As Solution to Disparity in Local Economies, Capital Relocation Plan Has Its Limits

If the capital relocation plan to Chungcheong area is actualized, the local economies in the Honam and Gangwon areas will worsen, an analysis reported.

According to the “Analysis Research of the Socio-Economic Influence of the New Administrative Capital Establishment” released last December by the Korea Research Institute for Human Settlements, a government-supported research institute, the capital relocation will make the national budget focused in the Chungcheong area and increase population growth in its surrounding areas. As a result, it estimated that production in Chungbuk (Northern Chungcheong) and Chungnam (Southern Chungcheong) would increase by 4,525.4 billion won.

In contrast, the metropolitan areas of Seoul, Gyeonggi, Incheon, and other cities will experience decreases in production of administrative services, educational and health industries, and others. The study predicts that the estimated decrease in production will be 4.0004 billion won

It also forecast that the population in Honam and Gangwon, considered as underdeveloped areas, would flow into the Chungcheong area, which would then cause local production volume to decrease by 188.5 billion won and 60 billion won, respectively. In particular, Jonnam was expected to experience a 155.4 billion won decrease in local production volume, which makes the area the biggest potential victim of the capital relocation plan except for the metropolitan area.

For the Youngnam area, Gyeongbuk, situated close to the Chungcheong area, will experience a 44 billion won increase, while Gyeongnam will experience a 154.3 billion won decrease. Overall, the Youngnam area will experience a 110.3 billion won decrease in local production volume.

This research has taken a 0.5 million population model for the new administrative capital among the three scenarios suggested by population scales of 0.5 million, 0.7 million, and one million. If the standard changes to the one-million-population model, the economic influences between the Chungcheong area and non-Chungcheong area become more drastic.

The institute explained, “The negative influence on the Honam area (caused by the capital relocation to the Chungcheong area) was analyzed by the standard of the current situation,” adding, “After the new capital is established, we can also expect the transactions between two regions, Chungcheong and Honam, to increase, which will bring a positive aspect to the situation.”

Regarding this issue, economics professor Kim Kyoung-hwan at Seogang University commented, “It is much likely that the relocation to the Chungcheong area will merely extend the metropolitan area further down to Chungcheong area,” and added, “There is a limit to solving the problem of inequitable development through the capital relocation plan.”

Kwang-Hyun Kim Ki-Jeong Ko kkh@donga.com koh@donga.com