Relocating public institutions not enough without ties to local industry, talent

South Korea's policy of relocating public institutions to the regions has succeeded in dispersing functions away from the greater Seoul area and building innovation cities, but the relocated agencies have failed to take root in local industrial and academic ecosystems, a new study has found. The research calls for a shift away from simply distributing institutions across regions by headcount, toward a model that matches each agency's core functions with local industries, talent pools and living conditions.

The findings come from a paper by Jeong Seong-ho, a senior research fellow at the Korea Public Finance Information Service, published in the June issue of "Public Institutions and Policy Research" by the Korea Institute of Public Finance's Public Institution Research Center. The paper was reviewed Wednesday.

Drawing on legislation, policy documents and prior research, Jeong said the relocation policy had achieved results in physically moving institutions but had fallen short in forging functional ties with regional economies.

The most prominent shortcoming is the weak link between relocated agencies and local industries. Although public institutions have moved to the regions, their core functions have not been sufficiently integrated with local industries, universities, research institutes or businesses, limiting their economic spillover effects.

Talent retention and quality of life also emerged as critical gaps. The paper found that adequate residential communities — encompassing housing, education, healthcare, culture and transportation — have not been established to keep relocated workers and local talent in the area over the long term.

The top-down nature of the policy process was also flagged as a problem. Because the central government has driven decisions on where to place and allocate institutions, the collaborative framework needed for local governments, relocated agencies, regional universities and businesses to jointly shape regional development strategies has remained relatively weak.

The study also identified a lack of systematic evaluation. Beyond tracking whether institutions have moved or innovation cities have been built, no adequate mechanism exists to analyze performance differences across regions and feed those findings back into subsequent policy.

Domestic innovation city cases illustrate both the limitations and the possibilities.

The Bitgaram Innovation City in Naju was cited as a case showing potential, with Korea Electric Power Corporation and other energy-related public institutions clustering there in a way that could link agency functions to regional industrial strategy. However, the paper said a separate coordination strategy and long-term governance framework would be needed to translate that clustering effect into private-sector investment, university and research collaboration, and the retention of local talent.

The Munhyeon Financial District in Busan has similarly laid the groundwork for a regionally specialized industry by concentrating finance-related public institutions in one place. Yet without organic connections to private financial firms, fintech companies, professional services and university programs that train financial talent, the district risks remaining little more than a cluster of public finance agencies, the paper warned.

The North Chungcheong Province innovation city was presented as a case study in the importance of living conditions. Relocating institutions alone is unlikely to translate into local talent retention or the formation of stable residential communities, the paper argued, making it essential to expand life infrastructure — including housing, education, healthcare and culture — alongside any move.

"Ultimately, the effectiveness of relocating public institutions depends not on the relocation itself, but on how well the institutions integrate with local industries, talent, lifestyles and governance," Jeong said.

He recommended that future relocations prioritize "functional fit" over "regional balance." Rather than simply weighing geographic equity when deciding which institution goes where, policymakers should assess how well an agency's core functions align with a region's industrial structure, university and research base, business ecosystem, labor market and local government development strategy.

Living conditions and talent retention were also presented not as afterthoughts to be addressed after a move, but as core criteria to be considered from the earliest stage of selecting a relocation site. For a relocation to translate into genuine population settlement, the destination must offer not only housing, education, healthcare, culture and transportation, but also childcare and conditions that support families relocating together, the paper said.

Jeong also said the policy process itself needs to shift from top-down central government allocation to a structure in which regional stakeholders participate from the start — including local governments, relocated agencies, regional universities and businesses, and civil society. After a move, he said, success should be measured not by simple population growth or relocation tallies, but by how closely institutions have built cooperative ties with the regional industry and talent ecosystem.