Sandbox, S. Korea’s new regulation paradigm

Regulation Sandbox, the much-hyped policy proposed by the South Korean government as a solution to regulation reforms, was kicked off Thursday. The policy allows new products and services to enjoy exemption or postponement of regulations for a certain period of time. As the name suggests, the new policy aims to provide opportunities for new businesses like school kids playing freely in a sandbox.

Of the five Regulation Sandbox laws, four were passed in the National Assembly last year, and two laws with enforcement decrees – Act on Information and Communications Convergence and Act on Industry Convergence and Facilitation – went into effect on Thursday. In April, the Act on Finance Reforms and Act on Special Economic Zone were enforced, and the remaining Framework Act on Administrative Regulation passed the standing committee. Upon introduction of the deregulation policy, as many as 19 requests were made in the private sector, with KT and KakaoPay seeking temporary service for “Facilitation of Mobile E-Bills in Public Institutions” and Hyundai Motor filing for temporary service and special case to install charging stations of hydrogen vehicles in urban areas. When passed, for instance, the request for special case will allow charging stations to be installed in Seoul, an effort previously thwarted by the existing safety laws on high-pressure gas management.

When operated properly, the Regulation Sandbox will prove to be more effective than any other reform drive. If the individual laws on accommodations sharing or carpool were compared to foot-soldiers, the Regulation Sandbox could well be likened to massive fighter jets. The latter is designed to allow businesses to skip tedious step of regulations on technologies and services, and put their products on the market immediately.

The United States adopted a similar policy drive that prioritizes implementation over regulation, which is giving birth to a constellation of new industries, but it took more than 10 years in South Korea to barely follow suit. On Tuesday, Hong Nam-ki, minister of Economy and Finance and deputy prime minister of South Korea, told a gathering of businessmen that he will see to it that “more than 100 cases of implementation of Sandbox will be achieved both with visibility and significant within this year.” Far from 100, it will take more than 1,000 successful cases every year for South Korea to catch up with advanced economies and unshackle new industries from the old practices of regulation. The government must adopt a more ambitious roadmap in pressing ahead with the Sandbox project. Even if it backfires, it can always be fixed with post treatment. Fear of failure is anathema to innovation.