Free economic zone project moving forward

Free economic zone project moving forward

OCT.12,2005

Three areas attract increasing foreign direct investment as benefits improve

Korea will move swiftly to further improve the contents of its free economic zones as well as strengthen its sales pitch to potential investors, the Ministry of Finance and Economy said.

"The success or failure of our FEZ plan will depend much on how we move on in the next one or two years," said Cho Sung-ik, deputy minister of MOFE's Free Ecomonic Zone planning office.

"The government's resolve to make this (the FEZ plan) a success is firm.

Korea has been actively seeking foreign investors to the free economic zones it designated in 2003 - Incheon, Busan/Jinhae and Gwangyang - to spur economic growth and ultimately transform the country into a financial and logistics hub of Northeast Asia.

The global competition for developing FEZs, however, has lately intensified, with Korea pitted against strong neighboring contenders like Singapore, Hong Kong and Shanghai.

However, the government believes Korea has many advantages, including the geographical location, abundance of well-skilled human resources and a strong IT infrastructure.

"The Free Economic Zone Planning Office will provide a systematic support to enable the world's leading corporations to operate their businesses in the best environment. The zone will simplify procedures for permits and will provide a one-stop service, the best infrastructure, and living conditions well-suited to the service-oriented public administration," Cho said.

The Korean government has allocated 1.9 trillion won this year to support activities of the three FEZs, up 47 percent from last year. Next year, the subsidy will be raised to 2.4 trillion won.

"One of our priorities (for this year) will be post-negotiations with foreign companies which already have indicated interest in investment so it is made into reality," Cho said. "The FEZ authorities will also actively carry out IR (investor relations) activities jointly with the central government and other related organizations."

Further, Cho said special efforts will be made to remove any hurdles to foreign investment, with special emphasis on creating a competitive living environment.

"World-class schools and hospitals in FEZs will actually benefit local people as well and lead to raising the competitiveness of domestic industries," Cho said.

The government said in July that a consortium of U.S. hospitals, including the Hospital of the University of Philadelphia, plans to establish a foreign-run hospital in Songdo International City in the Incheon Free Economic Zone by 2008.

Under the revised FEZ Law, foreign hospitals will be allowed to treat local patients. The government believes foreign hospitals will push domestic medical service to improve as well as help attract international biotech companies to the country.

In May, the National Assembly passed a bill allowing foreign schools to open in the nation's free economic zones.

The Korean government believes developing FEZs will advance the nation's position as the business and logistics hub of Northeast Asia.

With a population of 1.5 billion and accounting for nearly 20 percent of global gross domestic production, the region is emerging as one of three major trade blocks that fuel global economic growth.

Recent developments

Officials at the Ministry of Finance and Economy say the three free economic zones are taking shape.

In March, ground broke to start building an international business district in New Songdo City, within the Incheon FEZ.

In June, developers of the international business district raised $1.7 billion in syndicated loans from 26 firms, including ABN Amro, Kookmin Bank and Woori Bank, attesting to the high potential of the project's success.

The project to develop New Songdo City, envisaged as an alternative for Seoul for multinational companies, is the largest privately financed real estate development in Korea to date. A joint venture of Gale International, a New York-based real estate company, and POSCO E&C, an affiliate of Korean steel giant POSCO, the project was launched in 2002.

Officials further said a "knowledge industry complex" in the New Songdo City will be completed by year end housing 35 venture companies. The industrial complex will also be home to Korea's first UN affiliate, UN ESCAP ICT.

The Ministry of Information and Technology meanwhile unveiled plans to build a Radio Frequency Identification cluster within the industrial complex.

Cheongna, also in the Incheon FEZ, is being developed into a leisure hub targeting visitors from Southeast Asian companies. The region will house a theme park and an "Asian Village," among other attractions.

The Finance Ministry recently also said an upscale Chinatown is to be established there to help draw investors from Asian neighbors, namely China, Singapore and Hong Kong.

Incheon International Airport has established an around-the-clock customs system as part of its resolve to become the world's leading airport. Construction is under way to build a third runway and periphery facilities, to be completed in 2008.

A new bridge will also be completed, cutting travel time between the airport and Songdo New City to 15 minutes.

Officials also say that by next year, the new Busan Port and Gwangyang Port will have infrastructure to compete with Chinese ports.

Busan and Gwangyang are situated along the world's main trunk routes, which allow both locations with a significant geographical advantage to develop into a prominent global harbor.

Especially Busan and Gwangyang are exceptionally advantageous compared to Shanghai and Hong Kong in terms of North China cargo processing competitiveness.

Recently North Chinese and Japanese cargo has significantly increased the cargo processing volume of both harbors. This, in turn, proves that it is very likely that both harbors hold a strong possibility to become the central harbor of North East Asia.

Further, Busan and Jinhae are upbeat about transforming into a machine-automotive parts cluster after receiving inquiries from many companies. Hwayang, within the Gwangyang FEZ, will be developed into a global marine and leisure complex also in relation to Yeosu cit
y's bid to host the International Exhibition in 2002.

2005 IBC Forum

An advisory group of political and economic veterans recently held a seminar to review the progress of the nation's FEZ projects. The Aug. 30-Sept. 3 IBC (International Business Center) event was attended by the likes of former Prime Minister Nam Duk-woo, former finance and economy minister Jin Nyum and former dierector of the National Intelligence Service Lee Jong-chan.

The participants agreed that like China, Korea's national efforts should be concentrated on FEZ projects to make it a test bed to transforming Korea into a more advanced economy.
The participants offered several recommendations for the government to promptly follow in order to improve the country's chances for becoming a Northeast Asian hub.

They said the nation should make FEZs a priority concern and manage the areas as special districts with "no-visas, no labor disputes and no tariffs."

They said the FEZ office should report directly to the central government while giving full administrative power to heads of the FEZ authorities.

FEZs should also have staff specializing in attracting foreign investment.
Finance ministry officials said the ministry will seek a revision of the FEZ Law to reflect the recommendations from the IBC forum within this year.