South Korean President Lee Jae Myung is putting three large scale industrial projects at the center of his effort to create new growth engines, strengthen strategic industries such as semiconductors and spread investment beyond the Seoul metropolitan area. But the government’s attempt to move those projects faster is beginning to collide with a labor reform South Korea adopted years ago to curb chronic overwork.
President Lee sees the mega projects as more than individual factories or industrial complexes. His government wants to use large corporate investment, supporting infrastructure and regional industrial clusters to create new centers of economic activity across the country. The strategy is intended to strengthen South Korea’s industrial competitiveness while expanding growth beyond areas where investment and jobs have traditionally been concentrated.
The difficulty is speed. Large industrial projects can be delayed by permits, environmental reviews, power and water connections, transportation infrastructure and coordination among government agencies. President Lee has argued that those delays can weaken companies’ willingness to invest and prevent projects from moving quickly from planning to construction.
That is why his administration is now preparing a special law for designated mega zones that would shorten approval procedures and environmental reviews and accelerate the construction of electricity, water and transportation infrastructure. Housing and education facilities needed to support workers and residents around the projects would also be developed more quickly.
At a public private review meeting on Aug. 10, President Lee said the government needed to go beyond simply moving fast and pursue what amounted to an all out execution effort. He also said the government should not merely promote innovation but become an innovation model itself.
The administration plans to establish a government wide council under South Korea’s Prime Minister’s Office to coordinate ministries and remove administrative bottlenecks. Officials will also compile a list of regulatory and investment obstacles reported by companies and work through them individually.
But as the government began removing administrative barriers, another issue emerged. South Korean businesses have argued that faster permits and infrastructure alone may not be enough if companies cannot adjust working hours during critical stages of research, engineering, construction and production.
That has brought South Korea’s 52 hour workweek back into the industrial policy debate.
South Korea introduced the current limit after years in which long working hours had become deeply embedded in the country’s workplaces. Under the previous system, employees could legally work as many as 68 hours a week. Labor reforms introduced in 2018 generally reduced the maximum to 52 hours, combining a standard 40 hour workweek with up to 12 hours of overtime. The change was intended to curb excessive working hours and improve workers’ health and quality of life.
Now the same rule is being questioned in a narrower context as President Lee tries to accelerate the mega projects. Business groups argue that semiconductor research, factory construction and other time sensitive work can become concentrated during particular stages of a project and that greater flexibility is necessary if companies are expected to meet aggressive development schedules.
Labor groups oppose special treatment, arguing that allowing exemptions for strategically important projects could weaken protections that were created specifically to end South Korea’s culture of excessive working hours.
President Lee’s government has therefore drawn a distinction between administrative deregulation and labor rules. The administration is moving quickly to shorten permits and other government procedures but has not decided whether companies inside the mega zones should receive exemptions from the 52 hour limit.
A senior official at South Korea’s presidential office said the issue should not be decided unilaterally by the president or the presidential office and that the views of labor groups and residents in the affected regions would need to be considered.
The disagreement is also visible inside the government. Kim Jung Kwan, South Korea’s minister of trade, industry and energy, and Kim Young Hoon, South Korea’s minister of employment and labor, have expressed differing views over greater flexibility in working hours. The presidential office has said those differences should be resolved through further discussion before the government reaches a unified position.
Speed, however, is only one part of President Lee’s strategy.
His administration also wants to prevent the mega projects from becoming a program in which government support and large scale investment benefit only South Korea’s biggest corporations. President Lee has said mechanisms for broader growth need to be designed before companies invest and factories are built rather than added later.
The government plans to spend $745 million over 10 years on joint semiconductor technology development between large corporations and small and midsize businesses. It will also provide $3.5 billion in trade financing to ease funding pressure on companies supplying materials, parts and equipment.
Another $3.5 billion investment fund will target promising semiconductor materials, parts and equipment suppliers as well as fabless chip companies, which design semiconductors while relying on other manufacturers to produce them.
The government also plans to expand agreements that allow changes in raw material costs to be reflected in the prices large corporations pay smaller suppliers.
The policy leaves President Lee trying to reconcile three goals. He wants mega projects built quickly enough to strengthen South Korea’s industrial competitiveness, smaller companies and regional economies to share in the resulting growth, and labor protections to remain intact even as businesses demand greater flexibility.
The government has already set a timetable for part of the regional expansion. It plans to complete the relocation of the military airport in Gwangju, a city in southwestern South Korea, by 2028 to support development of a semiconductor cluster in the Honam region. Additional nearby sites could also be considered if companies require more land.
The broader tension now extends beyond permits and infrastructure. South Korea created the 52 hour limit to correct the long working culture that accompanied its rapid economic development. President Lee’s mega project strategy is now testing how much of that regulatory framework can remain unchanged when the government is simultaneously asking companies, ministries and local governments to move faster.
For President Lee, the challenge is to make South Korea’s industrial policy more aggressive without simply reversing earlier labor reforms. His administration is prepared to cut bureaucratic delays quickly. Whether it is also willing to loosen the limits on how long people work remains unresolved.
