Korea’s Incheon Free Economic Zone (IFEZ) has taken on a highly ambitious challenge. It aims to transform the three Incheon city districts into the distribution, high-tech, and leisure and tourism hub of the north-east Asian region.
North-east Asia is one of the fastest growing economic blocs in the world, with three countries – South Korea, China and Japan – serving as a driving forces for growth. South Korea knows that if it fails to take advantage of global economic trends, it will be squeezed between China as a low-cost producer and Japan as a high-tech supplier.
Lee Hwan-kyun, commissioner of IFEZ, says that South Korea’s two Asian neighbours pose a challenge to its position as a magnet for business investment. “China – boasting 9% to 10% annual average economic growth – has emerged as the factory of the world. Japan – the world’s second economic powerhouse – is outpacing Korea in terms of advanced technology,” he says. “Under these circumstances, Korea may fall to the bottom among the three countries if it fails to secure a position as the business centre country of north-east Asia within the coming five to 10 years, considering the speed of development of China.”
The South Korean government recognised more than a decade ago that the country’s economic future depended on making the best use of its economic and geopolitical location between China and Japan, playing the role of a facilitator or intermediary in the economic hub of north-east Asia.
In 2003, Incheon was designated the country’s first FEZ, becoming a contender in the race to develop the leading business hub in the region. The development offers foreign-invested companies optimal business and living conditions in a seaside location with easy access to the strategically important Chinese and Japanese markets.
Officials are seeking to capitalise on the competitive advantages of metropolitan Incheon and the financial benefits of an FEZ. To this end, they are stepping up work on what will be the world’s largest mixed-use development.
Incheon is fighting to stay ahead of the competition, not only abroad but also from the two to three new FEZs that the ministry of finance and economy plans to designate by the end of the year. “If more FEZs are designated, it can further facilitate balanced regional development and attract more foreign capital,” says a ministry official.
According to the ministry, the most probable candidates to be FEZs are Pyongtaek and Dangjin in South Chungcheong Province, and Gunsan in North Jeolla Province, which failed to become FEZs in 2003. The government also plans to extend tax breaks for foreign companies to seven years, up from the current five, to attract more non-Korean businesses to the zones.
IFEZ has catapulted itself into the vanguard in attracting a consistent flow of foreign investments into the area. The complex covers 51,755 acres, comprising New Songdo City, Cheongna and Yeongjong districts. With an eventual population of 480,000, IFEZ will earmark about $15bn to build up its infrastructure by 2020. The zone can count on the logistic support of Incheon International Airport and the Port of Incheon.
The strategy at Incheon is to create a four-hub development, calling for the construction of hubs for business, logistics, IT, and leisure and tourism. Incheon is in competition with three other FEZs in the country, and strives to differentiate itself by becoming an “intelligent city” with 24/7 connectivity to computer networks. In addition, more than a third of the area is allocated to green space development and leisure facilities. IFEZ will have cutting-edge transport systems, such as personal rapid transit and light rail transit to minimise pollution and congestion.
IFEZ enjoys the advantage of being the first FEZ that has attracted a broad spectrum of investors, by which it intends to consolidate its reputation. Big names already established there are US developer Gale International and engineering and construction firm POSCO E&C, which have joined forces to develop New Songdo City, lauded to be the first ‘new’ city in the world designed and planned as an international business district. Stanley Gale, chairman of Gale International, says the group is managing $12.7bn “to develop Incheon’s New Songdo City into Korea’s most upscale urban environment”.
Gale and POSCO will build an international business centre on 1362 acres of reclaimed land. Construction of the conference centre began in 2005 and construction of the 65-floor landmark Northeast Asia Trade Centre started last year. Korea KT&G, Nextol Corp, J Stephan & Co and the US pharmaceutical company VaxGen have also begun their operations at IFEZ.
A consortium led by the UK’s AMEC, a consultancy, engineering and project management company, is the contractor of the project to build Incheon Bridge, linking Incheon International Airport and New Songdo City. GM Daewoo will invest about $28m in an automobile testing development and $70m in research and development facilities. Together with Portman Holdings of the US, Hyundai E&C, Samsung Corp and SYM will build the 151-storey Twin Incheon Towers, which are scheduled to be completed by 2010, adjacent to the International Business Centre.
Incheon’s developers are taking the project a step beyond the business realm by focusing on IFEZ’s social infrastructure, a distinguishing feature with the country’s other FEZs. The United Nations has opened its first South Korean agency in Songdo, and the UNESCAP Asian and Pacific Training Centre for Information and Communication Technology for Development (APCICT) will train information and communications technology (ICT) specialists from member Asia-Pacific countries. APCICT will use the benefits of Korea’s cutting-edge ICT technology and Songdo’s superior infrastructure in boosting regional economic development.
Songdo City International School, the first such school in Korea’s FEZs, will open its doors to about 2100 foreign and Korean students next year. Simultaneously, New York Presbyterian Hospital, Korea’s first foreign-operated hospital, will begin service with 600 beds, providing superior quality health care for foreign residents and Koreans.