By Kim Da-ye
The government vowed on Wednesday to invest 82 trillion won ($72 billion) to complete the development of eight free economic zones by 2022, with the long-term aim of attracting as much as $20 billion in foreign investment.
Some districts around the free economic zones may face closure because the government decided to “pick and choose” among 101 districts in order to accelerate the development of those that show promise.
The restructuring will be done “in a decisive manner,” the Ministry of Trade, Industry and Energy announced Wednesday in a blueprint for the development of free economic zones between 2013 and 2022.
When designated districts fail to find a developer, it will be recommended to give up its special status. Furthermore, until the eight free economic zones are completely developed, the government will “strictly limit” the designation of a new one.
Foreign investors based in free economic zones receive various tax benefits including full income tax exemption for the first three years from the date they generated operating profits; fewer restrictions and duties, especially those related to the labor law; and financial support for rent and for the construction of plants and research and development centers.
The trade ministry said that it hopes to vitalize the service sector in the free economic zones. One dramatic ― possibly controversial ― measure would be to support foreign hospitals operating in such zones through deregulation.
The ministry added that free economic zones will also be used as “test beds” for certain industries that require deregulation such as healthcare and that for integrated resorts ― leisure facilities with casinos built within them.
To attract foreign companies, the government will further modify tax systems, cash support and comprehensive incentives that encompass deregulation and support with locations. The ministry said that incentives for foreign investors could be extended to domestic firms because attracting Korean companies into free economic zones would be necessary to draw additional foreign firms.
Between 2003 and 2012, 58 trillion won have been put into free economic zones by the central government, municipal governments and private developers. Until 2012, $6.8 billion were invested by foreigners based in the free economic zones, and that represents merely 6 percent of the total foreign investment, according to the MOTIE. The ministry added that it is weaker than expected. As of late 2012, there were 11 foreign firms and 11 domestic companies that generate 100 billion won or more in sales in the existing free economic zones.
Free economic zones were first introduced in 2003, and the eight designated are Incheon, Busan-Jinhae, Gwangyang Bay Area, Yellow Sea, Daegu-Gyeongbuk, Samanguem Gunsan, East-Sea and Chungbuk. More than 52 percent of 101 district in the eight zones have been developed or are being developed. In the performance evaluation in 2012, Incheon came first, followed by the Gwangyang Bay Area.