Innovations in FDI Policy
2019 was a fruitful year for the Incheon Free Economic Zone (IFEZ) as it exceeded its foreign direct investment (FDI) attraction goal by as much as 43 percent. Yet IFEZ needs to change its FDI attraction strategy this year as the South Korean government has abolished or reduced incentives for FDI and shifted the paradigm of FEZ development from FDI-based development to innovation-led growth. In reforming the FDI policy, the key word is customization, says Lee Won-jae, commissioner of the Incheon Free Economic Zone Authority. In an interview with BusinessKorea, Lee says that an investor-specific FDI strategy is the way to go for IFEZ, which accounts for about 70 percent of the FDI attracted by the nation’s seven FEZs. The following are excerpts from the interview. – Ed.
Q: In 2019, despite tough conditions, IFEZ exceeded its foreign direct investment target by 43 percent. What is your outlook for 2020?
A: We expect to face external difficulties this year as well due to uncertainties in the U.S.-North Korean and inter-Korean relations, Japan's export restriction on important items against Korea, a global economic slowdown, and the spread of COVID-19.
However, IFEZ has set the FDI target for 2020 at US$656 million, a 4 percent increase from 2019. We are determined to turn a crisis into an opportunity. We will more aggressive efforts to attract foreign investment.
The goal was set based on a plan to expand DHL’s logistics warehouses, attract investment in the distribution and logistics sectors of Cheongna FEZ and find new investors for the Golden Harbor project and the tourism and leisure facilities in Yeongjong and Cheongna FEZs.
In addition, IFEZ will do its best to achieve its goals by setting up an investment attraction strategy tailored to companies and utilizing various support programs of the central government.
Q: The Korean government has been preparing a new FEZ development strategy after reducing and abolishing incentives for foreign investment since 2019. How is IFEZ responding to it?
A: In accordance with the Second FEZ Basic Plan for 2018-2027 prepared by the Ministry of Trade, Industry and Energy, the paradigm of FEZ development shifted from FDI-based development to innovation-led growth. The aviation, logistics, biotech-based healthcare and knowledge service industries have been selected as the main industries for IFEZ. .
Accordingly, at the moment, IFEZ urgently needs to employ an FDI attraction strategy that fits the new paradigm. We have asked a consulting company to develop a new FDI attraction strategy for IFEZ based on an analysis of our investment resources and capabilities. The plan will suggest a new future direction based on an analysis of successful FDI attraction examples at home and abroad, propose measures to improve the living conditions for foreigners and formulate action plans for each project that needs FDI.
Based on the plan, we plan to set up an investor-specific mid- to long-term investment attraction strategy in the second half of this year and reinforce efforts to attract excellent domestic and foreign companies for each target sector.
Q: Would you walk us through the projects being promoted to turn the biotech cluster in Songdo International City into a world-class biotech hub?
A: The Songdo Biotech Cluster is close to Incheon International Airport and has an excellent living environment. A biotech company that sets up a plant here can easily exchange information with such global biotech companies as Celltrion, Samsung Biologics, Samsung Bioepis, Merck, and GE Healthcare.
In addition, the cluster is home to the world's largest biopharmaceutical production facilities in a single city. It is showing remarkable growth in R&D and biopharmaceutical production processes.
Currently, IFEZ is planning to expand the cluster to be built in Songdo Block 11 in connection with the existing bio clusters in Songdo Blocks 4 and 5. To this end, IFEZ will focus on increasing its competitiveness in biotech manufacturing processes and strengthening R&D capabilities in the biotech and healthcare sectors.
To attract companies in the R&D sector, IFEZ will boldly develop residential areas and launch networking support projects that can satisfy demand from R&D companies.
Q: Don’t you think that Yeongjong International City needs additional complex resorts in addition to the three currently in operation or under construction to become a global tourism hub?
A: Currently, Yeongjong International City is operating Paradise City, Korea's first complex resort which opened in April 2017. Caesars Korea and Inspire are under construction.
The three complex resorts are smaller in scale than their competitors in cities such as Macau and Singapore. Furthermore, two or three new casino complex resorts will open in Japan in the future, weakening the competitiveness of the resorts in Yeongjong International City.
IFEZ is well aware of the need to build new complex resorts in Yeongjong to enhance its competitiveness as a tourism hub. To this end, IFEZ will continue to discuss additional resort construction with relevant government agencies such as the Ministry of Culture, Sports and Tourism and the Ministry of Trade, Industry and Energy.
Q: Would you tell us your plan to develop the international business complex in Cheongna International City, which has been stuck in limbo for more than 10 years?
The Cheongna International Business Complex was originally planned to become an international financial business center. But we have amended the development plan in consideration of changes in the industrial environment and investment attraction conditions. We have added artificial intelligence (AI), information and communication technology and IoT as the target industries.
IFEZ prepared a new development blueprint last year in cooperation with LH Corp., the operator of the Cheongna International City project, based on research by a research institute. When the new development plan is approved by the authorities concerned in the beginning of March, we will hold a tender to select a bidder in April and choose a preferred bidder in the first half of this year and sign a contract in the second half of this year.
Q: Please tell us your plan to make IFEZ a hub for startups in high-tech industries.
A: To foster startups and create an advanced new business ecosystem, IFEZ is creating a startup park dubbed Poom. The park is intended to overcome the limitations of public-led job creation efforts. At the part, public and private institutions will work together to create an startup ecosystem.
This is a national project aimed at creating jobs in the 4th Industrial Revolution technologies at Tomorrow City of Songdo International City and build an ecosystem for the smart city, biotech and MICE sectors.
This project is expected to create a self-sustaining startup support ecosystem that combines public resources and private capabilities while working together with public-private partner programs, private accelerators, investment firms and leading companies in fostering startups. At the same time, the project will make Incheon a startups Mecca by helping startups and venture companies interact with each other and come up with good ideas in an open environment.
Q: One of the biggest challenges for FEZs is to make them a good place to live for foreigners. What programs are you planning to implement this year to help foreign residents enjoy their life here?
A: The language barrier is the toughest challenge facing foreigners in IFEZ. We are operating various programs to support foreigners' communications with Koreans.
For example, we are operating free Korean language classes. This year, we are planning to send more volunteers for translation and interpretation to apartments where many foreigners live.
In addition, this year, as a pilot program, we will encourage workers at restaurants, hospitals, dental offices, and pharmacies in the Songdo area to use English when they serve foreigners. We plan to set up a network with the foreign residents’ community in Songdo to reflect their voices better in living environment improvement projects.