Inclusive Growth in

Policy Highlights About the OECD About the OECD The Organisation for Economic Co-operation and Development (OECD) is a forum in which The Organisation for Economic Co-operation and Development (OECD) is a forum in which governments compare and exchange policy experiences, identify good practices in light of emerging governments compare and exchange policy experiences, identify good practices in light of emerging challenges, and promote decisions and recommendations to produce better policies for better lives. challenges, and promote decisions and recommendations to produce better policies for better lives. The OECD’s mission is to promote policies that improve economic and social well-being of people The OECD’s mission is to promote policies that improve economic and social well-being of people around the world. around the world. The OECD Champion Mayors initiative The OECD Champion Mayors initiative The OECD launched a global coalition of Champion Mayors for Inclusive Growth in March 2016, as part The OECD launched a global coalition of Champion Mayors for Inclusive Growth in March 2016, as part of the broader OECD Inclusive Growth initiative. The OECD approach to Inclusive Growth is multi- of the broader OECD Inclusive Growth initiative. The OECD approach to Inclusive Growth is multi- dimensional, going beyond income. Champion Mayors are a group of willing leaders who have dimensional, going beyond income. Champion Mayors are a group of willing leaders who have committed to tackling inequalities and promoting more inclusive economic growth in . For more committed to tackling inequalities and promoting more inclusive economic growth in cities. For more information, please contact Marissa Plouin (marissa.plouin@.org) or visit http://oe-cd/champion- information, please contact Marissa Plouin ([email protected]) or visit http://oe-cd/champion- mayors mayors. This study This study This document summarises the preliminary findings of the forthcoming OECD (2018), OECD Case Study This document summarises the findings of the study: OECD (2018), Inclusive Growth in Seoul, OECD of Inclusive Growth in Seoul, OECD Publishing, . Publishing, Paris. The OECD Case Study of Inclusive Growth in Seoul, the first study to assess the performance of a Inclusive Growth in Seoul is the first OECD study to assess the performance of a city along a range of along a range of inclusive growth dimensions, is produced as part of the OECD Champion Mayors for inclusive growth dimensions, and is produced as part of the OECD Champion Mayors for Inclusive Inclusive Growth initiative. This report was made possible with the support of the Seoul Metropolitan Growth initiative. The report was made possible with the support of the Seoul Metropolitan Government. Government. This work is published on the responsibility of the Secretary-General of the OECD. The opinions This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the expressed and arguments employed herein do not necessarily reflect the official views of the Organisation or of the governments of its member countries. This document and any map included Organisation or of the governments of its member countries. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. international frontiers and boundaries and to the name of any territory, city or area. Photo credits

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Table of contents

Introduction | Inequalities are a pressing policy challenge in Seoul ………………….. 5

Part 1 | Seoul is an economic powerhouse, yet some groups are left behind ……… 7 Seoul is the country’s economic engine, yet demographic challenges pose risks…………… 7 Outcomes across four dimensions of Inclusive Growth in Seoul ………………………………….. 8 Towards a people-centred policy agenda for Inclusive Growth in Seoul …...... 13

Part 2 | Pioneering efforts to bridge climate action and inclusive growth ………….. 14 Climate change impacts and inequalities in Seoul ……………………………………………………….. 15 Climate change mitigation policies in Seoul ……………………………………………………………….. 18 Towards inclusive, low-carbon growth in Seoul: Challenges, opportunities and next steps …………………………………………………………………….. 20

Part 3 | Fostering Inclusive Growth through the Economic Democratisation Agenda ...... 26 SMEs and entrepreneurship are key to deliver more inclusive growth in Seoul …………….. 26 SME and entrepreneurship development challenges require action …………………………….. 26 The Economic Democratisation Agenda: An important policy lever for SMEs and entrepreneurship in Seoul ...... 28 Moving forward: Strengthening support for SMEs and entrepreneurs from under-represented populations ...... 31

Notes and Bibliography ………………………………………………………………………………………. 34

Introduction

Inequalities are a pressing policy challenge in Seoul

The Dutch government is developing new tools Seoul has been at the centre of ’s These Policy Highlights summarise the and institutional responses to strengthen urban areas political, economic, and social transformation preliminary findings from the OECD Case Study over the past decades. The country has shifted of Inclusive Growth in Seoul, assessing Seoul to democracy, experienced rapid urban and Metropolitan Government’s progress towards economic growth, and achieved high more Inclusive Growth. education attainment levels and a technology • Part 1 will examine major urban and , transitioning into a major global player. economic trends in Seoul, with a special Despite these achievements, the benefits of focus on challenges facing vulnerable economic growth and urbanisation have not groups, and assess a selection of outcomes been equally distributed. Echoing trends of a along the four pillars of the New York growing gap between the rich and the poor Proposal and the Paris Action Plan: across OECD countries (Box 1), Korea registers education, labour market, urban the seventh-highest income gap and the environment, and and public eighth-highest relative poverty rate in the services. OECD (OECD, 2016a). There are also high inter- • Part 2 will take a closer look at the impact regional income disparities within Korea: Korea of climate change on inequalities in Seoul, recorded the seventh-highest rate of regional and at the Seoul Metropolitan disparities among OECD countries in 2013 Government’s efforts to bridge strategies (OECD, 2016b). The Seoul Capital Region for climate change and inclusive growth, concentrates around half of the country’s GDP, building on the Promise of Seoul, the city’s firms, jobs and population. long-term strategy released in 2015 to But inequalities are not just about income, achieve an inclusive, low-carbon future. and some demographic groups in Seoul face • Part 3 will focus on the city’s efforts to level significant barriers to access social and the playing field for small and medium- economic opportunities, including quality sized enterprises (SMEs) and provide housing, transport, education and jobs. While support to specific populations and Seoul performs relatively well in terms of economic sectors through its Economic educational outcomes and access to services, Democratisation Agenda. important challenges remain, especially for youth, women, the elderly and migrants. Some of these groups will be more vulnerable to the

impacts of a changing climate in Seoul. And there are a number of challenges facing firms – particularly small firms – and individuals in the labour market.

5 Box 1. Inclusive Growth and the global coalition of Champion Mayors at the OECD

Across the OECD, the average income of the Inequalities can be even more acute in cities. richest 10% of the population has grown from Income inequality tends to be higher in cities seven to ten times that of the poorest 10% in a relative to their respective national average single generation. But inequalities are not just (OECD, 2016c). In recognition of the key role of about money: they affect every dimension of cities in tackling inequalities, the OECD created people’s lives and well-being, such as life a global coalition of Champion Mayors for expectancy, education outcomes, and job Inclusive Growth in March 2016. Together, prospects. Champion Mayors delivered the New York Proposal for Inclusive Growth in Cities and the In 2012, the OECD launched the Inclusive Paris Action Plan for Inclusive Growth in Cities, Growth initiative as a response to a widening which outlined a series of commitments and gap between the rich and the poor. The OECD policy priorities, along four main pillars: 1) defines Inclusive Growth as “growth that Education; 2) Labour markets; 3) Housing and creates opportunities for all segments of the the urban environment; and 4) Infrastructure population to participate in the economy and and public services. These dimensions will distributes the dividends of increased serve as a framework to assess Inclusive prosperity fairly across society” (OECD, 2014). Growth outcomes beyond income at the city The OECD takes a multidimensional approach, level in this study of Seoul. going beyond income to take into account a range of well-being outcomes and policy domains.

Source: OECD (2014), All on Board, OECD Publishing, Paris; OECD (2016c), Making Cities Work for All; OECD (2016d), New York Proposal for Inclusive Growth in Cities; OECD (2016e), Paris Action Plan for Inclusive Growth in Cities.

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xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Seoulxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx is an economic powerhouse,xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx yet somexxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx groups are being left behindxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Seoul is the country’s economic engine, yet demographic challenges pose risks

With a population of 10 million, the city of A rapidly ageing population – which is Seoul is home to in five Koreans. The primarily due to the sharp decline in the fertility broader metropolitan area, which includes the rate, poses major demographic challenges for city of Seoul as well as the surrounding policy makers. Korea is ageing faster than any province of Gyeonggi and other OECD country, and the Seoul Metropolitan City, is home to 25 million metropolitan area concentrates one-third of inhabitants. Despite a slowdown in recent the nation’s elderly population (OECD, 2016a). years, economic growth in the Seoul Moreover, almost half of seniors are living metropolitan area remains well above the below the poverty line (Figure 3). In parallel, OECD average and that of other major metro Seoul has the lowest fertility rate in Korea (1 areas, such as , New York and . child per women), in a country that already xxx The Seoul metropolitan area concentrates records the lowest fertility rate in the OECD xxx around half of the country’s firms, employment (1.2 children per women, down from 4.5 in and GDP and is the most densely populated in 1970, and compared to a current OECD the OECD, with 16 000 inhabitants per km2, average of 1.7), below the rate necessary to well beyond Tokyo, Paris, New York and Mexico keep the population constant (2.1) (OECD City. 2016a). The changing demographics pose a major challenge both for the country and city.

Figure 1. Korea has by far the largest share of elderly poor in the OECD Share of persons living with less than 50% of median equivalised disposable income, by age group, in 2014 (or nearest year).

Source: OECD Income Distribution Database (http://oe.cd/idd).

7 Outcomes across four dimensions of Inclusive Growth in Seoul

Korea records important income disparities Although robust data on income inequality are relative to OECD countries, while some groups in not available at the level of Seoul, there is clear Seoul face particular challenges. Korea has the evidence that some groups face important seventh-highest level of income disparity among disparities in terms of income and wages, as well OECD countries, based on the ratio of the as in a number of non-income dimensions. This poorest 90th income percentile to the richest section delves deeper into the challenges facing 10th (Figure 3) (OECD, 2016a). High income specific groups – namely the elderly, women, inequality reflects large gaps in productivity and youth and migrant workers. It goes beyond wages between large conglomerates and small income to assess outcomes in Seoul along the firms (Part 3), manufacturing and services, and four dimensions of the New York Proposal for regular and non-regular workers (OECD, 2016a). Inclusive Growth in Cities and the Paris Action In particular, the dualistic structure of the labour Plan for Inclusive Growth in Cities: 1) education, market has resulted in high wage inequality and 2) labour market, 3) housing and the urban a high relative poverty rate (14% in 2014, the environment, and 4) infrastructure and public eighth-highest in the OECD).1 Given the services. These are four policy areas in which problems in small firm and services, Korea's cities – often in partnership other levels of overall labour productivity is only 55% of the top government – have some capacity to intervene half of OECD countries (OECD, 2016a). to address inequalities.

Figure 2. Regional disparities are relatively high in Korea, and have been on the rise

Gini index of inequality of GDP per capita across TL31 regions, 2000 and 2013.

1 Regions within the 35 OECD countries are classified on two territorial levels reflecting the administrative organisation of countries. The 391 OECD large (TL2) regions represent the first administrative tier of subnational government. The 2 197 OECD small (TL3) regions are contained in a TL2 region. TL3 regions correspond to administrative regions, with the exception of , Canada, Germany and the .

Note: Data for period 2000-13. TL3 regions. Australia, Canada, Chile, Mexico, and the United States TL2 regions. Germany Non Official Grids regions. Brazil, , Colombia, , Russian Federation and South Africa TL2 regions. Regional GVA for Turkey. Regional GDP is not available for Iceland and . For China, data for the Special Administrative Region of , the Special Administrative Region of and Chinese are excluded. First available years: and 2001; Mexico 2003; China 2004. Last available year: Austria, Brazil, China, Colombia, Estonia, Finland, , Germany, Hungary, Indonesia, Ireland, Italy, Japan, Latvia, Lithuania, Norway, Poland, Russian Federation, Spain, Sweden and Switzerland 2012. Information on data for Israel: http://dx.doi.org/10.1787/888932315602.

Source: OECD (2016b), OECD Regions at a Glance 2016, OECD Publishing, Paris. http://dx.doi.org/10.1787/reg_glance-2016-en

8 Pillar 1 - Education

Seoul stands out in a country that is already Supplementary education plays an essential one of the best performers in the OECD in role to help students access prestigious terms of education and equity outcomes universities and high-paying jobs, but not measured through OECD PISA. Not only is everyone can afford to pay for it. Korea has the Korea one of the top performers in the OECD highest percentage of students attending in science, mathematics and reading, OECD after-school lessons in mathematics (76%) in PISA results also show that a student’s socio- the OECD, far above the OECD average of 34% economic background does not have a (OECD, 2014b). Korea also registers an significant impact on his or her performance: exceptionally high level of private spending on equity indicators for 15-year-olds in Korea are supplementary education, particularly in Seoul positive overall (OECD, 2016f). Within this where private spending is 40% higher than the strong national context, the Seoul Capital national average. In Seoul, the best Region has the largest share of labour force supplementary education institutions are with a tertiary education in the country (OECD, located in higher-income neighbourhoods, and 2016b). Education attainment is nonetheless the top students are found to have more much lower among the elderly compared to resources for supplemental education than other OECD countries. The impressive catch- their lowest-performing peers. High pressure up of education outcomes for younger for academic excellence, however, affects generations is also reflected in the fact that young people’s well-being (Korean Statistical Korea has the largest gap in education Information Service, 2017). attainment between young adults and the older generation (OECD, 2014b).

Pillar 2 - Labour markets

A number of challenges in the labour compared to an OECD average of 15% market hit women, youth, the elderly and (OECD, 2016f). This trend holds true even foreign workers particularly hard, and among well-educated youth: one-fifth of contribute to inequalities (OECD, 2016a): those aged 25-34 with a tertiary education were not active in the labour force in 2015. • Korea’s labour market is separated into • Workers are forced out of firms at around regular and non-regular workers. Non- age 53, leaving them to transition into self- regular workers earn around 62% of the employment and low-quality jobs, hourly wage of regular workers and have contributing to the elderly poverty rate weaker social protections (OECD, 2016a). (OECD, 2016a). • Women make up a large share of non- • Foreign workers, while representing only regular workers and face a significant wage 2% of the population, recorded an gap: Korean women are paid 63% of men’s unemployment rate that was ten times average wage, which is the highest gap in higher than that of the overall the OECD. In Seoul, the labour force unemployment rate in the city in 2016. participation rate of women is just over More than half of foreign workers earn less 53%, compared to 73% for men, a much than KRW 2 million per month larger gap than that of other large cities (approximately USD 1 750), well below the from OECD and EU countries (Figure 3). average wage of non-migrant residents in • Youth register some of the highest labour Seoul (KRW 3.2 million) (OECD, 2015; Seoul market inactivity rates in the OECD: around Metropolitan Government, 2017). 18% of Korean youth are neither employed, nor in education or training (NEET) (2015)

9 Figure 3. Seoul has one of the highest gender gaps in labour force participation among a selection of world cities Percentage-point gap in the labour force participation (male-female), 2014.

Note: Data for Marseille and Paris are for 2013. Data for Manchester are for 2015. Data for all other cities are for 2014. Source: Eurostat, Bureau Labour Statistics, US.

Pillar 3 - Housing and the urban environment

Quality affordable housing remains a levels well beyond World Health Organisation challenge in Seoul, particularly for youth, the (WHO) standards. Low-income households are elderly and, though it affects a smaller share of exposed to higher levels of (Figure the population, migrant workers. The younger 5); these lower-income also have a population is particularly affected by high larger share of senior citizens, whose health is housing prices. The price-income ratio is much more likely to be negatively affected by higher in the Seoul metropolitan area relative environmental challenges: air pollution, for to other metropolitan areas in the country and instance, especially on hot days, can result in the national average (Figure 4). Difficulties to deaths in older populations (Kim, C et al, 2015; access quality affordable housing has led many Son, J.Y et al, 2012). young people to delay marriage and starting a Energy poverty is a challenge for more than family (MOLIT, 2017). Although significant 10% of households in Seoul – meaning that progress has been made towards improving around one in ten cannot afford heat or air the quality of housing for seniors, nearly a conditioning, a worrisome statistic given the quarter of seniors live in homes that fail to prospect of more extreme weather events in meet the Korean government’s minimum the context of a changing climate (Part 2). Low standards, based on floor space and income, along with low energy efficiency environmental and housing facility measures dwellings and home appliances create a (OECD, 2012b). Similarly, many foreign burden for low-income households. Moreover, workers live in substandard and overcrowded beyond the exposure to climate risks, there is conditions, including non-residential buildings ample evidence to suggest that low-income like factories and shopping centres (OECD, and other vulnerable populations will face 2012b). additional hurdles in responding to and Environmental challenges pose particular recovering from climate damages. In light of risks for the health and well-being of low- the city’s rapidly ageing population – and the income and elderly populations. The Seoul relative poverty of seniors – the elderly are at metropolitan area recorded the third-highest serious risk. levels of air pollution of PM2.5 among 291 OECD metro areas between 2012 and 2014,

10 Figure 4. Housing in the Seoul metropolitan area is much less affordable than elsewhere in Korea

Housing price-income ratio by region in Korea, 2006-2016.

Outcomes across four dimensions of Inclusive Growth in Seoul

Note: Data for Seoul refer to the metropolitan area. Income data refer to median income. Source: Ministry of Land, Infrastructure and Transport (MOLIT) (2016), 2016 Korea Housing Survey.

Figure 5. Low-income districts tend to be more affected by air pollution in Seoul

Exposure to Nitrogen Dioxide, by household income in Seoul.

Source: OECD calculations based on Seoul Metropolitan Government and Seoul Institute (2016), 2015 Seoul Survey.

11 Pillar 4 - Infrastructure and access to public services

With few exceptions, Seoul has one of the segregation and boosted access to jobs and top urban public transport systems in the public services (OECD, 2017b). world, providing the vast majority of urban The provision of public health institutions is dwellers with excellent access to jobs and equitably distributed across Seoul, with one services. Over 80% of the city’s population centre per , and even more sub-health lives within 10 minutes of a and public centres located in low income districts. almost 20% within 10 minutes of a train However, private health centres are station (OECD, 2017b). Among smaller regions concentrated in the higher-income central and in Korea (TL2), Seoul registers the highest level southeast parts of the city. While physical of accessibility to public transport (Figure 6) access to health care may not be a problem (OECD, 2017b). Some gaps remain: and Koreans benefit from universal health care accessibility to bus stops in Seoul tends to be insurance, some medical needs remain unmet higher in areas with higher average incomes due to the high level of out-of-pocket and higher job density; and the elderly in payments required (e.g. for direct payment for Seoul tend to live in areas further away from a hospitalisations, outpatient visits, dental bus stop, which is contrary to trends in most treatment, surgery, prescription drugs, nursing other Korean regions (OECD, 2017b). care). This constitutes a financial burden, Nevertheless, Seoul’s public transport system especially for the elderly and residents with provides strong coverage overall, and lower income levels. This is all the more evidence suggests that improvements in worrisome in the context of rapid population public transport management over the past ageing. few years have helped reduce spatial

Figure 6. Seoul has excellent transport accessibility 10-, 20-, and 30-minute walking distance to a bus stop (2010).

Note: The dark blue, roughly horizontal line in the middle of the city represents the . Source: OECD (2017b), Urban Transport Governance and Inclusive Development in Korea, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264272637-en 12 Towards a people-centred policy agenda for Inclusive Growth in Seoul

Seoul inhabitants benefit from high quality inequalities and disadvantages. Along with public services, including education, health and policies at the national level to address these public transport, yet a number of challenges critical policy challenges, Seoul Metropolitan remain. The city faces a rapid and massive Government (SMG) has made a concerted demographic transition, a rigid labour market effort to promote a growth paradigm that is that poses significant barriers for certain more inclusive, climate-resilient and low- populations and firms and, as will be further carbon. explored in the next section, a changing climate that risks exacerbating existing

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Climate change and inclusive growth are not climate action, and in search of concrete isolated challenges. On the one hand, the solutions to ensure that climate strategies can impacts of climate change risk further also effectively respond to major social and entrenching existing inequalities as economic challenges – such as rising disadvantaged populations suffer inequalities, unemployment, poverty and disproportionately from its effects. On the other unequal access to opportunities. hand, climate change mitigation policies also Seoul is pioneering efforts to advance both have a range of distributional consequences agendas in a mutually reinforcing way, notably that are not limited to greenhouse gas emission with the Promise of Seoul, the city’s long-term reductions, as they intend to influence strategy released in 2015 to achieve an behaviours and transform our economies. inclusive, low-carbon future. This section The low-carbon transition needs to be explores the interaction between climate inclusive. With high levels of inequality in many change and inequalities in Seoul, highlight the cities, public acceptability and the success of good and innovative practices of Seoul xxx the transition towards a low-carbon future will Metropolitan Government, and identifies depend on the fair and transparent distribution knowledge gaps and challenges that remain to xxx of the costs and benefits of this transition develop a coherent policy response that can

(McInnes, 2017). deliver on both climate change and inclusive Cities around the world are key actors of this growth. “just” transition. Cities are in the frontline of

14 Climate change impacts and inequalities in Seoul Seoul is particularly exposed to climate risks

The climate is already changing in Seoul, as doubled (Figure 7). In the meantime, farmland inhabitants face rising temperatures and decreased from more than 20% to 2% of the increased frequency of extreme weather events. metropolitan area, while forested areas It is also changing faster than in other parts of decreased slightly, from 28% to 24%. These the globe: between 1911 and 2010, the average trends have led to an increased vulnerability to temperature increase in Korea was nearly floods, and rising temperatures (Kim, 2015). double the global average. Seoul faces more Climate change damages are expected to warming than the national average: between increase in Seoul. Annual average temperature 1975 and 2004, the annual mean temperature is expected to increase by 2°C by the 2100s increased by 1.5 °C, compared to an increase of from current levels (Seoul Metropolitan 0.6°C in rural and coastal areas of the country Government, 2012). This will lead to more due to the effect.2 (Chung et extreme hot days and heat waves, increased al., 2004). Seoul has also seen an increased water scarcity and drought, inland and frequency in extreme weather events, such as groundwater floods and an increased risk of torrential rains, floods and heatwaves (Kim, vector-borne diseases (Seoul Metropolitan 2015). Government, 2012). Heat wave-related deaths Seoul’s vulnerability to floods and heatwaves could double to about 1.5 deaths per 100 000 is driven by its intense urbanisation over the past people over the period 2036-2040, compared to decades that saw a rapid expansion of the city’s 0.7 deaths per 100 000 people over 2000-2010 built-up areas. Between 1975 and 2014, the (Seoul Metropolitan Government, 2015). built-up area of the metropolitan area has

Figure 7. Seoul metropolitan area’s built-up area has doubled over the past four decades Evolution of the built-up area in Seoul metropolitan area, 1975-2014.

Note: The map represents Seoul’s Functional Urban Area. Source: OECD analysis based on Global Human Settlement (GHS) dataset: http://ghsl.jrc.ec.europa.eu/index.php

15 Climate change is likely to further entrench structural inequalities in Seoul

Climate change is poised to exacerbate the limited access to public infrastructure effects of structural inequalities in cities. The (hospitals) to help them cope with a climate impact of climate change on inequalities is still disaster. an emerging research field, and large In Seoul, climate change presents particular uncertainties remain. However, inequalities and risks for those who are already economically climate change impacts are mutually vulnerable, including non-regular workers3, low- reinforcing: even if wealthier populations have income people, women and the elderly. While more assets at risk, vulnerable populations are data is limited, the risk of floods and heatwaves more exposed (IPCC, 2014). And cities with a seems to affect rich and poor neighbourhoods poor environment or high climate risk will be alike in Seoul (Cho, 2012; Kim, 2017). However, less attractive and hence potentially less climate change damages are likely to economically productive (OECD, 2010). Three disproportionately affect some vulnerable main factors influence the vulnerability of low- groups, as they are either more vulnerable to income populations to climate change health impacts, or lack insurance and social (UNDESA, 2016; Hallegatte, 2016): safety nets to help them recover from damages. • Increased exposure to climate risk and Over the period 2000-2010, mortality rates hazards: low-income neighbourhoods are increased by 8.4% overall in Seoul during heat more likely to live in neighbourhoods that waves, compared to non-heat wave days – are more exposed to flood or landslides risks more than double the Korean average. than more affluent areas, as the cost of Estimated risks were higher for women versus housing often reflects exposure to risk. men, older versus younger residents, and those with no education versus some education (Son • Higher susceptibility to damage: et al., 2012). Non-regular workers will be disadvantaged groups are likely to live in particularly vulnerable to climate shocks, as homes that are not properly designed to they are not covered by unemployment face climate risks (e.g. poor insulation, insurance or property insurance should they underground flats, low-lying structures). For lose their jobs or sources of income in a climate instance, low-income households can disaster. Women and the elderly cumulate struggle to withstand heatwaves if they disadvantages, as they often belong to low- cannot afford air conditioning. income groups; many women are non-regular • Lower ability to recover: low-income workers, and half of the elderly people are poor populations have more difficulty recovering (Part 1). from climate-related damages and losses, as

they often lack access to social insurance systems and safety nets. They also may have 16 Box 2. Innovative strategies to address climate change and energy poverty in a mutually reinforcing way: Lessons from Seoul

Seoul has implemented two innovative programme also receives private funding from policies that pursue climate and inclusiveness the Energy Welfare Civic Fund, into which objectives in a mutually reinforcing way. citizens and businesses can make monetary and in-kind contributions. Contributions can Energy Welfare Public-Private Partnership come from savings earned through the Eco- Programme mileage programme or the innovative “virtual In 2015, Seoul launched the Energy Welfare power plant,” through which 17 municipal Public-Private Partnership Programme to target buildings and 16 universities save electricity already vulnerable low-income families who consumption during peak hours and donate will become even more at risk of energy profits towards the fund. poverty as climate change accelerates. The Energy Self-sufficient Villages programme aims to increase the energy independence of energy-poor households by Energy Self-sufficient Villages are providing at-risk communities with home community-led actions to reduce energy energy upgrades, including energy efficiency dependence on fossil fuels and nuclear energy, improvements, decentralised rooftop solar notably through energy efficiency measures panels, and the distribution of LED lights and and the deployment of renewable energy. mini-photovoltaic cells. It also supports Community efforts for energy self-sufficiency disadvantaged job seekers through training and also include energy-related welfare activities, employment as energy consultants to assess such as visits to single-senior households to energy performance of low-income check for energy leaks, or the use of the profits households. from “energy supermarkets” (which sell energy-saving products at affordable prices) to The programme operates with an help members of the community in need. This innovative and sustainable financing method to initiative helps strengthen social linkages and ensure its long-term sustainability. This raise awareness on the issue of energy poverty includes public funding from the city within communities. government for energy-efficiency building retrofits for low-income households, as well as the training of energy consultants. The

Source: SMG (2012); SMG (2015); C40 (2016).

17 Climate change mitigation policies in Seoul The context for climate action in Seoul: From energy security to energy welfare

Seoul’s strong economic growth in recent One Less Nuclear Power Plant programme decades came with a rapid escalation of GHG encompassed six priority areas for climate emissions and a very high environmental cost. action: i) expanded production of new and Seoul represents less than 10% of the nation’s renewable energy through the provision of total emissions, which is small relative to the feed-in tariffs and low-interest loans; ii) a city’s share of national population and GDP building retrofit programme (BRP) offering (Part I). This is because most GHG emissions in competitive loans to building owners and Korea come from the manufacturing and energy energy companies; iii) the establishment of an sectors (representing 75% of emissions in 2015), environmentally-friendly, high-efficiency which are located outside the metropolitan transport system; iv) job creation in the energy area. However, energy consumption of buildings industry; v) a shift to a low-energy, urban spatial and transport accounts for 91% of the city’s structure, and vi) the promotion of a civic total GHG emissions, and their indirect culture promoting energy conservation (namely emissions have more than doubled since 1990. through the eco-mileage programme, which In parallel, air pollution partly linked to fossil mobilises households and businesses to reduce fuel combustion has also become a significant emissions through voluntary energy challenge in Seoul (Part I). conservation measures). The Korean national government and Seoul While One Less Nuclear Power Plant was have been at the forefront of efforts to tackle initially heavily focused on energy security, its climate change. Since 2009, the national second phase, the Seoul Sustainable Energy government has developed a strong policy Action Plan, also integrated an important energy framework, putting green growth and climate welfare dimension. The Seoul Sustainable change as top priorities at the national level. Energy Action Plan went beyond energy and The National Green Growth Strategy (2009- climate change to also address energy poverty, 2050) structured the vision of a low-carbon, with citizen’s participation at its core. It focused green-growth society and the 2010 Framework further on three core values: Act on Low Carbon, Green Growth established a • Energy self-reliance, with a goal of achieving comprehensive institutional framework for an electricity self-reliance rate of 20% to implementing the strategy. Meanwhile, Seoul limit exposure to power crises, by promoting recognised early on the urgency of the climate mini-photovoltaic power stations on the challenge and the central role of cities in roofs of school buildings, apartments and mitigating GHG emissions and adapting to a other structures to create local energy changing climate. SMG’s Ordinance on Tackling independent communities, known as energy Climate Change, enacted in 2008 before such self-sufficient villages (Box 2); legislation was introduced at the national level, set a goal of a 25% reduction of GHG emissions • Energy sharing, through the Energy Welfare by 2020 compared to 1990. Public Private Partnership, a globally recognised programme that helps low- In 2012, SMG launched its flagship energy income and marginalised populations reduce policy, One Less Nuclear Power Plant, in response their energy consumption and trains and to concerns over Seoul’s high dependence on employs disadvantaged job seekers to energy imports, vulnerability to climate change become energy auditors for low-income impacts, and need to transition to a low-carbon households (Box 2); and economy. The comprehensive energy plan aimed to reduce the city’s energy consumption • Energy participation, through an open by 2 million TOE – equivalent to the amount of governance system to ensure the electricity produced by an average nuclear participation of all citizens in the entire power plant in Korea – by the end of 2014 energy policy making process, from policy through the introduction of new energy planning to implementation. efficiency and conservation measures and the production of new and renewable energy. The

18 The Promise of Seoul: A holistic approach to adaptation and mitigation to increase citizen’s welfare

In 2015, Seoul unveiled the Promise of Seoul, spaces, the development of urban a comprehensive plan to address climate change agriculture and the strengthening of citizen’s mitigation, adaptation and citizen welfare in a capability to respond to disaster with the mutually reinforcing way, while engaging citizens training of 100,000 citizen safety guards. at all stages of the policy making process. The • Improving energy efficiency and reducing Promise of Seoul builds on the energy reduction energy use, with plans to save 5 million tons efforts of One Less Nuclear Power Plant, but of oil equivalent by 2030 through energy takes a holistic approach to the low-carbon efficiency and conservation; and cut transition by integrating other dimensions of emissions by 10 million tons of CO by 2020, the low-carbon transition, such as water, 2 approximately one ton of CO2 per person. ecosystems, adaptation policies and health Renewable energy is expected to amount to impacts. The plan provides an opportunity to 14% of total consumption by 2030. consider the distributive impacts of adaptation and mitigation strategies beyond income, as • Reducing water consumption and improving well as other dimensions of inclusiveness, such water quality, with a goal of reducing 10 as access to healthcare and clean water and million tons of water consumption by 2020. protection from floods and climate impacts. • Reducing private vehicle use and encouraging The Promise of Seoul combines GHG citizens to take public transport, walk and ride emissions reduction objectives along with bicycles, with goals of increasing the use of adaptation efforts. The strategy aims to reduce public transport to 66.5% by 2020. Seoul GHG emissions by 25% by 2020 relative to 2005 plans for a fourfold increase of bicycle lanes levels, and by 40% by 2030. At the same time, it (to 2,000 km) and 250 pedestrian-only aims to create a healthy and safe city by streets, up from 70, by 2030. strengthening climate adaptation through the • Increasing the supply of renewable energy to expansion of disaster prevention facilities. The 10% by 2020. key objectives of the Promise of Seoul include: • Improving solid waste management and • Relieving risks and vulnerability to climate scaling up recycling. change, including measures to protect citizens from disasters and infectious diseases. This includes the creation of green

19 Towards inclusive, low-carbon growth in Seoul: Opportunities, challenges and next steps

The transition to a low-carbon economy generates trade-offs and opportunities for inclusive growth

National and local policies that aim to reduce carbon energy; energy efficiency programmes; GHG emissions and adapt to climate change have and transport planning and management have a range of economic and distributional the potential to affect household spending and consequences. Addressing climate change is a the affordability of energy, transport services, transformation agenda, as emissions from GHG, and housing, particularly for low-income and particularly CO2 from fossil fuels, are households. The low-carbon transition will also embedded in many human activities. Achieving affect labour markets by stranding carbon- the goal set by the Paris Agreement will require intensive assets, activities and communities and national and local policies that induce profound creating new and different needs in skills and changes to infrastructure, technology and training. Less is known, however, about the behaviours. impacts of climate policies on household welfare, mobility, health and social inclusion Seoul has been at the forefront of cities’ (McInnes, 2017). efforts to seize the opportunities created by low- carbon policies for more inclusive growth. Seoul Nonetheless, there is significant policy inhabitants benefit from a well-functioning, experience that can help policy makers address affordable public transport system (Part I), even the regressive impacts of climate policies, and if further work is needed to identify if access to local governments have a central role to play to job centres and public infrastructure is even ensure a “just” transition to a low-carbon across the city. The Energy Welfare Public- economy. While sub-national governments do Private Partnership Programme reduces the not often have the authority over energy and overall energy bill of poor households, while transport fuel taxes, they have authority over decentralised energy systems, such as those land use, housing and transport policies. Local implemented as part of the Energy Self- governments can mitigate the regressive effects sufficient Communities, can provide access to of taxes through the development of quality reliable energy sources for a broader share of affordable transport alternatives (e.g. public the population, and increase resilience to transport) or campaigns to improve energy heatwaves (Box 2). efficiency of housing. Regarding labour market policies, sub-national governments are Climate policies also generate trade-offs for particularly well placed to provide targeted inclusive growth that need to be mitigated, yet support to small and medium-sized enterprises there is a lack of empirical analysis of the that have limited ability to provide on-site distributional impacts of the low-carbon training, and particularly in identifying skills in transition, at both the national and city levels. the local workforce that are transferable to fast- Some studies focus on the impacts of climate developing sectors (Box 3; OECD, 2017a). policies on income. For instance, core climate policies, such as those relating to energy, transport and carbon taxation; subsidy and pricing reforms; support for renewable and low-

20 Box 3. Distributional impacts of selected climate change policies in Korea: Trade-offs and opportunities

Addressing the distributive impacts of fossil fuel Addressing the impacts of the low-carbon subsidy reform and increased electricity prices transition on low-skilled workers National policies in Korea have aimed to keep The low carbon transition will achieve job electricity prices low in order to support creation in a number of low-carbon economic industrial competitiveness and ensure sectors, but also job destruction in carbon affordable energy for households. However, intensive activities. Low-skilled workers are while there is no evidence that such policies likely to account for the largest share of job have benefited energy-poor households, they destruction and job creation (OECD, 2017a) have encouraged a spur in electricity demand while job turnover will be small for medium- and partially contributed to increased GHG and high-skilled workers, who will also benefit emissions and tensions on the electricity from new opportunities in green technology supply, leading to major blackouts in 2011 and innovation. In Seoul, the net effect of the (OECD, 2012). Low electricity prices are also a low-carbon transition on jobs requires further barrier to a greater penetration of renewable research, but it is likely to further increase the energy and energy-efficiency measures (OECD, duality of the labour market, between 2017b). employees of with high skills and a good social protection and others in the work In order to achieve its GHG reduction force, especially non-regular workers (Part 1). objectives, the Korean government should The impact of the transition can be limited if strengthen the effectiveness and efficiency of labour markets are prepared. To maintain a the emission trading scheme, raise electricity high level of employment and a fair distribution prices to reflect system and environmental of the transitional costs, three areas should costs, and remove fossil fuels subsidies (OECD, receive specific attention (OECD, 2017a): 2017b). The government has begun to increase electricity prices progressively since 2010 to • Supply-side policies, with active labour ensure that prices better reflect the cost of the market policies and skill development system, but more reforms are needed to systems that can help facilitate a smooth ensure that prices also reflect the social and reintegration of workers into employment; environmental costs of electricity production, • Demand-side policies to foster a competitive particularly for energy-intensive industries green sector through strong product market (OECD, 2017b). competition and moderate employment Significant policy experience exists to address protection; and the regressive impacts of a rise in energy • Income support, such as unemployment prices, and even transform these impacts into insurance and in-work benefits to ensure a opportunities. Recycling tax revenues or fairer transition for workers (Part 3). savings through cash transfers or social tariffs can help limit the impact of carbon pricing policies on low-income groups. Policy makers could also design policies in a way that they provide economic, environmental and equity benefits, such as investing the proceeds of such taxes into the factors that underlie energy poverty and income inequalities, including moreSource: OECD,energy 2012-efficient; OECD, 2017 housesa; OECD ; 2017and b;appliances OECD, 2017c. (OECD, 2012; OECD; 2017b; OECD, 2017c).

21 Challenges investments; one opportunity, however, could be to invest profits from an increased • At the national level, low regulated electricity and expanded congestion charge into public prices that fail to benefit energy-poor transport improvements (Box 4); households and act as a barrier for an increased penetration of renewable energy • A lack of multi-dimensional indicators related and energy efficiency measures; to climate change and inclusiveness, at both Assessing the policy framework for low-carbon and inclusive growth: the level of the city and the broader opportunities and challenges • A dual labour market that leaves many low- metropolitan area, which could assess the income, non-regular workers with no access impact of climate change polices on several to unemployment insurance or pension The necessary transition to a low-carbon • A dual labour market that leaves many low- dimensions of inclusiveness (income, access scheme, increasing their vulnerability in the economy implies a radical transformation of income, non-regular workers with no access to jobs and services) and mainstream climate case of climate disasters (Parts 1 and 3); Seoul’s energy, transport and housing systems. to unemployment insurance or pension and inclusiveness in decisions related to Moreover, climate mitigation policies will have a scheme, increasing their vulnerability in the • Absence of a climate change strategy beyond land-use, housing, urban planning, transport range of economic and distributional case of climate disasters (Parts 1 and 3); 2030, which could help to identify climate planning; and consequences that are not limited to climate risks, potential future stranded assets and • Absence of a climate change strategy beyond • Limited policy co-ordination at the level of outcomes, as they intend to influence communities, and anticipate future needs in 2030, which could help to identify climate the Capital Region among Seoul, Incheon behaviours and transform the structure of the skills and training; risks, potential future stranded assets and economy. SMG has implemented a well- and smaller cities in the surrounding communities, and anticipate future needs in • A public transport system with a chronic functioning adaptation strategy and has . skills and training; financial deficit that could jeopardize future pioneered initiatives that seize opportunities to pursue climate and energy welfare objectives in • A lack of data available to evaluate the a mutually reinforcing way. Further progress interaction between climate policies and could be made to improve the understanding of inclusiveness outcomes in key sectors the trade-offs generated by climate mitigation (transport, housing, urban planning), at the policies, both within the city of Seoul and the level of the city but also beyond the broader metropolitan area. administrative boundary of the city; and Challenges • Limited policy co-ordination at the level of the Capital Region among Seoul, Incheon • At the national level, low regulated electricity and smaller cities in the surrounding prices that fail to benefit energy-poor Gyeonggi Province. households and act as a barrier for an increased penetration of renewable energy and energy efficiency measures;

22 Strengths and opportunities • At national level, an exemplary policy • Integrated approaches to policy framework that supports green growth and a implementation: universal health care system that favours • Energy: innovative business models in resilience; Assessing the policy framework for low-carbon and inclusive growth: the energy sector that incorporate • Strong leadership from Mayor Park relating climate and inclusiveness objectives at opportunities and challenges to mitigation, adaptation and inclusive the outset (Box 2); growth, both locally and internationally (C40, • Adaptation: an adaptation strategy that ICLEI, OECD Champion Mayors for Inclusive focuses on preparedness and Growth); responsiveness as much as • The Promise of Seoul, a long-term vision and infrastructure investment; strategy to 2030, which integrates climate • A well-functioning public transport change adaptation, mitigation and energy system, with a unique public-private welfare objectives at the outset across partnership model that allows the local different sectors (energy, transport, water, government to impose routes on health); private companies, allowing the • Stakeholder engagement at all stages of connection of remote areas; a system policy making, from policy design (Citizen of smart cards with an integrated Challenges investments; one opportunity, however, Committee for Green Seoul) to project transfer discount rate for workers could be to invest profits from an increased participation (eco-mileage programme, outside of the Seoul metropolitan area; • At the national level, low regulated electricity and expanded congestion charge into public energy self-sufficient villages) to financing and the use of big data to reduce prices that fail to benefit energy-poor transport improvements (Box 4); (citizen’s welfare energy fund) and congestion and adapt in real time to households and act as a barrier for an implementation (100 000 citizen safety- situations; and increased penetration of renewable energy • A lack of multi-dimensional indicators related watchers who are responsible for identifying Box 4. An opportunity to improve climate and • A comprehensive monitoring and reporting and energy efficiency measures; to climate change and inclusiveness, at both vulnerable populations ex ante in case of inclusiveness outcomes: The congestion charge the level of the city and the broader framework, with the implementation of • A dual labour market that leaves many low- climate-related events); in Seoul metropolitan area, which could assess the indicators for each target outlined in the income, non-regular workers with no access impact of climate change polices on several Promise of Seoul and an annual evaluation of to unemployment insurance or pension In 1996, a congestion charge was implemented in dimensions of inclusiveness (income, access GHG emissions reduction. scheme, increasing their vulnerability in the tunnels 1 and 3 (OECD 2017b). While the to jobs and services) and mainstream climate case of climate disasters (Parts 1 and 3); congestion charge initially reduced vehicle volume and inclusiveness in decisions related to and increased average speed through the tunnels, • Absence of a climate change strategy beyond land-use, housing, urban planning, transport the rate has not been raised since its introduction 2030, which could help to identify climate planning; and due to public opposition, and its impact on risks, potential future stranded assets and • Limited policy co-ordination at the level of congestion and GHG emission reductions has communities, and anticipate future needs in the Capital Region among Seoul, Incheon declined (OECD, 2017b). There is a need to skills and training; and smaller cities in the surrounding increase the price and extend the coverage of the • A public transport system with a chronic Gyeonggi Province. congestion charge. While such a reform could financial deficit that could jeopardize future affect the affordability of transport for low-income households who live outside Seoul, it could also be an opportunity to recycle the revenues of the charge to invest in accessibility improvements, including affordable public transport alternatives for low-income groups (McInnes, 2017).

Source: OECD, 2017b; McInnes, 2017.

23 Recommendations: Towards greater integration of climate policies and inclusive growth outcomes

While SMG has developed a strong policy and across different groups of the population framework for more inclusive, low-carbon (OECD/ITF, 2016). For instance, new public Assessing the policy framework for low-carbon and inclusive growth: growth, there are several opportunities to transport systems could expand access to jobs, opportunities and challenges further climate change and inclusive growth but also lead to an increase in land and property objectives in a mutually reinforcing way. values, in turn threatening to displace poor populations out of the city centre. Mechanisms Develop long-term low-emission development such as land value capture tools would then be strategy at the city level needed to ensure that any future increases in The Paris Agreement recognised that long- property values could be directed towards other term, low-emission development strategies policy goals, such as social inclusion (OECD/ITF, (LEDS) are a crucial policy tool that can help 2015). In addition, congestion charges are very place short-term actions in the context of the efficient tools to limit air pollution and climate long-term structural changes required to change in cities, but have a regressive impact transition to a low-carbon, resilient economy by that need to be understood and mitigated to 2050. While developing climate strategies for provide economic and social dividends (Box 4). 2020 and 2030 is an important first step, Seoul Collect data and develop indicators to would benefit from developing a longer term understand the interactions of climate and low-carbon strategy to 2050: the Challenges investments; one opportunity, however, inclusive growth outcomes, within the city could be to invest profits from an increased transformational changes required to achieve • At the national level, low regulated electricity administrative boundaries but also beyond and expanded congestion charge into public the objectives of the Paris agreement will strand prices that fail to benefit energy-poor transport improvements (Box 4); assets (e.g. highly inefficient buildings, bus There is currently an information gap that, if households and act as a barrier for an fleets and vehicles) and communities (e.g. heavy addressed, would enable a more increased penetration of renewable energy • A lack of multi-dimensional indicators related industry or coal workers). LEDS can help cities comprehensive assessment of the interactions Box 4. An opportunity to improve climate and and energy efficiency measures; to climate change and inclusiveness, at both identify the social and economic consequences between climate policies and inclusiveness inclusiveness outcomes: The congestion charge the level of the city and the broader • A dual labour market that leaves many low- of policy choices in the future, and develop outcomes in Seoul. To address this information in Seoul metropolitan area, which could assess the income, non-regular workers with no access compensation strategies or training strategies gap, it would be important to improve policy impact of climate change polices on several to unemployment insurance or pension to secure a just transition. This would enable coherence across policy domains and to collect In 1996, a congestion charge was implemented in dimensions of inclusiveness (income, access scheme, increasing their vulnerability in the SMG to balance the needs of current and future appropriate data for the development of multi- Namsan tunnels 1 and 3 (OECD 2017b). While the to jobs and services) and mainstream climate case of climate disasters (Parts 1 and 3); generations. dimensional indicators to measure the social, congestion charge initially reduced vehicle volume and inclusiveness in decisions related to environmental and economic impacts of climate and increased average speed through the tunnels, • Mainstream climate and inclusive growth Absence of a climate change strategy beyond land-use, housing, urban planning, transport change, transport, land-use and housing the rate has not been raised since its introduction objectives in transport, land-use and urban 2030, which could help to identify climate planning; and policies. due to public opposition, and its impact on planning risks, potential future stranded assets and congestion and GHG emission reductions has • Limited policy co-ordination at the level of Such indicators should allow policy makers communities, and anticipate future needs in SMG has managed to seize the opportunities declined (OECD, 2017b). There is a need to the Capital Region among Seoul, Incheon to consider systematically the effects of policies skills and training; created by renewable energy and energy increase the price and extend the coverage of the and smaller cities in the surrounding on people “here and now”, but also efficiency policies to increase energy access and congestion charge. While such a reform could • A public transport system with a chronic Gyeonggi Province. “elsewhere” and “later” (OECD, 2017h), energy affordability for low-income households. affect the affordability of transport for low-income financial deficit that could jeopardize future including a better understanding of the More could be done to identify synergies and households who live outside Seoul, it could also be consequences of climate policies on low-income potential trade-offs in areas essential for low- an opportunity to recycle the revenues of the inhabitants within the city boundaries, but also carbon and inclusive growth, such as transport, charge to invest in accessibility improvements, outside the city boundaries in the broader land-use and urban planning. These sectors are including affordable public transport alternatives metropolitan area. For instance on transport, often under the authority of local governments for low-income groups (McInnes, 2017). Seoul could consider developing multi-modal and have an important impact on the carbon location-based accessibility indices or integrated footprint of cities, but also on several Source: OECD, 2017b; McInnes, 2017. housing and transport affordability indices at dimensions of inclusiveness, such as the the level of metropolitan area (beyond its accessibility and affordability of transport and administrative boundaries). This would allow housing, as well as spatial segregation. SMG to measure different scales and The analysis of low-carbon transport and dimensions of accessibility within the broader housing projects should systematically take into metropolitan area. account their potential impacts on climate

outcomes and social exclusion, both spatially 24 Box 4. An opportunity to improve climate and inclusiveness outcomes: The congestion charge in Seoul

In 1996, a congestion charge was implemented in Namsan tunnels 1 and 3 (OECD 2017b). While the congestion charge initially reduced vehicle volume and increased average speed through the tunnels, the rate has not been raised since its introduction due to public opposition, and its impact Assessing the policy framework for low-carbon and inclusive growth: on congestion and GHG emission reductions has declined (OECD, 2017b). There is a need to opportunities and challenges increase the price and extend the coverage of the congestion charge. While such a reform could affect the affordability of transport for low-income households who live outside Seoul, it could also be an opportunity to recycle the revenues of the charge to invest in accessibility improvements, including affordable public transport alternatives for low-income groups (McInnes, 2017).

Source: OECD, 2017b; McInnes, 2017.

Overcome administrative fragmentation and Capital Region. For instance, there is a align policies across levels of government significant gap in the between the urban core and the periphery in Seoul: in Appropriate coordination mechanisms are 2010, public transport represented 52.4% of essential to ensure horizontal coherence transport in Seoul but only 34% in Incheon Challenges investments; one opportunity, however, (synergies and interlinkages) and vertical (OECD, 2017e). While both Seoul and could be to invest profits from an increased coherence (from local to national to • At the national level, low regulated electricity Incheon have a sophisticated transport and expanded congestion charge into public international) in the implementation of climate prices that fail to benefit energy-poor operation and information system that aims transport improvements (Box 4); and inclusiveness policies (OECD, 2017h). households and act as a barrier for an to improve user convenience, such systems increased penetration of renewable energy • A lack of multi-dimensional indicators related • Within SMG: SMG has implemented a operate within strict administrative Box 4. An opportunity to improve climate and and energy efficiency measures; to climate change and inclusiveness, at both comprehensive framework to ensure that boundaries under the rationale that they are inclusiveness outcomes: The congestion charge the level of the city and the broader citizens, businesses and the administration • A dual labour market that leaves many low- entirely funded by local tax revenues (OECD, in Seoul metropolitan area, which could assess the are part of the governance process of the income, non-regular workers with no access 2017e). To help achieve climate and impact of climate change polices on several Promise of Seoul and develop a “whole-of- to unemployment insurance or pension inclusiveness outcomes in a more integrated In 1996, a congestion charge was implemented in dimensions of inclusiveness (income, access society” approach. However, significant scheme, increasing their vulnerability in the way, efforts could be made to coordinate Namsan tunnels 1 and 3 (OECD 2017b). While the to jobs and services) and mainstream climate fragmentation remains within the SMG case of climate disasters (Parts 1 and 3); public transport policies at the scale of the congestion charge initially reduced vehicle volume and inclusiveness in decisions related to administration, preventing the adoption of a Capital Region. and increased average speed through the tunnels, • Absence of a climate change strategy beyond land-use, housing, urban planning, transport “whole-of-local-government” approach to • Across different levels of governments: At the the rate has not been raised since its introduction 2030, which could help to identify climate planning; and climate and inclusiveness. Improved national level, energy subsidies are a due to public opposition, and its impact on risks, potential future stranded assets and coordination mechanisms would be • Limited policy co-ordination at the level of significant barrier to energy efficiency and congestion and GHG emission reductions has communities, and anticipate future needs in beneficial, for instance between the the Capital Region among Seoul, Incheon renewable energy investments (Box 3; OECD, declined (OECD, 2017b). There is a need to skills and training; department of climate change and the urban and smaller cities in the surrounding 2012; OECD; 2017b; OECD, 2017c). Given increase the price and extend the coverage of the renewal unit, to better integrate climate and • A public transport system with a chronic Gyeonggi Province. that Korea has some of the lowest energy congestion charge. While such a reform could inclusive growth objectives across transport, financial deficit that could jeopardize future prices amongst OECD countries, the removal affect the affordability of transport for low-income housing and land use planning. One lever to of fossil fuel subsidies is a necessary households who live outside Seoul, it could also be facilitate cooperation could be to reflect condition for efficient low-carbon policies in an opportunity to recycle the revenues of the climate and inclusive growth objectives in Seoul. Importantly, such a reform would not charge to invest in accessibility improvements, the incentive structure of the administration. have to be at the expense of inclusive including affordable public transport alternatives • With other local governments in the growth objectives. Indeed, there is for low-income groups (McInnes, 2017). metropolitan area: While improvements to significant policy experience demonstrating Source: OECD, 2017b; McInnes, 2017. public transport systems in Seoul have been how to address the regressive impacts of remarkable, more effective coordination at increased energy prices (Box 3). the metropolitan level could help improve

social, environmental and economic outcomes across the population in the

25 PARTxxxxxxxxxx 3 |

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Fosteringxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Inclusive Growth throughxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx the Economic xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Democratisationxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Agenda xxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

SMEs and entrepreneurship play a key role in the delivery of more inclusive economic growth in Seoul

Sustainable business creation and small innovation and economic growth and they business development will play a major role in enable social inclusion. However, SMEs and driving future economic development and social entrepreneurs tend to be more sensitive than inclusion in Seoul. Small and medium-sized large businesses to weaknesses in business enterprises (SMEs) are the dominant source of environment conditions. This calls for policy employment in Seoul, SMEs and action to create a thriving and inclusive SME entrepreneurship make critical contributions to sector. wages and household incomes, they help drive xxx xxx SME and entrepreneurship development challenges require action

Seoul faces a number of macroeconomic and SMEs suffer from low productivity and value structural challenges, which affect SMEs and added share, which impacts on wages. Powerful entrepreneurship. Korea and Seoul are large conglomerates, known as chaebols, transitioning from a period of rapid growth accounted for 11% of GDP in 2013. There are 31 towards slower growth, as the country faces conglomerates with 1 736 affiliated firms in this increasing competition from emerging category, with combined domestic assets of economies. Low SME productivity and low levels more than KRW 10 trillion. At the same time, of technology diffusion to small firms call for SMEs make up more than 99% of firms and new policy measures to stimulate growth. Rigid employ more than three-quarters of the labour markets, combined with rising youth workforce. However, SMEs suffer from low inactivity rates and weak labour participation productivity and salaries, particularly when among women, highlight the need for a social compared with the large conglomerates (Table equity agenda that creates a level playing field 1). They also rely more heavily on non-regular for self-employment and business creation workers (fixed-term, part-time and dispatched among all parts of the population. Efforts to workers) who earn only 64.3% as much per hour enlarge business creation and increase the as regular workers and have less social productivity of SMEs will be essential to the insurance coverage. This results in a significant future development of Seoul on an inclusive gap in income between employees of chaebols growth trajectory. and the rest of the population (Table 1, Box 4).

26 Table 1. Relative share of SMEs vs large conglomerates in Korea, 2013

Firms Employees Productivity Value add

SMEs 99.5 77.9 47.6 49.5 Large 0.5 22.1 52.4 50.5 conglomerates Outcomes across four dimensions of Inclusive Growth in Seoul Source: (2016).

Box 5. Korea’s labour market duality

Korea’s labour market is characterised by a working as subcontractors to chaebols. They duality between primary and secondary rely much less on innovation and compete on markets. The primary market consists of large costs rather than with innovative products. business groups or chaebols. These are a Chaebols have a holdout power over them, collection of legally independent firms curbing their profitability. Bankruptcy and operating in multiple industries subject to de reorganisation rates are also high among SMEs. facto centralised control by the same person. SMEs are regulated much more loosely than They operate under tight regulation, such as on chaebols and are effectively exempted from their intra-group shareholding, trading and labour standards. Given the larger share of debt guarantees that are aimed at limiting their non-regular workers in SMEs, many are not economic power. They attract high-skilled covered by social insurance. In addition, as workers by offering regular employment with many are fixed-term workers, firms provide less generous benefits and career opportunities. training for non-regular workers, thereby limiting their prospects for advancement. The secondary market is populated by SMEs, mostly labour-intense service providers

Source: OECD (2016), OECD Economic Survey of Korea; Hlasny (2016).

About 20% of all Korean businesses are other OECD countries. located in the city of Seoul. Seoul has a large The leading role of large conglomerates number of businesses and business ownership (chaebols) poses challenges to SME and and self-employment are widespread. The start- entrepreneurship development. Most SMEs rely up rate in Korea exceeds that of Japan for on domestic consumption in their initial phase, example. However, the SME sector is mainly which limits their growth possibilities. In many comprised of micro-firms that do not scale and countries, one of the routes through which predominantly cluster in low productivity SMEs access wider international markets is activities, such as accommodation, retailing, or through participation in the value chains of food and beverage. Most entrepreneurs are larger internationally-oriented enterprises. solo entrepreneurs or employ only few people: While some SMEs in Seoul have been partnering less than 9% of SMEs have more than 10 with large corporations, the chaebols are employees (OECD, 2016a). This is exacerbated increasingly internationalising their supply by the structure of large-scale government chain, making it more difficult for small firms to support to micro and small businesses, which access international markets and to profit from ends once companies graduate from SME knowledge generation and technology diffusion status. There are also relatively small numbers through the supply chain. Poor prices paid to of high-growth firms and gazelles (high-growth SMEs because of their weak bargaining power young companies) – 3 261 and 854, respectively with large customers are a further challenge – and a low start-up rate per 100 000 people, that SMEs could address through linkages with despite very high rates of graduates in science, domestically-based large conglomerates. technology and innovation (STI) compared to

27 In addition to low labour market participation Youth, women, the long-term unemployed, the of women, female business ownership rates are financially underprivileged and the elderly, face low: nearly 57% of all businesses in Seoul are higher barriers to entrepreneurship in a number owned by men, compared to 43% by women. of areas, such as increased difficulties in Female business ownership is largely present in accessing finance through a lack of collateral, the service sector, such as accommodation and weaker entrepreneurship skills and food services, as well as education. Low rates of competences, more negative attitudes to Outcomes across four dimensions of Inclusive Growth in Seoul female owned-businesses in higher value-added failure, and smaller business networks relative and more knowledge-intensive industries to other entrepreneurs. These are constraints indicate additional barriers women may face in to both social inclusion and economic growth business creation and self-employment. through a more broad-based and inclusive Box 5. Korea’s labour market duality Moreover, under-represented and entrepreneurship across the population. disadvantaged groups face additional barriers to business creation and self-employment in Seoul. Korea’s labour market is characterised by a working as subcontractors to chaebols. They duality between primary and secondary rely much less on innovation and compete on markets. The primary market consists of large costs rather than with innovative products. business groups or chaebols. These are a Chaebols have a holdout power over them, The Economic Democratisation Agenda: An important policy collection of legally independent firms curbing their profitability. Bankruptcy and lever for SMEs and entrepreneurship in Seoul operating in multiple industries subject to de reorganisation rates are also high among SMEs. facto centralised control by the same person. SMEs are regulated much more loosely than They operate under tight regulation, such as on chaebols and are effectively exempted from • The Economic Democratisation Agenda (EDA), A second chance programme to address the their intra-group shareholding, trading and labour standards. Given the larger share of introduced by Seoul Metropolitan Government stigma of business failure; debt guarantees that are aimed at limiting their non-regular workers in SMEs, many are not • (SMG) in 2016, is an important policy response to Strengthened networks to promote economic power. They attract high-skilled covered by social insurance. In addition, as many challenges facing small business owners, as collaboration between social economy workers by offering regular employment with many are fixed-term workers, firms provide less well as other vulnerable workers and economic organisations and local governments in the generous benefits and career opportunities. training for non-regular workers, thereby sectors. The EDA aims to reduce economic pursuit of quality jobs, through the Global limiting their prospects for advancement. inequality and provide equal opportunity for all Social Economy Forum in 2013; The secondary market is populated by SMEs, citizens to engage in sustainable economic • Support from SMG relating to legal hurdles mostly labour-intense service providers activities. The agenda identifies 23 measures in and dispute resolution, as well as small the three categories of ‘partnership’, ‘fairness’ business support relating to intellectual Source: OECD (2016), OECD Economic Survey of Korea; Hlasny (2016). and ‘labour’ which aim to eradicate unfair property right breaches; and competition practices and support • Conversion of non-regular work contracts to underprivileged and disadvantaged groups in regular contracts for public sector workers. society (Table 2). In particular, the EDA is an important The EDA is an important policy strategy to instrument to support the government’s efforts strengthen inclusive entrepreneurship and SME to respond to the challenges facing youth and development, and responds to a number of women in the labour market. The EDA challenges facing large parts of the population recognises the need to address barriers that engaging in SME and entrepreneurship activities. youth face in sustainable business creation and These include issues of unfair franchise development and addresses them by proposing practices and commercial leases, and specific a range of support measures, including training, labour market challenges faced by workers. advice on technology development and network Moreover, it is a key instrument to raise building. The importance of supporting women awareness on the need for an inclusive society in the labour market is also recognised. which provides equal opportunities for all Supporting women in creating businesses in groups of the population in Seoul to start and higher value-added sectors and supporting run a business. It stands as a model for other entrepreneurial training for youth and women – regional governments to take action. particularly in STEM fields –will create more A range of important public policy measures sustainable businesses paying higher wages and have been taken to support the implementation promote well-being in the long-run. of the EDA. Among them: • Financial support measures for small firms;

28 Table 2. Seoul’s Economic Democratisation Agenda

23 measures introduced by the Seoul Metropolitan Government

Overarching Target of policy Specific measures objective intervention

Partnership Support for SMEs Support for neighbourhood and small enterprises to strengthen capability to continue businesses

Protection and invigoration of SMEs Enhancement of cooperation between large distribution companies and neighbourhood businesses

Reinforcement of technological protection support for start-ups and SMEs

Implementation of an outcome-sharing model between public institutions under SMG

Support for financially Support for the financially underprivileged vulnerable Support for young people to engage in sound financial activities

Provision of a second chance to small business owners with financial difficulties

Financial guarantees at a reasonable interest rate for small business owners

Fairness Unfair business Prevention of unfair franchise-related transaction practices transactions Elimination of unfair subcontracting practices in the construction industry

Provision of relief on damages caused by unfair practices of the art industry

Interactions between Protection of consumers’ rights and benefits producers and consumers Restraint of illegal activities threatening people’s livelihood

Building leases Protection of tenants’ rights to ensure stable businesses

Implementation and promotion of fair commercial lease system

Protection of tenants and their businesses from relocation caused by urban regeneration projects

Labour market Levelling the playing field Social insurance support for small business owners in the labour market Introduction of worker-director system for government-funded institutions

Facilitation of the early implementation of the living wage system

Conversion of non-regular workers to permanent work positions in the public sector

Prevention of overdue wages of part-time workers and provision of relief

Imposing obligation to pay prevailing wage to construction workers

Source: Seoul Metropolitan Government, Background Questionnaire provided to OECD, 2017.

29 Outcomes across four dimensions of Inclusive Growth in Seoul

Develop multidimensional indicators for climate facilitate cooperation could be to reflect and inclusive growth outcomes climate and inclusive growth objectives in the incentive structure of the administration,

based on the model of what has been To understand the interactions of climate achieved regarding gender equality in SMG. and inclusive growth outcomes, it is critical to • Among different local governments: In the develop indicators that take into account the transport sector, while improvements to many dimensions of inclusiveness. These could public transport systems in Seoul have been be in the form of multi-modal location-based remarkable, more effective coordination at accessibility indices or integrated housing and the metropolitan level could help improve transport affordability indices. Indicators should social, environmental and economic be developed at the level of the broader outcomes across the population in the metropolitan area (e.g. Capital Region) to Capital Region. For instance, there is a measure the accessibility to different types of significant gap in the modal share between Note: Data for period 2000-13. TL3 regionslocations. Australia, of interest, such as education and the urban core and the periphery in Seoul: in Canada, Chile, Mexico, Turkey and the healthUnited Statescentres , sports and cultural amenities, TL2 regions. Germany Non Official Grids regions. Brazil, 2010, public transport represented 52.4% of basic services (e.g. post-offices, banks, China, Colombia, Indonesia, Russian Federation and transport in Seoul but only 34% in Incheon South Africa TL2 regions. Regional GVApharmacies), for Turkey. consumption centres, and green (OECD, 2017e). While both Seoul and Regional GDP is not available for Iceland publicand Israel spaces. For ; and across different transport China, data for the Special Administrative Region of Incheon have a sophisticated transport modes (walking, , public transport and Hong Kong, the Special Administrative Region of Macau operation and information system that aims and Chinese Taipei are excluded. First availablecar). This years work: would allow policy makers to to improve user convenience, such systems Japan and India 2001; Mexico 2003; Chinameasure 2004. Last different scales and dimensions of available year: Austria, Brazil, China, Colombia, Estonia, operate within strict administrative At the national level, the incoming minimum wage increase, such a measure could accessibility within the broader metropolitan Finland, France, Germany, Hungary, Indonesia, Ireland, boundaries under the rationale that they are administration has already shown strong policy still negatively impact the competitiveness of area: between urban areas, between the city- Italy, Japan, Latvia, Lithuania, Norway, Poland, Russian entirely funded by local tax revenues (OECD, support for SMEs and entrepreneurship. The many SMEs if they do not upgrade their Federation, Spain, Sweden and Switzerlandcentre 2012and. metropolitan outskirts, among 2017e). To help achieve climate and Information on data forspecific Israel disadvantaged: populations, and across government has elevated the Small and productivity. http://dx.doi.org/10.1787/888932315602. inclusiveness outcomes in a more integrated Medium Business Administration (SMBA) to a different transport modes. Seoul’s efforts to level the playing field for way, efforts could be made to coordinate cabinet ministry, henceforth the Ministry of Source: OECD (2016b), OECD Regions at a Glance 2016, SMEs and existing/potential entrepreneurs OECD Publishing, Paris. public transport policies at the scale of the SMEs and Start-ups. Other priorities include from disadvantaged groups would benefit from http://dx.doi.org/10.1787/reg_glance-2016-en Capital Region. providing stronger government support for Governance: Overcome administrative structural reforms at national level. This could SMEs and start-ups, preventing discrimination fragmentation and align policies across levels of • Across different levels of governments: At the include addressing the structural challenges against temporary and contract workers, and government national level, energy subsidies are a facing specific groups in the workforce (youth, significant barrier to energy efficiency and increasing welfare for working parents, women; non-regular workers), as well as renewable energy investments (Box 3; OECD, including childcare (Business Insider, 2017). creating a more level playing field for SMEs vis • Within SMG: SMG has implemented a 2012; OECD; 2017b; OECD, 2017c). Given The government has also approved legislation a vis the chaebols. The new national comprehensive framework to ensure that that Korea has amongst the lowest energy to increase the hourly minimum wage by administration has demonstrated support for citizens, businesses and the administration prices of OECD countries, the removal of 16.4% in 2018. Although the government plans this agenda. are part of the governance process of the fossil fuel subsidies is a necessary condition to inject KRW 3 trillion to support SMEs in Promise of Seoul. However, significant for efficient low-carbon policies in Seoul. dealing with the financial impact of the fragmentation remains within the SMG Importantly, such a reform would not have administration, and improved coordination to be at the expense of inclusive growth mechanisms could be beneficial, notably objectives. Indeed, there is significant policy between the department of climate change experience demonstrating how to address and the urban renewal unit, to better the regressive impacts of increased energy integrate climate and inclusive growth prices (Box 4). 30 objectives across transport, housing and land

use planning. For instance, one lever to Moving forward: Strengthening support for SMEs and entrepreneurs from under-represented populations

To strengthen the impact of the EDA, SMG other relevant areas (e.g. efforts to expand could envisage some complementary strategies childcare support for women; efforts to that aim to boost entrepreneurship among support migrant workers). specific populations (such as women and Finally, SMG could also strengthen youth); strengthen collaboration and monitoring and evaluation in order to measure networking for SMEs (with other SMEs, large the efficiency and impacts of the different firms, academia, etc.); and improve policy measures of the EDA. A sound coordination with related efforts at the local monitoring and evaluation system would and national level to support SMEs and include a developed logic of change setting out entrepreneurship and, more broadly, create a the expected results of the interventions. The more inclusive labour market. Proposed intervention impacts should then be measured recommendations for SMG are grouped into through key performance indicators (KPIs), the following four categories: governance, which would demonstrate the effectiveness of entrepreneurial ecosystem, skills and networks. policies and the efficiency of the implementation approach (Table 3). The evaluation techniques should be guided by the Governance: Align the EDA with the city’s OECD Framework for the Evaluation of SME overall strategic vision for economic and Entrepreneurship Policies and development and inclusive growth and Programmes (see OECD, 2007). strengthen monitoring and evaluation efforts

Entrepreneurial ecosystem: Creating supporting Currently, there is limited co-ordination and conditions in the business environment collaboration across administrative depart- ments in Seoul, even though many of them are working on related policy challenges. Even Access to finance, skills, technology and within teams working on similar topics, there is knowledge are essential for innovative SME not always strong coordination or shared development and innovative entrepreneurship objectives. These silos are individually that will contribute the most to growing undertaking important initiatives, but run the employment and income opportunities in the risk of duplication. small business sector. The EDA identifies an There is thus an opportunity for SMG to important range of measures which will help to strengthen the impact of the EDA through develop more positive city-level business improved coordination within and across environment conditions. administrative departments. While not easy, In the context of inclusive growth, the this process would cut across departments of strengthening of the city entrepreneurial SMG and requires strong coordination and ecosystem should stress inclusion of all collaboration among the different teams population groups who can participate, charged with designing and implementing including under-represented and individual initiatives. The EDA could be even disadvantaged groups. To this end, it is more impactful by ensuring clear alignment proposed to complement the EDA with with the city’s overall strategic vision for i) policies that create an enabling business economic development and inclusive growth. environment for SMEs and entrepreneurship This requires a clear understanding of how and ii) targeted SME sector policies that aim to SMG can best align its policies with national increase the competitiveness of SMEs and policy, identify where it can build on these, ultimately their contribution to growth and and bridge gaps in existing policy efforts at social inclusion (Box 5). local level to achieve its inclusive growth objectives. In concrete terms, the EDA should clearly complement and link to policy efforts in

31 Box 6. An inclusive entrepreneurial ecosystem

An inclusive entrepreneurial ecosystem provides Innovation and business development support, a holistic view towards sustainable SME and access to markets and appropriate affordable entrepreneurship development. It involves a finance underpinned with sophisticated and range of important stakeholders, including the inclusive business and investment networks government, the entrepreneurs themselves, large complete the ecosystem (Figure 8). companies, media, and support organisations. Acting in partnership with all key stakeholders, an The ecosystem begins with education, culture ecosystem can be developed in Seoul that assists and human capital and the attitude of the local innovative small companies and start-ups from all society to entrepreneurship which directly segments of society. Lessons from the most influences an individual’s creative approach, effective policies and practices across OECD attitude to risk and fear of failure. countries can provide the basis for choosing a set Additionally, the business environment plays a of interventions that work. similar role in affecting obstacles likely to be encountered and the rewards to be achieved.

Figure 8. Key elements of an inclusive entrepreneurship ecosystem

Source: Adapted from OECD (2007).

32 Entrepreneurship skills: Provide Networks: Integrate vulnerable groups into entrepreneurship training and develop tailored business networks and support collaborative skills support for disadvantaged and projects between businesses to strengthen EDA underrepresented groups effectiveness The development of an entrepreneurial SMG could consider a range of measures to culture and mind-set in society is a crucial increase networking by SMEs and element of creating sustainable businesses entrepreneurs, including those from that contribute to social inclusion. disadvantaged and under-represented groups. Entrepreneurship and self-employment These networks can help small businesses and require a broad set of skills that includes risk entrepreneurs to gain access to markets, management and opportunity recognition, as resources and knowledge and advice. This well as business management. Women and could be done in a variety of ways. For youth are more likely to lack entrepreneurship instance, SMG could introduce policy support skills than men and evidence often points to for collaborations among networks of SMEs for different types of labour market experiences market access. SMEs could be encouraged to that offer fewer opportunities for women and work together for exporting or to develop youth to obtain business management partnerships with larger enterprises to enter experience. into their value chains. Public policy can help women and youth to SMG could also develop collaborative R&D overcome this skills barrier through projects. Most business R&D spending entrepreneurship training, as well as coaching happens in large corporations. SMG should and mentoring. There is a growing trend for consider collaborative research projects policy makers to focus such programmes on among large businesses, SMEs and universities developing skills that would support business on a competitive funding basis. These projects growth. Start-up training and consulting would target thematic issues around offered by the Small Business Development sustainability and inclusiveness. This could Centre could be further targeted towards include projects in the field of green these groups by either using specific training entrepreneurship and address modules or by setting targets for the numbers environmentally-friendly technologies or of clients drawn from women and youth. The projects that improve the situation of training should also be tailored to the needs disadvantaged segments of society. Various and experiences of women and youth instruments could be employed, such as entrepreneurs, for example by using innovation vouchers which have been tested in experienced female entrepreneurs as trainers a number of countries at national and regional or mentors within existing programmes. level. SMG could also promote a positive attitude There is also great potential to further to entrepreneurship by introducing role exploit opportunities for SME participation in models and ambassadors. Social attitudes and procurement tendering. Public procurement cultural views still tend to exert a negative should be open and transparent and public- influence on the local population’s desire to sector vendors should be encouraged to break start businesses, as well as on their self- down work packages into smaller tenders to confidence in managing a business. The policy make them more attractive and available to goal should be to raise awareness about the SMEs. Training in tendering processes and potential of entrepreneurship and to increase requirements by city officials would help open motivation of all citizens for business creation up more potential for procurement tendering and development. At the same time, to support social and inclusive SME particularly women and youth development. entrepreneurship needs to be encouraged to counter traditional career and gender stereotypes about activities of these groups in the labour market.

33

Notes and Bibliography

NOTES

1| Relative poverty is defined as the percentage of 3| As mentioned in Part 1, non-regular workers have the population with an income of less than half of a fixed-term contract with generally lower salaries the national median income. and poor social coverage.

2| As dark surfaces absorb more solar radiation, the 4| Korea implemented the traffic generation charge, concentration of roads and buildings in urban areas a tax levied on buildings larger than 1 000 m2 in cities results in warmer temperatures in metropolitan of more than 100 000 habitants, and revenue is used areas relative to suburban and rural areas. to improve transport infrastructure. Following criticisms over its calibration – too low in areas with high congestion and too high in areas without congestion, Seoul has begun to increase its rate

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35 oe.cd/champion-mayors

@OECD_local