The Incheon Free Economic Zone (IFEZ), aiming to become a business hub of Northeast Asia, is poised to become a global city.
Designated as Korea's first free economic zone (FEZ) on August 11, 2003, the IFEZ has grown up with a strategy of selection and concentration to strengthen the country's competitiveness by cultivating new growth engines, under the circumstances where global capital and technology poured into China, and the gap in competitiveness with Japan still remained.
With its 12th anniversary approaching, the IFEZ's achievement is truly remarkable. Last year,the size of foreign direct investment (FDI) already exceeded that year's goal in the latter half. As a result, the goal was revised upwards, reaching US$1.714 billion in the end. The number accounted for 9.0 percent of the total (US$19.3 billion), and the weight increased by 2.5 percent compared to 6.5 percent of the previous year. The proportion of the IFEZ to 8 FEZs nationwide in total FDI amounted to 94 percent. IFEZ is aiming for a global FEZ, going toward a leading FEZ.
A total of 13 international organizations including the Green Climate Fund are housed in the zone, which shows that the IFEZ is turning into a global city. The World Bank, the Association of World Election Bodies, and the Economic and Social Commission for Asia and the Pacific also have offices there, and more international organizations are expected to move into the zone.
Now, Incheon Global Campus, which has the State University of New York, George Mason University, Ghent University, and the University of Utah, may not seem strange to be called a hub of global education. IFEZ's other achievement is that it attracted many companies like Samsung BioLogics. Helped by these achievements, IFEZ's development model was exported to Ecuador.
Yeongjong District Establishing Foundation for Takeoff with Development of Cheong-na International City
The development of Yeongjong is said to have been slower than that of the Songdo District, but it has already established a foundation for its take-off last year. Yeongjong District is expected to be a cradle of the country's resort and casino industry this year. Paradise SegaSammy, aiming to become the nation's first global integrated resort Paradise City, already held a groundbreaking ceremony in Nov. last year. The construction of the LOCZ Resort is set to begin in June this year, and successive projects are underway to meet the target date. In particular, the construction is expected to create more than 8,000 jobs by 2018, and over 35,000 jobs by 2020, thereby becoming a catalyst for the development of Yeongjong District.
Hong Kong-based Chow Tai Fook (CTF) also signed a Memorandum of Understanding to create a resort in Yeongjong in Feb. this year. With a US$2.6 billion investment in Midan City, a foreigner-only casino, a five-star hotel, and MICE industrial facilities will be built.
The Cheong-na International City also created an opportunity to become a city of international finance and tourism. The Hana Financial Town project, which is under way with a goal to integrate finance-related functions of the Hana Financial Group by relocating its headquarters, human resource development center, and financial research center, had a groundbreaking ceremony in Oct. last year. Its construction is scheduled to begin in June.
After much difficulty, the IFEZ established a plan to lead the construction of the City Tour, which is expected to become a landmark in the 453 m2 Cheong-na International City. IFEZ is taking proposals from business operators to build, manage, and run the City Tour and complex facilities by early June, and is going to select a candidate for the business in July.
Benefits, Characteristics of IFEZ
A big increase in the investment in the IFEZ and relocation of international organizations is largely attributable to the Incheon International Airport, a base of a global network that has maintained the top spot in airport services for ten years in a row. It is a 20-minute bus ride from the Songdo District to Incheon International Airport, which is a hub connecting 2 billion people within three hours of flight and 61 cities with more than 1 million people.
Since IFEZ is also easily accessible in the metropolitan area, it is easy to acquire a high-performance workforce. Educational institutions like Chadwick International School and the Incheon Global Campus are considered to be a foreigner-friendly environment.
Most of all, foreign investors are impressed by the fact that it is becoming a compact, smart, and green city.
A Compact City means that all kinds of functions necessary for a city are possible within 30-40 minutes' walk. In other words, the city is totally self-sufficient in handling businesses within its 5-km radius, since facilities needed for everyday life such as business, leisure, education, medical services, shopping, and conventions are all housed there. Songdo was already recognized as “the City of the Future” by news organizations around the world.
The Smart City moniker refers to a ubiquitous computing environment capable of freely connecting networks or computers regardless of place. There is a cutting-edge management system that offers convergence services like communications, transportation, water and sewage, electricity, fire protection, and medical services in real time, based on communications networks linked with the Internet and smartphones.
Songdo has also been turning into an eco-friendly city, starting from the IFEZ Low Carbon Green City Declaration of June 2011, and its green plot ratio amounts to 30 percent. Thanks to an automatic collection facility for household waste, it is known as a city without garbage trucks. In addition, it is possible to reuse already-used water for cleaning, landscaping, gardening, and road cleaning with heavy water treatment. In particular, Songdo Central Park is the nation's first park where sea water flows.
Visions and Tasks for IFEZ
Many point out that the IFEZ has unlimited possibilities. In addition to its global accessibility like the Incheon International Airport and Incheon Port, the designation of IFEZ as a test of the Korea-China FTA based on the provisionally signed Korea-China FTA, along with Weihai City of China, shows tremendous growth potential.
However, the reality is tough. When it comes to this year's 579.6 billion won (US$522.6 million) budget, revenue from land disposal merely makes up 72.6 percent, extra tax income 25.3 percent, and government subsidies 2.1 percent. It is not easy to sell land owing to the property downturn. Since the IFEZ's debt is included in the city's entire debt ratio, it is difficult to secure liquidity. In other words, revenue from land disposal and government subsidies are totally insufficient. It is not easy to borrow money, either.
The same is true for its designation as a test bed for deregulation, which is aimed at turning the IFEZ into a hub of promising service industries like education, medical services, finance, and tourism. The designation is to create the IFEZ as the country's growth engine by reviewing regulations and relaxing unnecessary regulations, but there isn't enough consensus or driving force among central government agencies, including the Ministry of Strategy and Finance.
In contrast, Japan and China have already introduced the National Strategic Special Zones (NSSZs), expanding the designation of free trade zones, and thereby moving ahead with sweeping deregulations.
Cho Dong-am, an official at IFEZ, stressed, “Using its designation as a test bed for deregulation, the IFEZ would gain another momentum for its advance. Only then will it be possible to adapt quickly to a selection and concentration strategy, which is the background of IFEZ's designation, and to secure the nation's new growth engines. I'm looking forward to the central government's groundbreaking decision.”
He added, “I'll do my best to make IFEZ a world-class business-oriented city by attracting high-value-added service industries like education, medical service, distribution, tourism, and leisure.”