Kunsan National Industrial Complex has become a focus for the Korean auto industry as well as presenting business with a springboard to the Asia-Pacific market

Honam plain, the largest rice field in Korea located in the southwestern part of Korean peninsula, glows in the autumn season with the golden yellow of seasoned rice ears. A three hour drive from Seoul across the vast rice field will lead you to the port city of Kunsan, Chollar-pukto. The city, which originated from three small villages in the era of Three Kingdoms (the 4th-7th century A.D.), embarked on industrialization and efforts at modernization in 1899 with the opening of the Kunsan port to the outside world. Kunsan port, which had been the main port through which rice was exported to Japan, has emerged as the fourth largest port in Korea. The city has recently begun to attract attention as the center of the nation's development plans in the southwest.

With the tremendous increase in trade with China, now one of the world's largest trading nations, Kunsan has been cited as one of the most promising regions for industries keen to advance into the Chinese market. Kunsan, in fact, is the nearest of all Korean cities to Chengdao, the Chinese city on the opposite side of the Yellow Sea, and has now begun to fulfil the function of a national commercial hub. Domestic firms have rushed to Kunsan in a bid to expand their trade with southeast Asian and other Pacific nations as well as China.

In recognition of the city's increasing importance as the prime industrial center of the southwestern region, the Korean government has established the massive Kunsan National Industrial Complex, raising the prospects for Kunsan to emerge as one of the major focal points in the industrialization of the Far East Asian region during the next century. The government is planning to develop the Kunsan area as a center for balanced regional development and the revitalization of the regional economy.

The construction of the 6,828,000 square meter Kunsan industrial complex began in December 1988 and was completed in December 1994. The bulk of enterprises in the complex comprise mainly auto makers, automotive components manufacturers, and other industrial concerns.

Daewoo Motor Co. builds passenger cars and Daewoo Heavy Ind. makes commercial vehicles ; Hankook Pelzer Ltd. manufactures insulators for cars. A total of 23 manufacturing companies have now entered the complex. Automobile-related firms have invested US$1.39 billion in plant covering 3,819,000 square meters, employing a total of 3,724 persons. Other manufacturing companies include LG Chemical Co., Ltd. and SeAh Steel Corp. which invested more than US$180 million in production facilities covering 349,000 square meters. Daewoo Group last April emerged as the largest investor in the industrial complex following the completion of the construction of a massive automobile plant equipped with world-class state-of-the-art automated production facilities. Daewoo began the construction of its commercial vehicle and passenger car plant in June 1994. The company's 3.5 million square meter facility includes a test track, forwarding facilities, and a pier exclusively for exports, representing a total investment of US$1.1 billion.

Daewoo's passenger car production lines employ both leading-edge automation technology and management systems. They have the capacity to produce 140 car units per worker per day. The plant's flexible production lines are capable of manufacturing five different types of cars simultaneously.

Daewoo estimates it can save US$ 4.5 million in transportation costs through the use of a pier dedicated exclusively for exports of its fully-assembled cars and components. It is seeking to export about US$ one billion worth of automobiles this year. The region is expected to emerge as the center of Korea's automobile industry, since major car parts makers other than Daewoo Motor have rushed to begin production in the complex and making it possible for them exchange technology and information. With completion of the Kunsan Motor Park, Daewoo has the infrastructure in place to achieve its target of producing one million cars a year, an essential element in accelerating its drive toward a system of global management. The group is planning to become one of the top ten car makers in the world by the year 2000 through setting up a network of facilities to produce 2.5 million cars a year at home and abroad.

The Korean government plans to expand the current Kunsan complex to form a vast national industrial park comprising nearby the Kunsan area and to-be-reclaimed land. The newly-envisioned industrial park will cover 32.47 million square meters area by 2001 by the time the initial construction project is completed. The park will expand to 128.47 million square meters by the year 2021 at which point it will become the largest industrial complex in Korea. It takes only two to three hours from Kunsan to the major Korean cities of Seoul, Taegu, Kwangju and Taejon by the Honam expressway and the Kunsan, Janghang and Honam railroad lines. The opening of the West Coast Expressway, now under construction, will shorten the traveling times between Kunsan and the Seoul metropolitan area, and Kunsan and Mokpo city, the largest port city on the southwestern coast, to less than an hour-and-a-half each.

Kunsan port, five minutes away from the complex, can now accommodate 11 vessels at the same time. However, following the completion of the new port construction in 2011 which was began in 1989, it will be able to handle 70 vessels simultaneously and a concomitant volume of cargo of 35 million tons per year. Kunsan Airport, just six kilometers from the industrial complex, is also expected to serve local industries' need for effective transportation. It is anticipated the Kumgang Estuary Dam will be able to provide local industry with a steady supply of high-quality water. Experts have raised concerns manufacturers in the complex might experience possible manpower shortages because of the complex's relatively short history and the opening of similar industrial sites in the near future. It appears, though, the firms will have no worries about the supply of qualified manpower because of the range of educational institutes in the area which includes Kunsan National University, Kunsan Industrial College, Kunsan Junior College and other job-training organizations. As the region has lagged behind the rest of the country industrially, there is a comparatively large amount of available labor in the area. Because the region features good access, companies have the option of resorting to the Seoul and its vicinity in their quest for high-caliber employees. Said Jung Chang-hee, director of the Southwest Regional Office of the Korea Industrial Complex Corp.(KICOM), "The complex offers land at relatively cheap prices since most of it has been reclaimed." He said the complex is expected to be attractive for those companies in the heavy and chemical industry sectors who face generally high transportation costs, since the location will be able to offer more convenient access following the completion of the Southwest Expressway, the expansion of the port, and the construction of the new container terminal. "Automobile-related enterprises have also been invited into the complex because of the opportunities presented by the strong performance of auto component companies, as well as by Daewoo Motors," said Mr. Jung. In addition, he pointed out the sailing time to the opposite Chinese port of Chengdao is only 12 hours, providing the firms with easy access to the Chinese market and its 1.2 billion population.

Mr. Jung said Dow Corning has negotiated the price of land to set up plant in the complex "We are considering allowing the firm in the to-be-built Kunjang area adjacent to the Kunsan complex instead, because its proposed plant demanded too huge an area, amounting to more than 1.65 million square meters." Mr. Jung said.

The construction of massive Daewoo plant at the Kunsan complex has prompted a large number of auto component companies to rush to set up in the industrial park. Among them is automotive insulator manufacturer Hankook Pelzer Ltd., a wholly-owned subsidiary of Germany's HP Pelzer Co. The company now operates three production lines in Korea: in Kunsan, Incheon and Kyongju. The company supplies automobile components to major car makers like Ssangyong and Daewoo Motors, and experienced sales worth US$26 million in 1996. Some 20 percent of total output was exported, the bulk of which went to overseas plants of Daewoo and Hyundai Motors. "We have managed to reduce our transportation costs because our firm is located near Daewoo Motors. In fact, transportation has been a huge burden for us because we mainly deal in heavy, large-sized products," said Hankook Pelzer's plant director Lee Han-young. "I believe those wanting to expand business ties with Chinese firms may find advantages in terms of transportation at the Kunsan complex since it has a port through which they can directly connect with China." He noted the complex also has an advantage in having a supply of industrial water, and interested companies may be able to choose for themselves their precise location since the complex has spacious land available to be leased. "In addition, companies will find hiring employees relatively easy and will be able to provide their employees with a good working environment," Mr. Lee said. "Kunsan City government is considering extending significant tax advantages and free use of land to foreign companies wanting to do business in the complex," said Kim Duck-whan, the manager responsible for industrial affairs within the city government. "The Kunsan complex is expected to become among the most popular locations for investment by domestic and foreign companies since it offers comparatively better business opportunities by acting as a 'gate' to the Chinese market," he said. "Moreover, the completion of the reclamation project in the coastal region will also serve to establish Kunsan and its vicinity area as a new hub in the nation's continuing thrust toward economic development,"

The Korean government has ambitiously developed the Kunsan industrial complex in preparation of the nation's emergence as the center of the Far East economy at the threshold of the new millenium. Although the region has lagged behind the rest of the country in terms of industrialization, it is now poised to take center stage in the nation's economic development and to be the locomotive of Korea's industrial progress in the 21st century.


by Soo-Deuk Sohn