FEZ Authorities to Gain More Leeway

Korea celebrates the fifth anniversary of the debut of FEZs with a vow to accelerate their development amid a slumping economy in Korea and abroad

This year marks the fifth anniversary of the designation the nation's first three Free Economic Zones (FEZs) -- Incheon, Busan/Jinhae and Gwangyang Bay -- in a bid to create a business-friendly environment, particularly for attracting foreign direct investments (FDIs). The addition of three new FEZs -- Yellow Sea, Daegu/Gyeongbuk and Saemangeum/Gunsan -- this past April brings to six the number of FEZs through which Korea strives to present new growth models. About 150 government policymakers, FEZ officials and businessmen got together at COEX in Seoul on Dec. 17 to take a look into the developments of the FEZs. The following are excerpts of an interview with Park Chung-won, director general of the Free Economic Zone Planning Office at the Ministry of Knowledge Economy, which touched on FEZ policies and next year's business plans.

Question: Will you tell our readers about the main contents of the revision bill of the Act on the Designation and Operation of Free Economic Zones and its effects?
Answer: The amendment bill was submitted for action at the National Assembly Legislation and Judiciary Committee. A compromise measure was finalized by compromising on a revision proposal made by Representatives Lee Han-koo and Hong Il-pyo and combining it with another bill. It calls for, among others, easing restrictions by reducing administrative red tape and expanding incentives in order to invigorate Free Economic Zones (FEZ).
The bill would delegate the authority on execution plans to city mayors and provincial governors. But the delegation of the authority will be restricted in case the contents of a master plan and the government's financial support change, a move designed to prevent the side effects of regionalizing projects that the delegation of the authority would bring about. City mayors and provincial governors would be required to consult with the minister of the Knowledge Economy Ministry before approving execution plans to ensure congruence between FEZ development plans and execution plans. It would contain a legal basis in which the green light on execution plans, delegated to city mayors and governors, can be effectively handed over to FEZ authority chiefs to fully provide one-stop services to FEZ developers.
The measure calls for expanding a variety of support and incentives offered to foreign investors. It would stipulate steps to provide financial support to foreign research institutes and foreign schools as well as to offer land to them at prices lower than land development costs if necessary.
Under the revision, a supply of rental housing for the exclusive use by foreigners will be provided in a bid to improve living conditions for foreign residents of FEZs. Developers would be required to create land for the construction of rental housing for foreigners. The government plans to amend the enforcement degrees of the act to lift restrictions on deposit money and rent of foreigners's housing so that a stable supply could be ensured by improving rental housing developers' profitability.

Q: What major tasks will the government implement within FEZs during 2009?
A: Amid next year's forecast of a slumping economy, the government plans to step on the gas to improve the environment for foreign investments. In particular, it will work out guidelines for expanding the supply of foreigners' rental housing and the selling of land to foreign investors at lower prices while establishing the second phase of a plan to invigorate FEZs. It will expand to 231.6 billion won its financial support for building infrastructure including roads to accelerate the development of FEZs. The government plans to foster landmarks by focusing on the development of such leading areas as the Incheon Free Economic Zone while striving to settle down late-comer FEZs at an early date by sharing the experiences and lessons the initial FEZs have gained during the development process and by offering consulting support.
The MKE is striving to make implementation of FEZs efficient. It will pursue autonomy for local governments in the wake of the delegation of the authority and build a competitive system in which the central government's financial support to local governments is divided according to the FEZ's achievements. The Free Economic Zone Committee, headed by the MKE minister and the Free Economic Zone Planning Office, plans to beef up policy coordination by making the most of regular consultative channels, including regular meetings with FEZ authority chiefs and FEZ policy consultation committees.
It will keep a primary focus on providing intensive support to priority projects with regard to the attraction of FDIs. The government will conduct strategic activities to attract FDIs by expanding its support for foreign educational and research institutions to 40 billion won while strengthening its monitoring by building a systematic management system for core FDI projects.

Q: Will you elaborate on plans to give FEZs a boost in attracting FDIs in 2009?
A: We're striving to promote collaboration among the MKE, local governments, Invest Korea and FEZ authorities to concentrate our capability to attract FDIs. This is designed to prevent the division of capability arising from each agency's individual activities and to jointly participate in such activities as overseas investment road shows to maximize synergetic effects.
We will consider expanding the sharing of information on efforts to attract FDIs by such organizations as local governments and Invest Korea and promoting consultation among foreign investment organizations to respond to grievances regarding the implementation of core investment projects and to provide necessary support.
In addition, our ministry is trying to swiftly respond to investment companies' needs under the "home doctor system," designed to look into their complaints and grievances and manage them and provide administrative support to minimize the stumbling blocks in the way of attracting their investments.
We'll strengthen publicity activities in Korea and abroad in order to raise the FEZs' brand power. Even though public activities have been conducted in a variety of forms via diverse influential news organizations, they have been insufficient in building an effective image. Accordingly, we plan to draw up a unified brand for joint use by FEZs to raise publicity efficiency in 2009. The ministry will make efforts to diversify publicity strategies by holding joint investor relations sessions among FEZ authorities and by placing advertisements with influential news media with the goal of sparking an investment boom within the FEZs.

Q: Will you tell us about plans to develop the newly designated FEZs
A: Three FEZs -- Yellow Sea, Daegu/Gyeongbuk, and Saemangeum/Gunsan -- were added this past April to expand the areas of eased restrictions on an experimental basis and to ensure an organic integration with the existing FEZ areas. The news FEZs will be developed in stages by 2030 and are projected to bring about a maximum of 170 trillion won worth of production spillover effects and create up to 650,000 jobs.
For the Yellow Sea Free Economic Zone, the government plans to foster the Jigok District as a high-tech automotive parts complex, the Inju District as a display and IT-related production and research cluster and the Hyangnam District as a bio-technology center.
The Saemangeum/Gunsan Free Economic Zone will be developed as a Pan-Yellow Sea Sphere Hub City of industry, tourism and international business to cash in on its growth potential as an outpost for exploring the Chinese market. We'll do our utmost to advance the development of the Saemangeum area as a center of green growth by more than a decade. To this end, in early 2009, we will be able to launch a project to highlight the Saemangeum area.
The government plans to develop the Daegu/Gyeongbuk FEZ as an inland logistics model differentiating it from the existing inland FEZs. The FEZ area will be comprised of the Suseong Medical District, the Gyeongsan Education & Research District, the International Culture Industry District and the International Fashion Design District. The names of the districts indicate Daegu's traditional mainstay industries -- medical care, education, culture and fashion -- which will be combined with high technology and human resources to foster it as a value-added service industry center.

Q: Will you explain the plan to attract investments from foreign educational and medical institutions during 2009?
A: Projects to attract prominent foreign educational and medical institutions we have pursued so far will likely yield tangible results in 2009. The University of North Carolina and the State University of New York at Stony Brook are among foreign educational institutions seeking to branch out into FEZs. The two U.S. universities are to submit applications on the establishment of their Korean campuses for approval by the Ministry of Education and Science during 2009. The Friedrich-Alexander University is seeking the green light on its entry into Korea from the German government. In this regard, the German university has earmarked about 4 billion won from the German scholarship foundation.
As the government has financed 5 billion won this year in projects to attract foreign educational and research institutions, more and more foreign organizations want to enter our FEZs.
We have decided to earmark 40 billion won in financial support to briskly attract foreign institutions into FEZs. We expect that prominent foreign institutions' entry into FEZs will contribute to securing gifted manpower and establishing a growth engine behind the development of the national economy.
In the meantime, we are making all-out efforts to attract world-class hospitals in order to provide high-quality medical services to foreign residents within FEZs. The Incheon Metropolitan Government is seeking to attract the Johns Hopkins University Hospital in the Yeongjong District, part of the Incheon FEZ. National Assembly plans to establish an institutional foundation for the establishment of foreign hospitals by legislating a special act, requisite for the attraction of such institutions at an early date.

Q: Will you give specifics on each FEZ authority's plans and progress in developing its area?
A: The Incheon Free Economic Zone
The year 2008 marks a stellar year in which some five-year efforts to develop the Incheon Free Economic Zone (IFEZ) have shaped up with tangible results. For instance, the convention center, Songdo Convensia, was dedicated in the New Songdo International Business City; projects to develop the Yeongjong Sky City in the Yeongjong District and the Unbok sports-leisure complex broke ground; and a project to build infrastructure in the Cheongna District began. The IFEZ will finish the ongoing projects in a run-up to the Global Fair & Festival 2009 in Incheon and prepare itself for the launch of the second development phase. As a representative landmark, the Incheon Bridge will show off its splendor after completion next September to link New Songdo International Business City and Incheon International Airport. Projects to develop the Song Landmark City, including the planned 151-floor Incheon Tower, and to reclaim the 11th construction site will be in high gear.
The Busan/Jinhae Free Economic Zone
Out of the FEZ's 18 districts, 251 production companies have already moved into the Shinho Industrial Complex and the Busan Science Industrial Complex, and projects to develop the Hwajeon and six other districts will be in high gear. The FEZ has succeeded in attracting the Friedrich-Alexander University Life Science Research Institute and its graduate school, auguring well for its bid to allure investments from prestigious universities and other institutions. The FEZ will be expanded to include a total of 590,000 sq. meters of land in the Hwajeon, Nammoon and Mieum areas in a bid to solve a shortage of available land. The FEZ also will strive to continuously improve the living environment for foreign residents. In particular, it will create a better environment for developing gifted manpower while accelerating its bid to attract foreign medical centers in order to meet the rising demand for high-quality medical services.
The Gwangyang Bay Free Economic Zone
During 2008, the FEZ authority launched a project to build a free trade zone to accommodate foreign company occupants in the first Yulchon Industrial Complex while continuing to construct container piers and develop its backwater area to expand infrastructure for improving the self-sufficiency of Gwangyang Port. It also inaugurated the Hwanggeum logistics center and a Fe-Ni smelting plant to raise the port's functions of logistics and production. Netherlands Shipping and Transport College Korea has already opened a master's degree program on shipping and transport, and the FEZ authority has launched a project to develop the Shindae backwater area and has established a plan to develop the Hadong district.
During next year, the FEZ will establish a plan to develop the second Yulchon Industrial Complex to secure land for industrial use. In an effort to expand the logistics capacity of Gwangyang port, the FEZ will seek to attract U.S. Forces Korea' logistics and expand the entry of transport ships while continuing to construct container piers and develop backwater areas. It will push ahead with major projects to develop the Shindae backwater complex, the Hwayang District, the Galsa Bay shipbuilding industrial complex and Daesong Industrial Complex in the Hadong District without a hitch in order to invigorate the local economy by accommodating company occupants earlier than scheduled.
The Yellow Sea Free Economic Zone
On Apr. 25, 2008, the government designated as the FEZ five districts covering 55.051 million sq. meters in Gyeonggi-do and Chungcheongnam-do with its axis being the Pyeongtaek and Dangjin ports. The FEZ authority is in the process of selecting developers for each district, taking into consideration its characteristics, while conducting activities to attract FDIs by holding IR sessions in Korea and abroad and by participating in foreign exhibitions.
In an effort to accelerate each district's development projects during 2009, the FEZ authority will pick developers of each district by next March by scrutinizing such factors as financial soundness and the capability to attract foreign investments while undertaking projects to expand greater area transportation networks. It will pick up and intensively manage probable foreign investors in Korea and abroad in a strategy to attract investments while strengthening such steps to attract investments as the hosting of investment IR sessions and participation in exhibitions. The FEZ authority will devote its energies to building an environment for attracting investments by introducing an investment management system and establishing a plan to supply gifted manpower.
The Saemangeum/Gunsan FEZ
The FEZ authority strives to lure global investors with swifter development strategies and the provision of cheaper land with the goal of fostering the FEZ as a hub of future growth-engine industries. It plans to designate the Korea Rural Corp. as the developer of the Saemangeum district while seeking to obtain the green light on the detailed plan to reclaim 2.109 million sq. meters of land out of a total of 18.7 million sq. meters of land in an initial stage by making the most of the earth reclaimed from Gunsan port. The authority plans to establish a detailed plan on the remaining area and undergo an environmental impact study. It will undertake projects to fill up reclaimed earth and build industrial complexes during 2009. In the first half of the year, the FEZ authority will launch a project to develop the Saemangeum industrial zone, firing a salvo for the full-fledged development of the FEZ area. It will throw its heart and soul into accelerating the pace of developing the FEZ by designating the developers of the Saemangeum tourism district and the Gogunsangundo district with a view of yielding tangible results.
The Daegu/Gyeongbuk Free Economic Zone (DGFEZ)
The DGFEZ authority has revamped its organization since its debut on Aug. 13, 2008 and concentrated on publicizing its image by placing LED electronic signboard advertisements and installing billboards along expressways. It is accelerating the development of the existing five districts while seeking to designate the developers of the new six districts. The FEZ authority has signed MOUs with such developers as Korea Land Corp. to develop three of the new districts.
It will establish strategies to attract investments in cooperation with global consulting companies in order to work out each district's master plan for attracting investments. By next June, it will finalize a detailed action plan to attract investments by developing each district's own unique contents and designating anchor facilities and launch activities to lure investments. The authority will designate the developers of all districts by next March and establish a detailed development plan to speed up its development pace. It will hold investment IR sessions in Korea and abroad designed to target probable investors while expanding networking activities with foreign and domestic FEZs and organizations. The authority will publicize its efforts to improve a living environment for foreign residents through a variety of channels, including CNN and English title broadcasting of local TV networks. In this regard, it will seek to attract English radio stations into the area. nw

Park Chung-won, director general of the Free Economic Zone Planning Office at the Ministry of Knowledge Economy