In the far southwestern corner of the Korean peninsula sit the city of Kwangju and the province Chollanam-do, which surrounds it on all sides. The region is well known for the deeply entrenched traditions and passions that the local populace embrace proudly, but the new drive for industrialization and globalization has the city and the province reaching out and welcoming new investment and new ideas.

Traditionally known as Korea's "Hometown for Art," not only has the region yielded renowned artists of Oriental paintings, but it has also produced a large number of Korean folk music masters. One can easily see at least one piece of Oriental painting or calligraphy work hanging on the walls of every local home. And every villager seems to be able to sing at least one "pansori" song, from traditional Korean opera.

The relatively brisk artistic development in the area is ascribed to the fact that it was endowed with the basis for an affluent economy. Its fertile, wide plains for rice paddies, for example, made this region the place to be in an agrarian land. The rich agricultural industry, however, has also served to stunt the growth of other, more advanced industries that have pushed other provinces and cities past Chollanam-do in terms of economic development and income more recently.

So local government officials are now working to remedy that situation by actively promoting investment, and Kwangju is considered by most to be the engine for economic development in the province. The fifth largest city in Korea, with a population of 1.3 million, Kwangju is in fact poised to emerge as a new leader for the economic development of the entire nation, especially in terms of high-tech industry. To this end, the municipal government and all related provincial business sectors and even the citizens themselves are now concentrating their efforts toward the development of the city as the nation's new industrial star. The region's great potential for industrial development lies in large part with its relatively abundant natural and human resources. The central government, for its part, has also actively assisted in the promotion of industry in line with its "balanced regional development" program, providing a better business environment for companies doing business there.

Kwangju offers a number of positive conditions for investment. First of all, the residents in the area are said to be very diligent and offer skillful workmanship. The province graduates some 13,000 highly-educated workers per year from its five universities, seven colleges and four engineering high schools. And it also offers plenty of industrial water and power from nearby hydroelectric projects like the Juam Dam, for instance.

Kwangju, as the inland transportation center for southwestern Korea, provides easy access and relatively less expensive distribution of goods than other parts of the nation, and the Kwangju International Airport offers direct flights to major foreign cities, while another international airport is set to open in Muan in the year 2000. The Kwangyang Port, 104 kilometers from the city, will be expanded to accommodate a huge amount of shipping traffic. And a large international exposition, slated for 2002 in Kwangyang, is also expected to facilitate Kwangyang's bid to be a leading international port city.

In terms of inland transportation, three highways-the Honam, Namhae and 88 Olympic-link Kwangju with the nation's other major cities like Seoul, Pusan and Taegu. The Honam and Kyong-Chon railroads connect Seoul to the province and also help facilitate transportation to port cities like Yosu, Mokpo and Kwangyang. In early June, the government announced that it would double-track the Honam Railroad linking Kwangju and Mokpo. The project is expected to cost around $427 million, be completed by the year 2002, and result in highly improved traffic conditions for companies shipping cargo through the Mokpo Port.

Making the most of the currently sound business climate, Kwangju city officials have formed seven industrial parks on areas covering 12,165,300 square meters and plan to expand the total area to 16,500,000 square meters. With a view to developing the area as a center for information-communications and high-tech industries, the city has also set up the Kwangju Foreign Investors Industrial Park and the Kwangju Advanced Science and Industrial Complex and is sparing no effort in its assistance for the development of the industrial areas.

Boosted by this active support from the Kwangju municipal government, Anam was able to set up a semiconductor plant on April 24, followed by LG Electronics and Samsung Electronics which are now in land purchase negotiations for their factory sites. At its plant, Anam has been producing ball grid arrays, which have emerged as the "semiconductor package of the future." The company is also planning to build two more complexes with the goal of producing 120 million units per year with 6,000 employees by investing one trillion won ($1.12 billion) by the year 2000.

"An increasing number of foreigners are applying to enter into the Kwangju Foreign Investors Industrial Park, which is dedicated to the promotion of the industrialization of Kwangju and Chollanam-do province in a project by the Ministry of Trade, Industry and Energy," said Director Oh Young-rok, who is in charge of investment for Kwangju City. He went on to say that those investing more than $20 million in the high-tech category or more than $100 million in general industries will be able to use the land free of charge and will be exempted from local taxes for five years after the investment is made, with reduced taxes for three more years. The measures are noteworthy in that even companies with as little as 30 percent foreign ownership will receive the advantages, he noted. Of the 630,703 square meters set aside for the complex, 176,489 square meters have already been rented to eight foreign companies.

"Although the foreign investors complex in Kwangju has drawbacks in that it is located far from Seoul and lacks social overhead capital, it has a high degree of potential for a piece of land which has yet to be fully developed," said Yoon Dong-min, manager of the Kwangju Industrial Complex Assistance Team of the Korea Industrial Complex Corporation, which is in charge of the general management of the complex. "The bright points for investing in this complex include the construction of container ports in Kwangyang, the international airport in Muan, and the double-tracking of the Honam railroad. In addition, the investing firm will find convenience in terms of the supply of manpower because it is located so near Kwangju. Rental fees, for those who have to pay them, reach only $0.63 per square meter per year, less expensive than the similar park in Chonan," he said.

He went on to say that there is expected to be a synergy effect between the complex and the high-tech science complex for which construction is now underway near Kwangju, and the complex will also house residential areas in addition to the industrial facilities.

The eight companies preparing to enter into the complex after completing contracts include Hella Korea Inc., Daewoo Carrier Corp., and Lucky Safety for Industrial Corporation. Of the total 630,798 square meters of land, 421,893 are zoned for industrial purposes while the other 205,509 are for residential areas. So far, 42 percent of the land has been leased. Yoon noted that three foreign firms are now poised to enter into the complex and an increasing number of companies are consulting with the management office. "For the promotion of the convenience for foreign companies, we have established a one-stop service system and have been conducting investment procedures on behalf of our potential tenants. Through the service system, Kopak International has signed a contract for investment while Total Connection Company, an American firm manufacturing small-sized airplanes, mini-submarines and hydroplanes, is ready to follow suit," said Yoon.

Daewoo Carrier, a 75:25 joint venture between the UTC Group of the United States and Daewoo Carrier Corp., is now building a factory on 49,667 square meters of land. The company, a manufacturer of air conditioning equipment and compressors, has been operating a massive plant on 96,000 square meters of land in Hanam Industrial Complex in Kwangju and is now poised to expand its production lines because the production capacity of the plant has failed to meet the increasing demand for the products. The U.S. firm's inroad into the Korean market came in a bid to utilize the technical power of the Korean enterprises and cope with challenges from Japanese rivals. Sales for the company stand at $350 million with $150 million going to export, and the company predicts to increase its turnover to $500 million by the year 2000.

"We decided to set up the plant in the Kwangju industrial complex because of its relatively inexpensive land and abundant labor force," said Kim In-young, who is in charge of the company's production planning and purchasing affairs. "In addition, we can save investment costs because there are a number of enterprises in related high-tech sectors with high level technology and human resources." He noted that the company was designated as a supplier of train coolers to be used for the TGV trains on the high-speed railroad linking Seoul and Pusan.

Lucky Safety for Industrial Corporation, which has been producing traffic and industrial safety-related equipment for the past 13 years, has decided to set up a joint-venture plant in the Kwangju complex by investing 100 million won ($112,360) and introducing high technology from Japan. Company President Yeo Choong-gu said, "We have needed a joint-venture investment and the complex has provided us with very favorable business terms. Only $6,200 dollars is needed to lease 11,570 square meters of land for 20 years, for example. And an international airport and railway station are located near the industrial complex."

Hella Korea Inc., a 49:51 joint venture between Kumho Electricity and Hella Asia Pacific Pty. Ltd. of Germany, has signed a contract for use of land covering 49,500 square meters in the Kwangju complex, with a view to setting up a plant by 1998. The company, manufacturing high-tech automobile lighting equipment, will employ 150 and invest $6 million in capital. Says Hella Korea's director Choi Nak-joon, "Germany's Hella Group has decided to invest in Korea because it is the second largest market in Asia after Japan. In addition, the industrial park in Kwangju exclusively for foreign investors provides various benefits in terms of land lease and tax. It also has easy access to nearby enterprises." Hella Korea plans to provide Korean automakers with automobile headlamps under cooperation from the German headquarters. So far, the company has engaged in technology cooperation with some Korean companies but has decided to invest directly here to seek further market share.

The Kwangju Foreign Investors Industrial Park, boosted by assistance both from Korea's central government and the Kwangju city government, is expected to be the catalyst for Kwangju to emerge as a new high-tech industrial hub.

In conjunction with the development of the Yellow Sea Economic Zone, which began to take shape after normalization of diplomatic relations between South Korea and China in 1992, Kwangju is expected to also enjoy advantages on account of its proximity to the coastal cities of China and other Southeast Asian cities across the Yellow Sea. According to the Korean government's regional development plan in preparation for the Pacific Era in the 21st century, the economic role of Kwangju will increase in importance along with other cities such as Seoul, Pusan, and Taejon.

Kwangju has seven industrial parks covering an area of 12,165,300 square meters and accommodating 52,000 employees in 2,097 companies or industries. The movement that got underway in the late 1980's to transform Kwangju into a production base is now paying positive dividends.

by Soo-Deuk Sohn

Enterprises eligible
- Enterprises in which foreign investors have 30% or more equity

Free-rent lease
- High technology industries with investments exceeding $20 million
- Manufacturing industries which invest $100 million or more

Incentives
- High-technology enterprises: 100% exempt from income tax, corporate tax, property tax, integrated land tax for the first 5 years and 50% exempt for the next 3 years.
- General manufacturing: 100% exempt from income tax, corporate tax for 3 years and 50% reduction for the next 2 years, 100% exempt from property tax, integrated land tax and 50% reduction for the next 3 years

Financing
The ceiling on the amount of short-term foreign borrowings has been increased up to the full amount (100%) of investment for high-technology projects and up to one half (50%) for general manufacturing projects.
For importing industrial facilities, commercial loans are allowed up to the full amount (100%) of the foreign invested capital.

Remittance of Principal and Interest
The remittance of the principal and interest of investment funds and dividends is guaranteed by law.
The reinvestment of dividends in the original project or projects other than the original one is guaranteed on an equal footing with domestic enterprises.

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