Korea is striving to be the No. 1 center of Northeast Asian business. Accordingly, the Seoul government has established six Free Economic Zones in strategic locations across the country and is offering a variety of benefits to investors who do business there. These include tax incentives, cash grants, eased regulations and an excellent living environment.
"To establish a world-class environment for international business in Korea's Free Economic Zones, the Free Economic Zone (FEZ) Planning Office is making all-out efforts to achieve three goals," said Kwon Pyung-Oh, Director General for Free Economic Zones. "First, we plan to equip the Zones with advanced office buildings and convention centers, and to attract world-famous educational and healthcare institutions," he said.
"Second, we will make the most of Korea's considerable advantages as a logistics base-its proximity to the giant market of China and its global logistics infrastructure-and transform our Free Economic Zones into prime logistics centers unrivalled elsewhere in Northeast Asia," said Kwon.
"Third, we hope to foster the Free Economic Zones as hives of activity for the nation's future growth-engine industries. We will do this by building clusters specializing in LEDs, mobile handsets, biotechnology and IT and by extending active support to businesses engaged in the pursuit of low-carbon, green growth."
At present, Korea has six Free Economic Zones; combined, they cover 478 square kilometers. The first three Free Economic Zones, which are 30 to 40 percent developed and slated for completion in 2020, are located in the Incheon, Busan-Jinhae, and Gwangyang Bay regions. The Yellow Sea, Saemangeum-Gunsan and Daegu-Gyeongbuk Free Economic Zones will be complete between 2020 and 2030.
"Because of its advantageous location along the Pacific Rim, Korea enjoys excellent access to a giant market," Kwon said. Together, its two closest neighbors, China and Japan, account for one-fourth of the world's population, one-third of global freight volume and one-fifth of global GDP.
"Korea's many strong points set it apart from other countries," said the Director General. "For example, Incheon International Airport, the world's second most active center for air cargo; Busan Port, the world's fifth most active center for marine cargo; a high-speed railway that reaches every region of the country; the world's best information technology infrastructure; and excellent, innovative, globally minded workers with outstanding communication skills."
Korea leads the world in major sectors such as shipbuilding, mobile communications, LEDs, semiconductors and information technology and is also emerging as a major trade center, Kwon said.
"Korea has concluded FTAs with the United States, the European Union, India and the Association of Southeast Asian Nations," he said. "We are actively pursuing FTAs with Chile, Japan, China and the Gulf Cooperation Council."
Life in the Free Economic Zones
As part of its efforts to offer the best educational environment in Asia, the government has established the Songdo Global University Campus, which will accommodate 10,000 students. The State University of New York and George Mason University will open campuses there by the end of next year.
"We hope to attract 10 additional universities from the United States and Europe," Kwon said. These include the University of North Carolina, the University of Missouri and the Georgia Institute of Technology. In the latter half of 2010, Chadwick International School Songdo and Daegu International School opened facilities for primary, middle and high school students.
Korea is also looking to attract outstanding foreign hospitals in order to provide the best healthcare services to Korean and foreign residents in the Free Economic Zones.
"Hot springs and health resorts will be established close to the hospitals so that patients can recover their health," Kwon said. The FEZs will also feature various tourism, cultural and convenience facilities: high-end apartment buildings, a golf village, a theme park, a complex leisure town, exhibition halls and shopping malls.
"The FEZs will also offer a ubiquitous IT environment in which people can access global information at their fingertips," the Director General added.
A variety of incentives are available to foreign-invested companies operating in the Free Economic Zones.
"Foreign developers who invest at least 30 million U.S. dollars earn a five-year corporate and income tax holiday," Kwon said. The minimum investment to qualify for a five-year tax holiday is $10 million (USD) in manufacturing or tourism; $5 million in logistics or healthcare; and $1 million in research and development.
Additional two-year tax benefits apply to those who invest at least $30 million in manufacturing, $20 million in tourism, or $10 million in logistics, he explained. Such companies are also exempt from tariffs for five years.
"Foreign investors in Korea's high-tech, parts and materials, and R&D sectors can also receive 5 percent of their investments back in the form of cash grants," Kwon explained. "Regulations concerning labor and investment that apply to domestic companies will not affect these companies. Moreover, their employees enjoy lower income taxes, priority in purchasing new apartments, priority access to specially designated rental properties, and unrestricted foreign exchange transactions of up to $10,000."
Project managers at the FEZ Planning Office offer one-stop administrative support, including the issuance of official documents, in a number of foreign languages.
Korea's exciting Free Economic Zones
The Incheon Free Economic Zone (169.5 square kilometers) is emerging as the center of global business, finance and logistics on the strength of Incheon International Airport and convenient access to both China and Seoul.
The Busan-Jinhae Free Economic Zone (83.1 square kilometers), home to Busan Port, is emerging as the biggest shipping logistics base in Asia. Neighbors Hyundai Motor, Renault Samsung Motors, Samsung Heavy Industries and Daewoo Shipbuilding are gearing up to form the nation's biggest automobile and shipbuilding industrial belt.
The Gwangyang Bay Free Economic Zone (85.7 square kilometers) is home to Gwangyang Port, the best container pier in Northeast Asia. Not far away, POSCO and the Yeosu National Industrial Complex form a mature industrial cluster. Global companies are doing business in the logistics, steel and new materials sectors in this FEZ, which is getting ready to host the 2012 Yeosu World Expo and the 2013 Suncheon Bay Garden Expo.
The Yellow Sea Free Economic Zone (55 square kilometers) possesses an advanced technology industrial cluster including Samsung Electronics, LG Display and Hyundai Motor.
The Saemangeum-Gunsan Free Economic Zone (50.4 square kilometers) will be fostered as a core production base for Korea's future environmentally friendly, new and renewable energy and carbon materials industries.
The Daegu-Gyeongbuk Free Economic Zone (34.1 square kilometers) is a global R&D base situated adjacent to global industrial clusters specializing in IT, automobiles, steel and textiles. It will be a hive for knowledge-based industries with the development of Korea's IT convergence, advanced transport parts and materials, green energy, medical and software industries.
Numerous global companies are participating in the development of Korea's Free Economic Zones: Gale International is developing the Songdo International Business Estate, Portman Holdings is developing the 151-floor Incheon Tower, and Lippo of Hong Kong is developing Midan City. Tesco and DHL are advancing into the logistics business. Samsung, GM, IBM, Cisco, Renault, Mitsui and POSCO are all doing business in the Free Economic Zones.