After it was decided to relocate 176 public agencies to local provinces, controversies between the central government and local autonomous governments concerning the capital region spatial policy become serious.

The central government continues to adhere to its views that the mitigation of capital region regulation would be considerable following the construction of an administration city and the completion of the relocation of public agencies. The local autonomous governments, on the other hand, particularly of metropolitan areas together with business enterprises argue that the policy should be abandoned, as it has become a critical factor behind worsening national competitiveness. Be as it may, investment amounts of up to 4 trillion won by large corporations remains tied up by the present policy regulation on the capital regions.

The Korean government has set "balanced development of the national territory" as a policy priority largely with the view that balanced development would encourage social integration and help improve national competitiveness. This way regulation of the capital region is a precondition behind national policy. The government's main reason for pursuing such a policy lies in the belief that by prohibition of concentration in the capital, better income distribution and balanced development across local provinces would be both desirable and possible.

This policy is however subject to global free market principles, which would make distribution to local provinces somewhat unfavorable for Korea. If international and domestic companies are unable to the best location for their investments within the country, they are sure to search in cities outside the country's borders. That is, the capital region regulation could exert undesirable influences on the national economy. Simply put, cities now no longer compete on a domestic level. With globalization, if costs increase in terms of companies searching for the best location, time loss, unattractiveness to foreign investment, delayed domestic infrastructure, etc. cities would become increasingly disadvantaged.

The balanced development strategy for "everyone" and "everywhere" is a rather attractive political slogan, which might even be difficult to give up. Government's do worry about the increasing gaps between local provinces and metropolitan areas, and if the capital region spatial policy were abandoned, it is feared that even more people and capital would flow to metropolitan centers. As such, it is said that local provinces will remain undeveloped.

Other developed countries have had similar dilemmas and, interestingly, it was found that the pursuit of balanced regional development strategies only worsened national competitiveness. That is, balanced development was unattainable through regulation of the capital region, and, rather, ironically, decentralization of the administrative and financial powers proved to give better results.

This paper critically looks at the issues of the present spatial policy of Korea that regulated the capital or metropolitan regions from the point of view of the market economy. Further issues concerning spatial policy alternatives looking forward are also discussed. In the age of globalization, the future of national competitiveness lies in the hands of the metro-city. It is difficult to deny the fact that Korea's capital region, namely, the Seoul metropolitan area, is the only one able to compete with foreign cities around the world. As such, the current spatial policy must adjust to this reality and find ways to improve the city's competitiveness in comparison with other competing cities around the world. The government should realize, the sooner the better, that the rather narrowly defined spatial policy would disadvantage the country in favor of other cities like Tokyo, Beijing and Shanghai.