More Deregulation Planned for Free Economic Zones
By Jane Han
Staff Reporter
The Lee Myung-bak administration is reviewing ways to undo the heavy set of regulations governing the country's free economic zone (FEZ) system as it sees the current model, established under the Roh Moo-hyun government, as unsuccessful.
A revision of the entire business model overseeing the nation's six major zones will be finalized by the end of this month, said an official at the Office of the Prime Minister, Friday, who asked not to be named. He said necessary law revisions will be made in the National Assembly sometime before the first half of next year.
South Korea's FEZs are located in the Incheon, Busan-Jinhae, Gwangyang, Hwanghae, Daegu-North Gyeongsang and Saemangeum-Gunsan areas, but a recent government evaluation concluded the current system has degenerated into a new city development project without fulfilling its original purpose of drawing foreign investment.
It said a bottom-up assessment is necessary before making new additions to the current line-up.
Incheon was the first FEZ designated under the Roh administration in August 2003, but constant political debate over incentives and regulations linked to the special zones have repelled foreign investors.
Deregulation efforts have been made since President Lee took office, but a new government analysis showed that more drastic measures are needed to ramp up the competitiveness of local zones against those of neighboring areas, including Singapore and Hong Kong.
The report said the Korean government is expected to spend more than 65 trillion won through 2030 in building and managing FEZs, but only $8.5 billion in foreign capital has been brought in so far.
The lack of living accommodations and facilities were highlighted as the biggest factors driving away foreign investors, it said.
"The purpose of a FEZ is to not only to invite foreign companies, but to have foreigners come and live comfortably and conveniently," said the official from the office, who added that many of the forthcoming changes will be centered on building foreign schools and hospitals.
He said strict regulations mandating on new schools will be eased to increase the number of foreign educational institutions and lower the entry bar for local students. The establishment of hospitals will also be made easier, he said, adding that the government is considering ways to significantly simplify the approval process.