Deregulations, biz-friendly policies needed for balanced investment
By Park Si-soo
Nearly 70 percent of inbound foreign investment has been concentrated in Seoul and the surrounding area over the past five years, data showed Friday, confirming an investment divide between Seoul and other areas of the nation.
The overblown ratio is beginning to wane ― albeit sluggishly ― but it still stands at an "alarming level," leaving most rural free economic zones (FEZ) hardly developed, said Rep. Park Wan-ju of the main opposition New Politics Alliance for Democracy, citing data from the Korea Trade-Investment Promotion Agency (KOTRA).
In 2013, the ratio reached 74.5 percent and fell to 62.3 percent last year. During the first half of this year, Korea attracted $6.13 billion of foreign investment, 56.8 percent of which was used in Seoul and its vicinity.
"The investment divide remains unaddressed despite great efforts by the government," Park said. "It should be tackled as early as possible or dozens of free economic zones in rural areas will be left abandoned from investment."
The government is committed to easing regulations in FEZs. But the lawmaker said it's not enough.
"One of the major reasons why the divide remains unresolved is that FEZs and municipal governments are attracting investors with similar advantages," he said. "If there is little difference in advantages for investment, it would be wise and natural for investors to select Seoul and its surrounding area, which has a better setting for business than elsewhere."
Experts said that eased development regulations for Seoul and its adjacent areas, including Gyeonggi Province and Incheon, also stand in the way of a balanced arrival of foreign investment.
The deregulation drive has efficiently boosted the influx of foreign investment, but it's ended up making the rich richer and the poor poorer, they said.
For instance, the move allowed Incheon, a port city west of Seoul, to acquire several new foreigner-only casinos and giant entertainment facilities, attracting huge foreign investment.
In contrast, a free economic zone in Munmak, Gangwon Province, has attracted only two foreign investments since its opening in 2013. Another FEZ in Osung, Gyeonggi Province, has drawn only 12 percent of its investment target, 40 percent for a FEZ in Pohang, North Gyeongsang Province, and 39 percent for a FEZ in Iksan, North Jeolla Province, according to the KOTRA data.
The lawmaker said the government should come up with business-friendly policies to attract more foreign investment. More importantly, he noted, FEZs in rural areas should be committed to actively promoting their benefits for investment to overseas investors.
The government is trying to double the amount of foreign direct investment (FDI) this year to $20 billion from 2014 to help reinvigorate the sagging economy. The Korea-China free trade agreement (FTA) will give a big boost to FDI, said the Ministry of Trade, Industry and Energy in August.
It is encouraging companies in China and Middle Eastern countries to invest in the country's free economic zones, publicizing their geographical proximity, superb residential and business infrastructure, and extensive government incentives for investors.
The ministry is also committed to expanding Korea's FTA network, which will contribute in attracting more foreign investment.