Korea’s Free Economic Zones Making Business Easier
Once referred to as the “Hermit Kingdom,” Korea is a hermit kingdom no longer. Today, Korea has embraced its central location – and why not? Its proximity to the major Asian markets makes it the most ef ficient economic hub not only for China, Japan and Korea, but for the rest of Asia as well. Indeed, Korea’s Free Economic Zones ( KFEZ) were developed to take full advantage of this great location. The eight Free Economic Zones ( Incheon FEZ, Busan- Jinhae FEZ, Gwangyang Bay Area FEZ, Yellow Sea FEZ, Daegu- Gyeongbuk FEZ, East Coast FEZ, Chungbuk FEZ and Saemangeum- Gunsan FEZ) are scattered throughout Korea to suit the needs of enterprising businesses. The Korean government has gone to great lengths to create the most optimum business environment for companies located here.
Korea’s Free Trade Agreements (FTAS) with a whopping 52 countries top the list of reasons why companies want to do business in Korea. For many outsiders, it would seem counterintuitive for a Chinese company to set up shop in Korea. Not so, says Lu Xianyu, CEO of the Chinese enterprise HAM Global. While it’s true that wages and production costs are lower in China, he cites Korea’s impressive number of FTAS as the basis for his decision to move his operations to the GFEZ (Gwangyang Bay Area Free Economic Zone). “China doesn’t have as many FTAS,” he explains, “so exporting my products to other countries is more easily done here.” Korea’s accessibility to over 50 countries with populations exceeding 1 million makes the country’s extensive FTA network even more appealing. For Mr. Lu, in Korea, China is close, but so are the Philippines and Indonesia – his target markets.
“When we received the proposal from IFEZ to establish our own building here, we recognized it as a good financial proposal... We have met our objectives and we haven’t regretted our investment here.” — Martin Rotermund, Managing Director, Rittal Korea
Development is still ongoing for many of the economic zones, but the Korean government has already spent billions of dollars on laying the infrastructure to facilitate the emerging high-tech, international business, leisure and tourism hubs there. The country’s state- of-the- art infrastructure and public transportation systems, admired by the rest of the world, are often cited as key advantages that allow businesses to reduce operating costs, shorten delivery times and provide better customer service.
In many ways, Korea’s Free Economic Zones exemplify the synergy between the diverse industries located there. The cities have attracted numerous businesses from all over the world, and while almost everyone acknowledges that the Korean labor force is highly educated, some might think that setting up a business far away from Seoul would make it difficult to find talented workers. This isn’t the case, insists Mr. Rotermund, managing director of Rittal Korea. “When we moved here from Seoul, no one left the company,” he says, and points out that when it comes to recruiting new personnel, good workers are not difficult to find, as “IFEZ (Incheon Free Economic Zone) also has a very highly qualified labor force. There are quite a few universities in this area. Our relocation to IFEZ is not something that has affected our ability to hire good labor.”
One of those universities in IFEZ is the State University of New York - SUNY Korea. Because courses are taught by Stonybrook faculty, and students undergo the same selective process as those who apply to any other SUNY school, a SUNY Korea degree is identical to those given at Stonybrook University in New York – a fact that has generated a great deal of public interest in the school. James F. Larson, vice president of Academic Affairs at SUNY Korea, declares SUNY Korea to be the “best kept secret in study abroad right here. What we’re building here is a program that will be internationally competitive.” Many of the students at SUNY Korea are bilingual or even trilingual, which makes them highly globalized and attractive to prospective employers.
Similar scenarios are playing out in the other Korean economic zones, as higher education campuses in them have been a visible presence.
KFEZ has taken concer ted action to keep the business and living environments in the economic zones friendly toward foreign- invested enterprises and conducive to international businesses by offering tax breaks, financial support and other incentives. “The government has created a good environment for doing business,” Mr. Lu in GFEZ stresses. Mr. Rotermund echoes this sentiment. “When we received the proposal from IFEZ to establish our own building here, we recognized it as a good fi nancial proposal. We could not wish for much more. We have met our objectives and we haven’t regretted our investment here.”
“China doesn’t have as many FTAS, so exporting my products to other countries is more easily done here.” — Lu Xianyu, CEO, HAM Global