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Busan-Jinhae Free Zone Draws Foreign Investors
December 20, 2004
The Busan-Jinhae Free Economic Zone (BJFEZ) Authority has crammed a busy schedule of overseas trips and other activities this year to promote the region among potential foreign investors. Those efforts appear to be finally paying off.
The Busan-Jinhae FEZ has had a serious of good news recently, the latest coming from London. Officials said that SnowBox, a division of Sterland Leisure Ltd. specializing in indoor ski slope development and operation, has expressed an intention to invest $200 million to create a leisure town within the BJFEZ.
Representatives of the BJFEZ Authority, led by Commissioner Chang Man-su and South Gyeongsang Province governor Kim Tae-soo, and their British counterparts signed a memorandum of understanding on December 2 in London. Under the envisioned plan, SnowBox will build a leisure center spreading 85,000 square meters, complete with a 300 meter-high ski slope as well as a hotel, a health club, a shopping mall and other entertainment-oriented facilities. SnowBox hopes to open the ski dome in 2007. In return, the BJFEZ Authority will pledge full support for fast implementation of the company's plan, including one-stop service for all the necessary administrative procedures, officials said.
The talks with SnowBox are another proof that the Busan-Jinhae region, which is emerging as a new Northeast Asian business hub, has plenty of investment potentials, officials noted. If realized, FJFEZ Authority officials expect the leisure town to create 2,000 new jobs in the area.
The BJFEZ Authority has also been encouraged by the recent announcement by Renault SA, the world's No. 5 carmaker. The French company said it plans to spend more than 600 billion won over the next three years to strengthen operations of its Korean subsidiary, Renault-Samsung Motor Co.
At the center of the automaker's plan is to build a new engine plant in Busan, which raised hopes that Renault-Samsung will be able develop its own engine ability. Renault-Samsung has so far used platforms provided by Nissan Motor Co., Renault's affiliate in Japan.
Renault Samsung was formed in 2000 after the French auto giant bought a 70 percent stake in Samsung Motor Inc. The company's present flagship SM5 has more than 30 percent of the nation's midsize market. It has the one assembly plant in Busan.
Busan, Korea's second-largest city at the southeaster tip, and neighboring Jinhae hope to attract more than $15.5 billion in foreign investment by 2020, emerging as a Northeast Asian logistics hub surpassing Shanghai, Hong Kong and Kobe. Busan, also the world's fifth largest container harbor, and neighboring Jinhae city jointly form a 105-square-kilometer special industrial complex for logistics companies and related businesses.
It is one of three such free economic zones, the others being the northwest port city of Incheon and the southwestern port city of Gwangyang. The Korean government enacted a special law on free economic zone in November 2002 to develop the country as a hub of Northeast Asia. At the center of developing the Busan-Jinhae belt into a Northeast Asian logistics hub is the construction of a new port and distribution park with 30 berths, to be completed in 2011.
In efforts to attract global logistics companies, Busan-Jinhae is offering rent at just 4,000 won per pyeong, which would be one tenth of Shanghai. One pyeong equals 3.3 square meters. The port construction scheme includes a 3-square-kilometer expanse to house distribution centers, warehouses, packaging and reprocessing plants and container freight stations. "The Busan-Jinhae Free Economic Zone Authority needs to ratchet up its efforts to develop the new port and build up distribution parks surrounding it in the competitive logistics market in Asia," said Park Nam-kyu, a logistics management professor with Tongmyong University of Information Technology in Busan.
Busan-Jinhae zone will also consist of four other specialized areas, the Myeongji area for air logistic and high-tech parts companies; the Jisa area for research and development; the Dudong area for mechatronics industry, and the Ungdong area for education and leisure.
Busan-Jinhae lies within a 2-hour flight from Tokyo, Osaka, Beijing and Shanghai, as well as serving as a connection point between Northeast Asia and the rest of the world. Foreign investors should also benefit from major industrial clusters in southern Korea, such as Ulsan, the center of automobile and shipbuilding, Sacheon, the center of aerospace industry and Changwon, which houses many mechatronics companies.
BJFEZ Authority Commissioner Chang Man-soo has assured that best efforts will be made to ensure streamlined administrative process for foreigners. In addition, foreign schools and large hospitals will be established to improve living conditions for foreign residents. All official documents will be translated into foreign languages, and interpretation and translation services will be expanded, he said.
The Busan-Jinhae area also finds competitiveness in a well-educated skillful workforce at competitive cost and the absence of militant labor unions. "The Busan-Jinhae region traditionally has experienced less labor strife than other industrial areas because the industry structure here consists of small or mid-size companies," said Chang. In Korea, the union activism is rampant among large corporations, while workers at smaller companies have yet to be unionized.
Competitive tax and financial incentives are offered in the free economic zone. Foreign-invested companies with a larger than 10 percent foreign stake will receive a 100 percent exemption from all corporate or income tax for three years, followed by a 50 percent tax cut for an additional two years. Import duties on capital goods will be exempted for three years and acquisition and registration taxes will be eliminated for 15 years. The government plans to subsidize up to 30 percent of land purchase by foreign corporations, officials said.
When the economic zone construction project is completed in 2020, the Busan-Jinhae authority expects 84,000 new residences in the region, including 2,300 foreign households, will be set up for 235,000 people. The BJFEZ Authority has been engaged in promotion activities at home and abroad.
In late November, the BJFEZ Authority teamed up with the Korea Trade-Investment Promotion Agency to launch an eight-day road show in Germany, Spain and Austria, focusing on meeting with European auto parts associations. "We concentrated on informing the related industries about the unique merits of the Busan-Jinhae area," an official said.
In Seoul the BJFEZ Authority held a two-day presentation in November to attract investment from members of the European Union Chamber of Commerce in Korea. In a reflection of wide interest in the FEZ, more than 70 representatives from top European companies and government bodies showed up at the event, including Jerome Stoll, CEO of Renault Samsung Motor Co., Hans-Bernhard Merforth, Chief Representative of Commerzbank AG and Italian ambassador Michele Sabatino.
In late October, the BJFEZ Authority flew to New York for meetings with U.S. companies interested in real estate development in the industrial complex.