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he application for Free Economic Zone status was submitted by Incheon Metropolitan City July 1st 2003 and duly approved by the Ministry of Finance and Economy's Free Economic Zone Committee. Thus Incheon was officially designated as the Incheon Free Economic Zone Aug. 5th. The creation of the zone is part of the master plan to develop Korea as the economic hub of Northeast Asia. To this end, the zone will strive to attract the key industries of the 21st century.high-tech, international logistics and finance.

  The architect of the Free Economic Zone project is the mayor of Incheon, Ahn Sang-Soo who has worked energetically toward achieving this designation for his city since his election as mayor in July 2002. Below, Mayor Ahn explains the meaning of zone status to KT&I and what it offers to foreign investors who choose to locate in Incheon.

   What benefits will a foreign firm locating in the free economic zone have in terms of business and daily living?
  Foreign-investing companies coming to the zone will be granted dramatic tax benefits whereby they will be exempted from corporate tax and income tax for three years. Both companies and individuals will be able to freely use major foreign currencies such as the American dollar and the euro, and the administration of a whole host of civil affairs may be carried out in English.

  In terms of daily living, basic facilities and amenities will be provided so that foreigners can live here comforta b l y. Residential complexes in green settings, foreign schools established by some of the world¡¯s most prestigious educational institutions and foreign hospitals that any foreigner can trust will be accommodated within the Incheon Free Economic Zone. In addition more foreign broadcasting channels will be available than is usually the case in Korea, while the non-taxable portion of foreign expatriates¡¯ overseas allowances will be expanded. So, since foreigners will be able to use their home currencies, watch their favorite TV channels and have more money in their pocket books, you might say we offering all the comforts of home and more!

   What are the advantages and disadvantages of the Incheon Free Economic Zone compared to Singapore, Hong Kong or Shanghai?
  Being city-states, Singapore and Hong Kong do not have key manufacturing industries. Korea, on the other hand, has well-developed key industries in areas such as electronics, autos, steel and shipbuilding, so those who invest in manufacturing will be able to derive advantages from our advanced base of related industry.

  In regard to China, it has a large and attractive market, but its efficiency and transparency levels are still low. Without doubt, operating a manufacturing business in China has its advantages. However, if this were the case, I would recommend that locating companies have their regional headquarters in Incheon in order to manage and supply their factories scattered across China since Incheon offers an advanced logistical infrastructure in the form of its well-developed port and airport. Moreover, our city o ffers unbeatable living conditions for expatriates and reliable institutions. The kind of arrangement I¡¯m talking about can be compared to the way many American and offshore companies have their Central and South America regional headquarters in Miami, Florida because of the transportational, administrative and institutional advantages the city is able to provide.

  Northeast Asia has grown to become a key region in the world economy since it now accounts for one-fifth of global output. Since China¡¯s entry into the WTO, economic integration of the region has accelerated to such a point that the formation of a Northeast Asian business block will soon become a reality. Given the size of China¡¯s stillgrowing and variegated market, Korea has superior comparative edge compared to Singapore and Hong Kong.

  By making the best use of its geographical advantages, manufacturing base plus logistical infrastructure for marine and air transportation, Incheon will prove to be a far better location for investment than Singapore, Hong Kong or China.

   Are there specific industries or companies you intend to attract to Incheon?
  The Incheon Free Economic Zone consists of the three areas of Songdo, Youngjong and Cheongra. We are planning to establish an international business center in Songdo as a means of developing it as the base for international business or the Asia/Pacific headquarters of multinational companies.

  As for the Youngjong area, we are planning to develop it as a base for high-value added aviation logistics by linking it to the customs duty-free area of the Incheon International Airport. So now, we are negotiating with the world¡¯s leading express courier and logistical companies to provide composite and bonded transportation services.

  It is our goal to attract international financial institutions to the Cheongra region in order to better facilitate crossborder business transactions while developing it as a haven for tourists from home and abroad. Specifically, we plan to build tourist accommodation, a floriculture complex, golf courses and other sports and leisure amenities.

   What foreign companies have you attracted so far to do business in the Incheon FEZ?
  We have concluded a $12.7-billion contract with the Gale Company of the United States to create a 5.5-million square meter international business center in Songdo. We have also signed a working agreement with Britain¡¯s AMEC to construct a bridge across Incheon Harbor connecting Incheon International Airport with Songdo new city to be completed by 2008. In addition, VaxGen of the United States is investing $150 million to produce an AIDS vaccine and build a research and development center.

  DHL, one of the world¡¯s largest air express companies plans to invest 20 million euros ($21.6 million) in a 20,000 square-meter freight terminal within Incheon International Airport. Negotiations are underway to attract the Asia/Pacific headquarters of Cisco Systems and General Motors. Moreover, we have concluded MOUs for the development of a new port in Songdo with Christian Hinneberg and Pyne of the United States.

  On the educational front, Eton College and Brunel University of Britain, as well Tennessee University, have expressed their willingness to open branch schools in zone. For the future, we will enter into negotiations with Oxford and Cambridge Universities of Britain, and MIT and Harvard University of the United States to attract their branch schools. Thus far, hospitals attached to Johns Hopkins University and Harvard University Schools of Medicine and M.D. Anderson Hospital have indicated that they would establish branches here.

   What is your vision for Incheon as a Free Economic Zone?
  The designation of the Incheon Free Economic Zone, the first of its kind in Korea, will serve to activate the regional economy through the development of hightech industries and the tourism industry. It will also play a leading role in transforming our existing manufacturing-based business structure to one based on knowledge and services.

  According to projections by the Incheon Development Institute, the impact of the Free Economic Zone by 2020 will be to boost foreign direct investment in the area to 240 trillion won ($200 billion), annual economic output to 869 trillion won ($724 billion), heighten regional value-added to 365 billion won ($304 million) and increase employment to 2.11 million jobs.

  We are planning to attract 100 global firms and 300 hightech companies to the Technopark within Songdo new city by 2010. Should we succeed in attracting the Northeast Asian regional headquarters of multinational logistics companies such as DHL, Federal Express and TNT as planned, it is expected they will draw in other logistical and service-related foreign firms. The consequent ripple effect on the regional economy will then increase exponentially.

By Shin Seung-Hoon(shshin@kotra.or.kr)