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South Korea is planning and building
high-tech cities to remain competitive

By Seo Jee-yeon, Korea Times

21 November 2004: South Korea is expected to have more globally competitive cities like Seoul in 10 years as three free economic zones (FEZs) nationwide are developing into international cities. “Free economic zones were launched as part of South Korea’s survival strategies to cope with rising competition with other countries in the global economy,’’ Lee Hwan-Kyun, CEO of the Incheon Free Economic Zone Authority (IFEZA) told The Korea Times.

With neighbouring China growing fast as a global manufacturing hub, South Korea, the world’s 12th largest economy and Asia’s third largest, has encountered limits in its manufacturing-driven economic growth.

“FEZs, which will be featured with globally competitive businesses and living conditions, have tasks to develop the nation’s knowledge-based new growth engines, replacing manufacturing businesses, mainly by attracting foreign direct investment (FDI),’’ Lee said.

Developing FEZs in Incheon, Gwangyang and Busan-Jinhae is also one of the South Korea’s key strategies to prepare for the era of Northeast Asia, including Korea, Japan and China. The region has been emerging as a global economic powerhouse with a population of 1.5 billion, four times the population of Europe, accounting for nearly 20 per cent of global gross domestic production.

In a different aspect, the completion of the FEZ project also means South Korea will have more international cities nationwide.

Songdo City under construction in the Incheon FEZ is a model case for building a global city.

“Songdo is aimed at becoming a corporate hub in the Incheon FEZ, a bilingual English-Korean city where international schools and hospitals for foreigners are located and where international companies can obtain relief from Korean taxes and bureaucracy,’’ Mr Lee said.

FDI will play a key role in realizing the project. For instance, US-based Gale, partnered with local steel maker POSCO, is in charge of developing Songdo City by 2020.

The other two FEZs are also driving up to attract FDI to transform cities in their zone into globally competitive ones for international businesses.

“To ensure the success of FEZs, what is more important than FDI attraction, is to pull off negative factors that are deeply rooted in Korea, including excessive regulations, soaring labor costs, labor strikes, political instability, expensive land prices, higher tax rates and anti-business sentiment,’’ Lee said.

Lee advised the central government to provide the IFEZA with full support to the construction of infrastructure in the FEZ and to boldly ease regulations in areas related to living conditions such as educational and medical institutions. He said without world-class international schools and hospitals, foreigners would not invest in the IFEZ and other FEZs.

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