South Korea designates 7 new regulatory-free zones to fast-track hydrogen, medical cannabis projects

The commercialization of new technologies — including hydrogen power generation, industrial cannabis cultivation and fuel derived from recycled waste plastic — is set to move into high gear.

The Ministry of SMEs and Startups and the Office for Government Policy Coordination announced Monday that they had designated seven new regulatory-free zones, including global innovation regulatory-free zones, at the 18th Regulatory-Free Zone Committee meeting. The designations grant a total of 13 regulatory exemptions.

Regulatory-free zones temporarily suspend regulations for a set period, allowing new technologies and industries to be tested in designated regions with the aim of nurturing local strategic industries. This round of designations focuses on building a commercialization foundation in climate technology, biotech and future mobility.

In Haman, Changwon and Jinju in South Gyeongsang Province, a pilot project will test a hybrid hydrogen power system that converts water into hydrogen and then uses it to generate electricity. Commercialization had been difficult due to the absence of relevant manufacturing and inspection standards, but the new exemptions are expected to accelerate development of next-generation hydrogen energy systems.

In Andong, North Gyeongsang Province, the permitted scope of medical cannabis use will expand to include trace cannabinoids. Industrial use of cannabis is currently banned outright in South Korea, forcing the country to rely entirely on imports for related pharmaceuticals such as treatments for pediatric epilepsy. The Ministry of SMEs and Startups designated Andong as an industrial hemp regulatory-free zone in 2020, supporting pilot manufacturing of active pharmaceutical ingredients limited to cannabidiol, a neurologically calming compound. Expanding the industrial pilot scope to cover trace cannabinoids is expected to broaden the range of medical cannabis-based active pharmaceutical ingredients under development.

In Ulsan, a pilot project will begin producing recycled carbon fuel by pyrolyzing waste plastic. Efforts will also be made to establish quality and safety standards for pyrolysis oil, which has been difficult to bring to market due to the absence of fuel quality criteria.

In Iksan and Jeongeup in North Jeolla Province, pilot projects involving advanced new drugs and autologous vaccines for companion animals aim to shorten the development timeline for veterinary medicines. South Jeolla Province will pursue development of battery-swappable electric farm equipment and special-purpose electric two-wheelers. In Yeonggwang, South Jeolla Province, pilot projects will develop small battery-swappable electric farm equipment charged with renewable energy, as well as three- and four-wheeled electric two-wheelers.

In Chilgok, North Gyeongsang Province, development and road testing of modular low-speed electric vehicles will be carried out, while Pohang will run a pilot project to convert diesel vessels into electrically propelled ships. Pohang also plans to pursue entry into overseas markets for eco-friendly vessels through cooperation with Northern European partners.

With these new designations, the total number of government-operated regulatory-free zones has grown to 56, with 149 regulatory exemptions granted to date.

The significance of this round of designations lies not only in expanding pilot opportunities but also in linking domestic technologies to global market entry. Designating sectors such as electric farm equipment, low-speed electric vehicles and electrically propelled vessels — all of which require compliance with overseas safety standards before export — as global innovation regulatory-free zones reflects a strategy to connect pilot testing, certification and overseas distribution channels. The government has said it will revise relevant laws and standards to support early commercialization of technologies whose safety and economic viability are confirmed through pilot testing.

Son Dong-gyun, director general for regulatory coordination at the Office for Government Policy Coordination, said the government would "swiftly pursue legislative revisions together with relevant ministries for projects whose safety and effectiveness are verified through pilot testing."

Mok Seung-hwan, director general for startup and venture innovation at the Ministry of SMEs and Startups, added that the ministry would "continuously identify new technology regulations that startups require and pursue regulatory rationalization in cooperation with local governments and relevant ministries."