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| The picture shows a panoramic view of Songdo, Incheon, 40 kilometers west of Seoul, which with two other areas — Yeongjong and Cheongna — makes up the country's first free economic zone. / Courtesy of IFEZ |
Commissioner Lee pledges to be home to services industry
By Park Jin-hai
Lee Jong-cheol, Incheon Free Economic Zone (IFEZ) Authority Commissioner, witnessed the area's transformation into an active business center for companies throughout Asia within just a few years. Previously, he recalls, it was sparsely populated and barren.
"The city was called a ghost town when I first took office four years ago," said Lee in an interview. "And its developer, New Songdo International City Development (NSIC), was on the verge of bankruptcy."
Much work was needed to turn things around.
"My utmost interest then was to revive the doomed NSIC and make Incheon a lively city bustling with people," Lee continued. "Now many things have changed."
Korea's first government-designated free economic zone, established in 2003, the IFEZ sits 40 kilometers west of Seoul. It occupies 169 square kilometers and spans three of the city's administrative districts: Songdo, Yeongjong and Cheongna.
To attract foreign investment, the government offers tax support and more freedom to carry out business activities within the zone. Established in Incheon partly because of its advantageous location, the zone is a short flight away from at least 61 large cities and numerous megacities, thereby giving local businesses quick access to about 2 billion people.
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| Lee Jong-cheol, IFEZ Authority commissioner, says he will attract more services firms in the zone. / Courtesy of IFEZ |
Thanks in large part to Lee's efforts, the zone is now home to 1,000 businesses, whereas in 2003 it had only 294. It has 72 foreign-invested companies, as compared with just three in 2003. Foreign direct investment stood at $6.63 billion as of the end of May ― a huge jump from the mere $1 million recorded in 2004.
Eight of the companies on Fortune's top-80 list have offices here. A total of 13 international organizations, including the Green Climate Fund and the World Bank, also have regional offices in the IFEZ.
More development projects are underway to make the IFEZ a truly international city that is eco-friendly, full of cultural attractions, and equipped with ubiquitous technology (meaning Internet access and other IT services will be available everywhere, at all times).
Even so, the IFEZ still faces challenges that hold it back from meeting its goals.
One obstacle that discourages greater investment in the city, Lee said, is excessive government regulation.
"Although the IFEZ accounts for only 0.2 percent of Korea's land and 0.4 percent of its populace, it is bound by 47 laws and 440 regulations concerning land use," he said. "We need drastic, bold deregulation. In fact, the city's small land mass and its small population make it an ideal place for the government to test out various deregulation projects."
The IFEZ is also looking to attract as many service businesses as possible, because the service sector can create more jobs than the manufacturing sector.
"An economy based on manufacturing has less room to grow, and above all job creation is limited in the manufacturing sector," he said.
In contrast, the service sector will become a new-growth market when Korea achieves its goal of $30,000 per capita gross national income. The increasing number of global business meetings and conventions will open up more opportunities for companies in the service sector, said Lee.
"The IFEZ has the potential to develop into a comprehensive service center in terms of tourism, health care, education and entertainment," said Lee.
The IFEZ said in a statement that it aimed to attract 640,000 additional residents by 2020. As of the end of May, the number of residents stood at 207,188, including more than 3,000 expats. Songdo has the greatest concentration of foreign residents in the IFEZ, with 1,584.
In light of the prolonged slump in the local construction market, Lee believes more funding for development projects should come from government coffers. "Since we develop land and profit from land sales, we are inherently vulnerable to the fluctuations of the local construction market," he said.
Over the past decade, Lee said, the local government has provided the IFEZ with 810 billion won, less than 10 percent of its total budget of 8.47 trillion won for the same timeframe, and the zone paid 2.5 trillion won in local taxes.
