This study proposes a set of policies based on practical approach to deregulate Capital Region (CR) Regulation. In general, there should be no exceptions in reforming regulations. However, since weakening CR Regulation is subject to strong political controversy, we propose a practical approach with an enhanced political feasibility. Empirical results on locality in this study suggest that benefits from CR regulation is concentrated only in non-CR regions which are closer to CR. In terms of quantity aspects such as number of firms, employment, and value-added, non-CR area has surpassed CR area. Even in terms of labor productivity, near and non-CR area is better than CR area. However, in terms of total factor productivity, CR area is superior to non-CR area, probably reflecting the competitiveness due to locational benefits. In regards to empirical results on industrial sectors on different technological levels, the gap between the CR and non-CR area are shown to be significant. Especially, CR area seems to have locational advantage in high-tech industries, technology-intensive ventures, or small-medium sized enterprises. Therefore, if an all-at-once or overall deregulation of the CR Regulation is politically not feasible, we suggest that it is better to take a realistic approach by setting priorities for gradual deregulation and breaking bottlenecks of individual investment project through administrative legislation. Furthermore, we suggest policies including support for local government-led regional development and tax transfers to non-CR area of a portion of consumption tax in CR as well as increases in tax revenues resulting from CR deregulation.