BusinessKorea sat down with Kim Gwang-shik, chairman of the Incheon Chamber of Commerce and Industry in order to speak about the progress of the Incheon region, the upcoming Asian games, and the next steps in its continued development. The following are excerpts from the interview.
Would you give a brief summary of the regional economy of Incheon for last year and the outlook for 2014?
Incheon City showed improved results last year in terms of employment and exports alike, in spite of the economic recessions both at home and abroad. In particular, the major industries such as automobile and petroleum product manufacturing led the growth, despite the decreased manufacturing output and shipments, and the slump in the construction sector.
The Korean economy is expected to grow 3.7% this year, according to the Korea Development Institute (KDI), and the export growth is forecast to be accelerated along with the increase in domestic consumption. Under the circumstances, the regional economy of Incheon City is predicted to enjoy a recovery as well.
Please give an explanation of the industrial structure of Incheon, its economic output, and percentag of the national economy.
Incheon accounts for 5% or so of the national economy of Korea. Specifically, 5.5% of the population is living in the region, taking up 4.8% of the gross regional domestic product (GRDP). The ratios are 4.9% in terms of the number of business entities, 4.7% in the number of employees, and 4.9% in exports. The regional employment rate is 61.9%, which is higher than the national average by a margin of 1.4 percentage points, and the unemployment rate of 3.6% is a little higher than the average of 2.8%, too.
Although the ratio of the manufacturing sector is high, a rapid change in industrial structure is underway now. Manufacturing stands for 30.0% of the regional industry, followed by transport (13.4%), construction (8.0%), and retail, wholesale and service (48.0%). During the past 10 years, the manufacturing sector’s ratio fell by 10 percentage points, while the service industry raised the figure by the same amount.
The region’s total production is at around 60 trillion won, ranking third following Ulsan (68 trillion won) and Busan (62 trillion won). It also accounts for 4.9% of the total exports from the country and 7.7% of the imports to it. It mainly exports manufacturing products to the United States, China, and Japan, while importing raw materials from China, Qatar, and Australia. Cars take up 18.1% of the exports, followed by auto parts (9.8%), semiconductors (6.9%), and steel plates (6.3%), while 25.8% of the imports is natural gas, 12.0% petroleum, 6.0% alloys and scrap iron, and 5.9% coal.
What are the pending issues of Incheon’s regional economy and its future development directions?
Incheon is home to abundant industrial infrastructure, including the airport, port, free economic zone, and 10 industrial complexes. It is close to China, the world’s largest consumption market, and is on the outskirts of the metropolitan area. Still, it is in the face of regulations on the growth of the capital area characterized by the Seoul Metropolitan Area Readjustment Planning Act and high land prices, the lack of factory sites, and an increasing number of industrial facilities moving out to other regions.
We need to attract more local and foreign companies while further developing our industrial complexes for high-tech industries. The targets include the manufacturers that are hoping to return from East Asian countries such as China. In the first quarter of 2013, Incheon attracted a foreign direct investment of US$1.469 billion to take the highest spot in Korea, and the efforts should be continued on the global level. New growth industries like biotechnology, new and renewable energy source production, and photovoltaic energy are emerging rapidly to increase their shares. We will have to attract companies in these industries with the most attractive conditions so that they can become the new growth engines of the region.
During the past decade, the ratio of manufacturing dropped by 12.3 percentage points in Incheon along with the ratio of its GRDP, compared to the national total. This situation can be addressed by promoting the manufacturing sector by means of R&D in the metal, machinery, and plastics industries.
A lot of production facilities have relocated themselves to the southern region, and apartments and housing complexes are taking their place, causing Incheon to become a sort of bed town for those working in Seoul. However, the municipal and central governments will work on more measures down the road in order to ensure the future growth of the regional economy. The specific measures include those that that can be applied to the automobile, IT convergence, biotech, medical equipment manufacturing, electronics, fashion, and many more sectors.
Incheon houses the world’s best airport, but its strategy to turn it into a regional hub has been hindered by the central government’s fostering of Gimpo Airport. Likewise, it has Incheon Port, which handles a volume of shipments to and from China, but the two-port policy of the government has limited its growth for a while.
At present, the importance of Incheon Port is on the rise amid the rapid expansion of the Chinese and Southeast Asian economies, and thus ways for the better utilization of the Incheon New Port have to be sought. Also, it has to be more closely linked to the Seoul/Incheon International Airport for Incheon to remain a logistics hub of Northeast Asia. Incheon City is planning to get some of the shares in the airport, sharing the central government’s logistics policy and vision, and suggesting constructive opinions.
What are the Incheon Chamber of Commerce and Industry’s key projects for regional development?
Now is the time for us to make greater efforts if we are to hand over a vibrant Incheon. The Incheon Chamber of Commerce and Industry will strive hard to create investor and businessfriendly environments. In this context, the city government held a joint IR session with the authorities concerned last year and revised the ordinances related to the relocation of corporate headquarters’ and business attraction. Such endeavors will continue throughout 2014 for greater investment and employment.
The construction of the Gangwha Industrial Complex, which broke ground in March last year, will come off without a hitch in the second half of this year. It will address the problem of factory site shortages in Incheon, while taking the lead in the revival of the manufacturing sector to be a cornerstone of regional development.
The FTA Support Center, established as the first one of its kind in Korea, will keep providing assistance so that firms in Incheon can make better use of the Korea-EU FTA and the KORUS FTA. It will nurture and train FTA experts, contributing to the employment situation of the country as a whole, too. In the meantime, the Human Resources Development Committee, which was set up last year, is offering HR fostering systems tailored to regions and industries for more effective job placement.
The Intellectual Property Center is going to shore up its on-site consulting function as a partner of Korean firms exposed to the patent war in the global arena. The importance of intellectual property will be publicized in a strategic way, and we expect that the significance of intellectual property can be better recognized by public organizations and local companies.
This year, the 2014 Incheon Asian Games takes place in September. A number of private-public cooperation opportunities will be sought building on the international sports event, and be a boon to the regional economy. The chamber will suggest various opinions through multiple channels and do its utmost so that companies located in Incheon City can contribute to the successful hosting of the Asian Games.