of the creation of external economies, local revitalization and local competitiveness.
The policy implications are as follows that we learn from the experiences of several EU countries-Sweden with centralized local economic policies, France with decentralized local economic policy, and Italy with localized local economic policy. First, classification of regions is valid on EU level, but generally, European nations maintain systems that have been developed within a nation’s historical conditions. Second, because of changes in economic environments following the EU unification, direct developmental policies aimed at local balance have now converted to policies focusing on local competitiveness. In other words, local policies have changed to policies to develop further regions with potentials from policies to support underdeveloped regions. Third, the progress of EU unification has caused decentralization because the EU’s relief fund policy itself is for regions. On top of that, a region’s own policy is required for local competitiveness. Fourth, the governance of local economic policies for local growth has been made by means of foundation of local development organizations where private and public sectors like corporations, social partners, and government cooperate. Fifth, cluster support policies are selective by the characteristics of clusters. And both central and local governments are promoting cluster policies as industrial and business policies of the opening era. Sixth, although it is true that financial decentralization expands according to the growth of decentralization, there is no significant difference in relative importance of local finances between Italy with a federal system and centralized Sweden. This makes us reconsider on correlation between financial decentralization and local decentralization.
This study suggests financial decentralization, greater economic blocs led by local governments, and local governance reform to establish local economic policies. Also, this study proposes the following: ‘selection and concentration’ strategy and maximization of the effect of agglomeration; request of expanding the central government’s support on Gyeonggi-do’s underdeveloped regions; abolition of the tax policy discriminative to the capital region; and promotion of local development policy based on industrial policy.