Deregulations for Investment Promotion

A view of the Incheon Free Economic Zone, which had estimated its employment and added value inducement effects until 2020 at 4.84 million persons, 128 trillion won, respectively.
A view of the Incheon Free Economic Zone, which had estimated its employment and added value inducement effects until 2020 at 4.84 million persons, 128 trillion won, respectively.

 

The South Korean government is planning to open up free economic zones for more South Korean companies.

Free economic zones in South Korea have been run with the focus laid on foreign investment attraction. As of the end of June this year, a total of eight such zones, consisting of 95 districts, are in operation in the country, including 34 districts in the Incheon Free Economic Zone (IFEZ) and 19 in the Busan Jinhae. At the end of December last year, a total of 2,189 companies were housed in the zones, which are divided into 1,952 domestic firms and 237 foreign-invested companies.

The foreign-invested companies have employed 26,781 persons in the zones with a total employment of 96,449. From 2004 to last year, the free economic zones attracted approximately US$5.6 billion in investment, which is much short of previous goals. For example, the Inchoen IFEZ consisting of Yeongjong, Cheongna and Songdo Districts, one of the largest FEZs in the country, had estimated its employment, production and added value inducement effects until 2020 at 4.84 million persons, 312 trillion won (and 128 trillion won, respectively.

The ratio of foreign-invested companies in the zones to foreign-invested companies located in the country as a whole stands at 1.5%. Besides, the actual foreign investment attraction in a unit area of one square kilometer is approximately US$675 million in individual foreign investment zones whereas the amount is about one-fortieth of it in the zones.  

Under the circumstances, the government is going to allow foreign educational institutions in the zones to provide certain special courses and establish new departments associated with companies. At the same time, fashion and art colleges are to be added to the targets of attraction.

In addition, the required minimum ratio of foreigners working for foreign medical institutions in the zones is to be reduced from 50% to 49%. Then, South Korean medical institutions can have the rights to run such establishments and this can lead to the establishment of foreign medical institutions by domestic organizations, which are limited in for-profit business, in partnership with world-renowned institutions. This, in turn, can contribute to improving the residential environments of foreigners in the zones and attracting inbound medical tourists from China.

The other incentives prepared for South Korean firms include 20-year lease of public land, housing in the long-term lease complex for foreign-invested companies and resale of parts of land and buildings from foreign-invested companies to partner firms.

 

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