K-Smart City : How does the Korean government fund smart city initiatives?
What is the secret behind South Korea’s sustained leadership in the global smart city market? More than a decade after introducing the globally pioneering smart city, Songdo International City, South Korea remains a prominent player in the sector. Innovations such as Seoul’s smart transportation payment system and the digital civic mayor’s office, powered by an integrated smart city data platform, have bolstered this reputation. However, these alone do not fully explain South Korea’s enduring commitment to smart city development. For professionals working in or interested in the smart city field, exploring the policy efforts driving these advancements may be particularly intriguing.
There are several reasons behind South Korea’s leadership in the global smart city sector. In the 1990s, during the early stages of internet adoption, the Korean government spearheaded the development of a nationwide high-speed communication network. Companies like Samsung and LG, which evolved into global IT giants in the 2000s, further strengthened Korea’s image as a leader in the smart city domain. Most importantly, I believe that the operation and ongoing evolution of the Smart Challenge Program (hereafter referred to as the K-City Smart Challenge Program), which has been conducted annually since 2019, play a crucial role in showcasing a variety of urban-scale smart services across Korean cities.
The K-City Smart Challenge Program was inspired by the “Smart Challenge” launched by the U.S. Department of Transportation (USDOT) in 2016. This U.S. program attracted applications from 78 cities, with Columbus ultimately selected as the winner. Over five years, Columbus undertook a project with an investment of approximately $54.6 million, leading to the development and operation of a parking app, smart shuttles, electric vehicle charging stations, and more.
The K-City Smart Challenge Program has several characteristics. Below, I will introduce these features.
- Annual Competition
While the US Smart City Challenge was a one-time event, the K-City Smart Challenge has been held annually since 2019. Each year, details of the competition such as submission deadlines, application conditions, and allocated award amounts are announced between February and April. Its regular and predictable operation helps Korean cities and companies maintain dedicated teams for smart city projects. These teams set business and revenue targets, aligning their strategies with the competition’s schedule. This prompts companies involved in smart city projects to start searching for interested local governments and partners from the beginning of the year, enabling them to prepare for the competition and develop distinctive smart city strategies tailored to the cities of interest.
2. Annual Allocation of National Budget for Smart City Initiatives
The Korean Ministry of Land, Infrastructure, and Transport oversees the country’s smart city policies, allocating and managing a dedicated budget for these initiatives each year. Since the program’s inception, the budget has seen significant increases: starting at 9.3 billion won (7 million USD) in 2019, it grew to 26.9 billion won in 2020, surged to 83.4 billion won in 2021, and reached 117.6 billion won (88 million USD) in 2022. This progressive funding reflects the Korean government’s strong commitment to advancing smart city technologies and infrastructure. Additionally, other ministries, such as the Ministry of Science and ICT and the Ministry of Culture, Sports, and Tourism, are now planning and operating similar programs, like the Smart Village Challenge and Smart Tourism City competitions. This trend underscores the continuous increase in public investment by the Korean government in smart city development.
3. Adaptive Competition Framework
The K-City Smart Challenge program consistently adapts to changes in Korea’s urban policy landscape. Launched in 2019 as the “Smart Challenge,” the competition initially featured a complex two-phase screening process — the preliminary phase and the main phase — designed to fund cities that, after a year of planning and demonstrating solutions, were selected for main projects. Recently, the competition has simplified its procedures to a single phase and modified its requirements to focus more on addressing regional development imbalances. It now supports cities that demonstrate the potential to act as hubs, fostering growth and integration with neighboring areas. The provision that previously allowed local governments to apply independently has been adjusted to also permit proposals from alliances of local governments.
4. Local Government Matching Fund Requirement
Cities wishing to participate in the competition must prepare financial resources equal to the contribution provided by the Ministry of Land, Infrastructure, and Transport. For instance, if a city wins, the Ministry will provide 16 billion won over three years. Similarly, the chosen city must secure a budget of 16 billion won for the project. This requirement not only indirectly discourages cities that lack confidence in securing funding for smart city projects from applying but also ensures that the city has a vested interest in the project’s success.
5. Private Sector Partner Participation as a Mandatory Requirement
To apply for the K-city Smart Challenge Program, local governments must form a consortium that includes private companies. When participating private companies commit to a certain level of investment in the competition proposal, the local government’s chances of winning the challenge increase, as this commitment earns additional points in the proposal evaluation. In 2023, Ulsan City was the winner of the K-City Smart Challenge competition. The city partnered not only with large companies like Hyundai Motors and SK but also startups such as HealthConnect, along with local public institutions and universities like Ulsan University and Ulsan Technopark. Through this requirement, collaboration and communication among large corporations, startups, and public institutions are being fostered, with a focus on smart city development.
As mentioned earlier, I believe that the key to South Korea’s ability to maintain its leadership in smart cities for over a decade lies in the continued operation of the Smart City Challenge Program, which has been tailored to suit the unique conditions of the country. I hope this information serves as a guideline for many cities and countries interested in the innovation, dissemination and expansion of smart city solutions and services across their cities.
