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T he roads stretching eastward from Seoul are frequently jammed with vacationers bound for destinations in Kangwon Province. Peak periods are the summer holidays, the ski season, and weekends year-round.
With world-renowned natural attractions such as Mt. Sorak and the scenic coasts along the East Sea, the area has become the favorite tourist destination for both Koreans and foreign visitors, providing them with the opportunity to enjoy some of the most spectacular scenery in Asia in conjunction with a variety of leisure activities depending on the season. The winds of change, however, have recently begun to blow in the region.
Whereas the region has come to symbolize Korea's historical appellation of the "Land of the Morning Calm," it now emerging as a promising area for investment. The Kangwon provincial government has been pursuing a range of programs to this end in addition to its drive to develop the region as the premier tourist destination in Northeast Asia as well as in Korea. The government's strategy has been to focus on attracting those industries considered to have the least impact environmentally, and range from pharmaceuticals to multi-media including animation. In keeping with its drive to protect and enhance the local environment, the province plans to transform an abandoned mining area near Mt.Taebaek into a massive tourist complex and establish media and animation centers in Chunchon, Kangwon's provincial capital.
Geographically, Kangwon is blessed with all the features to attract its target industries in the tourist and leisure-related fields. In particular, Chunchon, designated as water resources conservation area, is a pollution-free city in unspoiled natural surroundings of outstanding scenic beauty. The city and its surroundings are thus conducive to encouraging the creative process and offer some of the finest living conditions in Korea. The province is located near Seoul and its metropolitan area, the country's largest market. Its quality life-style and stimulating business climate, coupled with its strong tradition in the arts and education, further enhance its potential for attracting high-caliber professional personnel and the development of knowledge-based industries.

IMPROVING ACCESS

C ommunications between Chunchon and other centers rate well. Now only one-and-a-half hour's drive or train ride from Seoul, the city's accessibility will improve markedly once the road and rail network to link Seoul and cities in its vicinity to Kangwon, now under construction, is complete. In addition, the projected Wonju Airport is also expected to further facilitate access to the area.
Businesses seeking to locate in the Chunchon area should have no concerns about the availability of high-quality employees as the city, albeit with a population of only 240,000, can boast six universities including Kangwon and Hanlim Universities. In addition, the region has six specialized research institutes mainly in the information and communications sectors. It is also home to five establishments dedicated to training and education in the software-related industry. Also, because Seoul is within commuting distance, businesses can recruit from skilled workers from the metropolitan area. "The chief merits of Kangwon province we will promote as an investment target will be, among other things, its pristine environment, natural scenery and excellent tourism resources," said Bong-kee Hahn, director of Kangwon's Bureau of Trade and Industry. "Our investment promotion efforts are geared to attracting environment-friendly industries." He said the development of the exhausted mining area into a high-altitude tourist complex will be a top priority. "Chunchon itself will be promoted as a center for animation and bio-industries while Wonju will accommodate a massive techno-park centered on the medical equipment industry," said Mr. Hahn. "We also plan to set up research centers in coastal area of Kangnung and other cities along the East Sea."
On the subject of measures to attract foreign capital, Mr. Hahn said the provincial government is preparing a package of incentives which will be totally different from those adopted by other provinces. "For instance, there are spacious state-owned areas in the province," he said. "We are considering leasing the land on a long-term basis and reducing all associated taxes. We have also decided to induce foreign capital to develop the derelict mines since the financial crisis began to impact, and there are many other investment incentives under consideration." Mr. Hahn pointed out Kangwon plays host to some 40 million tourists annually and the development of the abandoned mining area will be essential to the promotion of the tourist industry. "It will also soften the impact of the worsening unemployment situation and revitalize the depressed regional economy," he said. An added benefit is new regulations which will permit Koreans as well as foreigners access to casinos in Kangwon. The prospect of closer cooperation on the Korean peninsular also holds the promise of further advantages. "Should the possibility of broader economic exchange with North Korea become a reality, the development of the Mt. Kumkang area will become possible. Any foreign company wanting to take advantage of the opportunities presented by reunification should consider establishing a foot-hold in the region right now," Mr. Hahn said.

BUILDING ON THE PAST

S pearheading the province's drive to boost tourism in the area is its plan to invest 3.348 trillion won until 2005 in developing a massive 729.7 square-kilometer resort complex on a high-altitude former mining area. The leisure complex, to be built on the 1,000-meter altitude Taebaek Highlands, will have access to the East Sea coastal area and will be developed as four-season tourist destination. Key to the project is the province's plan to induce an enormous US$ 1.3 billion worth of investment from the private sector. Investors will enjoy such special privileges as tax exemptions or reductions, special consideration for civil petitions or applications that require government approval, and free use of national or other public land.
A horticultural complex involving 26 separate projects will be formed on 30.89 million square-meters, while 45 infrastructure programs will provide the area with necessary facilities. Resort facilities such as casino parlors, and golf and ski courses will be constructed over a further 65 million square-meters with the aid of foreign capital. The province is also planning to construct training centers for young people and a folk village through eight separate business projects. Specifically, eight ski courses, four golf courses, six hotels and eight condominiums will be constructed. A casino room, unique to Korea by virtue of the fact it allows domestic tourists too, will be established in a hotel.
Foreign enterprises are expected to participate in the construction projects involving tourism, leisure and casino facilities. The Ministry of Commerce, Industry and Energy established the Kangwon Casino Resort Corporation in late May with a budget of 51 billion won to undertake the development of the abandoned mining area. The ministry also plans to invest another 49 billion won drawn from domestic and overseas sources. The ministry judges foreign capital as essential to financing the project and the construction of the casino and resort facilities.
With the establishment of the corporation the resort complex project has gained momentum, a specific master plan on the casino center and theme park due late October this year. The casino resort development project will proceed in two stages. On completion of the first stage, the hotel, casino and theme park will open in October 2001, while the golf and ski courses comprising the second stage will begin operation in 2006 after construction begins in 2002.

ANITOWN:
An Animation Center of Excellence

C hunchon has become an important center for the animation industry with the growth and establishment of an increasing number of related companies, studios, schools, and a theme park. The promotion of Chunchon as a center of excellence for the industry is a brain-child of the provincial government. The municipal government, having designated animation as strategic industry for the town, has made the industry the subject of a seven-year incentive and promotional program. Under a related project, an animation complex will be set up in Chunchon comprising an animation information center and theme park to be built over 205,000 square-meters. The 142,000 square-meter animation theme park will combine both educational and recreational functions. The municipal goverment plans to attract foreign capital to finance the project.
Chunchon City, which already operates a state-of-the-art animation studio it launched with an investment of 6.8 billion won, has also set up the Politech Adventure Town Corp. in conjunction with nine corporate partners including Daewoo and Korea Telecom to drive its animation-town project. To create an atmosphere favorable to the development of its planned animation town, the city held the 1st Chunchon Animation Festival July 25 through Aug. 3 last year, attracting some 240,000 visitors. Chunchon plans to continue holding the festival to enhance the city's profile among animation professionals and to foster interest in developing the city as the center for the animation industry.
An increasing number of animation-related educational institutes have also taken root. The tentatively-named Chunchon Information College will open in March next year with an enrollment of 640 students. JBI, the French animation and design education organization, is planning to open a branch here in February next year, accepting 120 students for a three-year training program. The goal of the institute will be to develop human resources in the area of animation, cinema and multimedia. Due to the level of governmental assistance offered the industry in terms of administrative procedures and financial incentives, an increasing number of animation businesses are seeking to set up shop in the city. A total of 46 companies have so far signed contracts with Chunchon city to locate in an industry-dedicated complex, of which 20 have already begun operation. The municipal government is offering assistance to interested firms by curtailing lease fees and extending loans. The reason for the city's focus on the animation industry: its estimation of the industry's continued potential and the proven track record of Korean expertise in the field.

VALUE-ADDED

I n fact, animation has emerged as the most promising sector among Korea's cultural industries. With the value of production of the national animation industry now ranking number three in the world, government at all levels realizes its economic benefits. Planners have concluded animation is an appropriate industry to foster in a country like Korea which counts a high-quality work force as one of its assets, since it offers high value-added and requires no huge amounts of investment.
When it comes to the value-added potential of the animation industry, the experience of the Disney Corporation has frequently been cited. "Beauty and the Beast" earned the company $140 million on an investment of only $20 million in 1991. The company garnered $980 million by producing "Lion King" with $40 million. Disney also grossed $140 million with "Pocahontas" and $1.5 billion with "Toy Story" which cost only $50 million and $75 million, to make, respectively. Korea's problem is that while it is a world animation power behind only the United States and Japan, its industry has to date failed to produce an animation masterpiece in its entirety over which it has complete creative control. Korean firms worked on the production of "101 Dalmatians," "The Simpsons," and "Magic School Bus," but their involvement was as sub-contractors to leading foreign producers.
It is the ultimate goal of the project's planners that the synergy created by the juxtaposition of so many industry players in Chunchon will eventually lead to the creation of an industry masterpiece. The province believes the project is feasible if overseas capital and strategic capability can successfully combine with the domestic manufacturing expertise. Observers look forward to further foreign involvement into the domestic animation market but as partners pooling capital and skills in the furtherance of joint ventures.

MEDIA VALLEY GETS INTO GEAR

C hunchon city has also been pressing ahead with plans to set up a Media Valley of its on similar lines to a project of the same name scheduled to be built on reclaimed land off Inchon. In pursuing this project, the city seeks to exploit to the full its geographic merits to attract the environment-friendly multimedia industry. With California's Silicon Valley as a benchmark, the city plans to build a complex incorporating research and production centers and a theme park. The city is presently constructing a multimedia technology assistance center on an area of 9,878 square-meters, designed to aid small and medium-sized venture businesses to develop new technologies. The Ministry of Information and Communication has designated Chunchon Digital Studio Venture Street as area for the promotion of the software industry, to which it will extend assistance in the form of facilities, information and financing. It is also considering establishing a world-class multimedia theme park on Sangjung Islet in Chunchon's Eui-Am Lake with the assistance of foreign capital. The area will be developed to focus on the production of special visual effects. The project has so far attracted proposals from one domestic and two foreign companies.

TRAVEL EXPO:
Raising Kangwon's Profile Worldwide

W hile the number of local tourists visiting Kangwon province has decreased since the onset of the International Monetary Fund's strict assistance program late last year, that of overseas visitors surged to 149,000 in the first quarter of this year, up 63.7 percent from a year earlier. In contrast, the total number of tourists fell to a little more than six million, in comparison to the 6.335 million seen in the same period of last year. To promote its tourist attractions worldwide, the city plans to hold the International Travel Expo '99 from Sept. 11, 1999 through Oct. 30. Some 40 state and provincial governments and 90 tourism-related organizations from 30 countries including the United States, Japan, China, Russia, the European Union, Australia and a number from Southeast Asia, plan to take part in the exposition to be held under the theme of "Man, Nature, and Life for the Future." Participants are expected to engage in an exchange of information on matters relating to tourism and culture and benefit from the resultant cross-pollination of ideas.

MEDISON:
A Case Study in Successful Foreign Investment

C urrently, there are some 10 foreign companies are operating in Kangwon Province. According to a survey conducted by the Kangwon office of the Korea Trade-Investment Promotion Agency (KOTRA), 10 locally-based domestic companies want to induce between $1 million to $5 million of foreign capital. The province's efforts to introduce foreign capital include its current negotiations with the central government to have the Pukpyong Industrial Park designated as a Free Foreign Investment Zone. Located near the East Sea coast, the industrial complex is well-positioned to be a manufacturing center for trade with North Korea, China and Russia. Following the reunification of the Korean peninsula, the park could be play the role of a forward base for companies wanting to do business with the North.
Medison, a manufacturer of ultrasonic diagnostic equipment, magnetic resonance imaging (MRI) medical systems, and associated X-ray equipment, has been one of the most successful businesses in the province. Founded in 1985 by seven young researchers, the company succeeded in independently developing ultrasonic diagnostic equipment and has chalked up growth rates of more than 50 percent per year. In the process, it has emerged as a global player in the field of leading-edge medical equipment.
With a corporate asset base of key technology, independent branding and a worldwide distribution network, the company has developed and is now marketing the world's first three-dimensional digital ultrasonic equipment. Working through its seven overseas branches in six countries and 60 agents in an additional 55 countries, Medison has experienced an annual 80 percent increase in exports to claim 70 percent of total Korean exports of electronic medical equipment. Company turnover topped 123 billion won in 1997 and is expected to exceed 200 billion won this year. Sales per employee, among its 330-member staff, stands at 400 million won, compared to a Korean average of 50 million won per employee, a reflection of the firm's excellent managerial practices.
In contract to most of corporate Korea, faced with the need for rationalization and streamlining, Medison is striving to augment its workforce to keep abreast with the burgeoning world demand for its products. Explaining the decision-making process which led the company to choose Kangwon as the site for its factory, Medison general manager Han Sung-ho said, "We chose this site on account of the tax incentives we could gain by locating in the regional industrial complex. In addition, Kangwon Province neighbors Seoul." The company's main factory is in the Kangwon city of Hongchon; Medison has an additional plant in Taejon where it produces its MRI systems and a joint-venture factory in Shanghai, China. It also operates plants in Austria and Japan for the manufacture of three-dimensional video diagnostic equipment and X-ray accessories, respectively.
Following an investment of 6.1 billion won in 1994 by three foreign investment banks - British-based Schroders, Regent, and W.I. Carr of Hong Kong - Medison stock has emerged as the most frequently purchased among foreign investors due to its remarkable growth and potential. This was evidenced when foreigners rushed to buy the company's stock up to the permissible limit immediately after the government raised the ceiling for foreign ownership of a domestic company to 55 percent. "An increasing number of foreign enterprises have recently expressed their intention to invest in Korean companies, especially in those in the medical equipment area," said Mr. Han. "They are looking to take stakes of 30 percent through equity purchases worth between $5 million and $10 million, but the domestic companies in this field are mostly too small to accommodate investments of this size." Mr. Han said the medical equipment industry is dominated by corporations in the developed world, Korea and Israel being the only countries outside the G-7 with the technology to compete in this area. He noted the current dip in the value of the Korean won has made the domestic industry more price competitive, ultrasonic diagnostic equipment manufacturers benefitting in particular.
"It's our belief Korea will be able to produce highly-competitive products should it apply its world-class electronics technology to the production of medical equipment," continued Mr. Han. "We are working with a group of venture business entrepreneurs to develop the Korean medical equipment industry to world-class levels. Because the industry is characterized by the manufacture of a variety of products in small quantities, often to the specific requirements of particular clients, the venture business format is the most suitable through which to advance this particular business."
Given the track record of Korean venture business in developing advanced electronics technology and highly-skilled technical personnel, the medical equipment industry is shaping up as one of the most lucrative areas for foreign investment. Kangwon Province is poised to seize this window of opportunity by all means possible. On the subject of the climate for foreign investment in Korea, Mr. Han said the reduced wage costs following the onset on the financial crisis and the devaluation of the won has resulted in a decline in overall investment and operational costs. "In accordance with the IMF-directed corporate restructuring drive, layoffs have increased with a consequent boost in productivity per employee to even higher levels," said Mr. Han. Meanwhile, the proven technological and distributional capability of Korean companies represent tangible, exploitable benefits for potential foreign investors. "Foreign enterprises always tend to opt for companies with technology and a strong local marketing network," Mr. Han noted.
While Kangwon has laid the groundwork for those companies wanting to establish themselves in the animation, state-of-the-art medical equipment, multi-media and bio-technology industries, the province has in fact remained relatively less-developed. Fueled by a desire to take the lead in the regional race for development, the province is now getting to grips with the task of inducing investment into these industries of the future. Its strategy to this end involves nothing more than capitalizing on and maintaining its greatest resource: its natural advantages, which provide a home for those economic activities which will make the province a player in the global marketplace of the 21st century.

by Soo-Deuk Sohn

For further details, please contact :
Kangwon Province International Trade Support Center
Tel : (82-361) 57-6374
Fax : (82-361) 57-5611
E-mail : TP6118@chollian.net

Kangwon Province Mine Area
Development Division
Tel : (82-361) 57-7680/7690
Fax : (82-361) 250-2432