S Korea eyes more FDIs at its free economic zones

At the Korean Free Economic Zones (KFEZ) Business Day 2014 held in Incheon yesterday, government officials and economists pointed out that FDI in the eight free economic zones will be one of Korea’s key engines driving the economy in the future.  

Bak Sungi, KFEZ director of industry, said foreign investors have become a strong sector to support Korea’s economic growth. Hence, its government will continue to support more FDI through many measures in the eight free economic zones such as tax incentives, financial support, deregulation of labour rules, and lease of properties. Also, as South Korea will soon complete a free-trade agreement with China, the country could become the gateway for investors to penetrate the world’s second-largest economy.    

Bak said FDIs currently contributed 38 per cent of its gross domestic product. Accumulated FDIs reached US$7 billion in 2013.  

South Korea aims to attract $20 billion FDI and more than 100 foreign and domestic companies in the free economic zones from 2013 to 2020. 

He said foreign investors are welcome to invest in Korea in the eight free economic zones, with each zone favouring investments in specific industries and services. Although most investors currently are from the United States, the European Union, Japan, Taiwan, Singapore, and China, with the emerging growth of East Asia, South Korea expected more investment from Asean and Thailand.          

The South Korean government launched the KFEZ in 2003 with total area of 330 square kilometres. Bolder deregulation measures have been undertaken under President Park Keun-hye’s three years of economic innovation plan, which will facilitate more foreign investment. Construction of all the eight free economic zones is scheduled to be completed by 2020. 

As of mid-2013, construction of 53 districts under all free economic zones (accounting for 53 per cent of the total) had been completed. The rest will be developed and completed in the next few years, before 2020. 

Each free economic zone promotes a priority industry. State-of-the-art services are in Incheon FEZ and Busan Jinhae FEZ; material components are in Gwangyang Bay Area FEZ, Yellow Sea FEZ, East Coast FEZ, Saemangeum FEZ; biotechnology medical are in Daegu Gyeongbuk FEZ and Chungbuk FEZ. 

 

Close ties with Thailand 

Lim Kiseong, director at the Korea’s policy planning division, under the Trade, Industry, and Energy Ministry, said the country would like to capitalise on its close ties with Thailand by promoting more trade and investment between the two sides. 

As an emerging economy with many strong businesses, he said Thai companies could consult with South Korea agencies to expand investment in many sectors such as in service, retail, finance, and manufacturing with high technology, and innovation. 

David Carbon, chief economist and managing director for Economic and Currency Research at DBS Bank, said the free economic zones would help South Korea stay on the path of growth and was a key engine in driving average GDP growth of 3.2 per cent during the past five years. The country will also be a major contributor to Asia’s development, as its FEZs will provide services and high-technology manufacturing.  

South Korea is the world’s 14th-largest economy and Asia’s fourth-largest. Kim Young-sun, ambassador for International Relations of Incheon Metropolitan City, said foreign direct investment is very important to the South Korean economy. South Korea, therefore, would like to pursue collaboration and investment from overseas and continue to become a more sophisticated, high-technology economy. Kim said the KFEZ project should help promote growth and create a win-win benefit for investors and Korea as well. 

William Lee, director for tourism investment at Incheon Free Economic Zone Authority, said IFEZ would like to draw more investment from Asean and Thailand to add to investors from the US, the EU, Japan, Singapore, and Hong Kong, and one from Indonesia. IFEZ aims to be among the top-three economic zones in 2020. Under the strategy, it has promoted investment in three areas – Songdo for research and development, service, and MICE industry (meeting, convention, conference, and exhibition); Yeongjong for tourism industry such as resorts, marine, and logistics; and Choengna for finance and banking investment. So far, about 50 per cent area of the IFEZ project has already been taken up while the remaining is still available for new investment.

Lee pointed out that with the free economic zone policy, income per capita for people living in IFEZ had tripled from the average per capita income of South Korean people, which is now about $26,000 a year.

Lee Junggu, team leader at Investmet Promotion Division for Yellow Sea Free Economic Zone (YSFEZ), said the South Korean government has active policies to offer incentives to foreign investors under many priority projects, while Korean labourers have high knowledge and are well educated to support industrial growth involving sophisticated technology. 

The YESFEZ is targeted to draw up to $3 billion capital investment in the next two years.