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Foreign firms rushing to set up in Foodpolis
President Park Geun-hye, center, participates in a groundbreaking ceremony for the Korea National Food Cluster in Iksan, North Jeolla Province, on Nov. 24, 2014. Agriculture Minister Lee Dong-phil, fourth from right, and Hampton Grains CEO John Kwak, fourth from left, also attended the ceremony. Hampton Grains plans to build grain processing facilities inside the cluster.
By Lee Hyo-sik
By Lee Hyo-sik
Global food companies have been paying a great deal of attention to the Korea National Food Cluster, named Foodpolis, as their strategic base in Asia.
Fifty-two foreign firms have already signed an agreement with Foodpolis authorities to set up a presence in the cluster, attracted to its geographical proximity to key markets, advanced research and development (R&D) and information technology infrastructure, skilled manpower, attractive business incentives and other advantages.
When completed by 2016, the cluster is expected to host at least 150 Korean and non-Korean companies. Ten research centers will operate in the state-administered food industry cluster in Korea’s southwestern region, churning out $14 billion in output annually and generating 22,000 new jobs.
The Ministry of Agriculture, Food and Rural Affairs will invest a total of $500 million to build the food industry complex in Iksan, North Jeolla Province. The cluster is designed to attract companies aiming to export a wide range of value-added, processed food products.
The Korea Times recently interviewed the CEOs of three foreign food companies planning to establish production and other facilities in Foodpolis, to figure out what they think of the cluster and what made them decide to set up a presence there.
The three companies are BGX Group, Hampton Grains and Gold of Prague.
The CEOs were also asked about their business plans and the kind of support they need from Foodpolis authorities.
Lee Ju-myung, right, director general at the Ministry of Agriculture, Food and Rural Affairs, shakes hands with BGX Group Chairman Bi Guoxiang after the two signed a memorandum of understanding at the Westin Chosun Hotel in downtown Seoul on March 30. Under the agreement, BGX will establish food processing facilities and logistics centers inside the Korea National Food Cluster in Iksan, North Jeolla Province.
BGX Group
China-based BGX Group, a distributor of refrigerated and frozen food products, plans to establish food processing facilities and logistics centers inside Foodpolis.
Established in 2007, BGX earned nearly $10 billion in sales last year from running eight wholesale markets and 50,000 large-scale distribution centers in Nanjing and Harbin.
Chairman Bi Guoxiang said the company will manufacture high-quality and safe processed food items inside the food industry cluster, using ingredients produced in Korea, and then ship the final products to China.
“We will establish extensive facilities in the food industry cluster, covering food processing, packaging, refrigeration and distribution. We will transport the products to China and other Asian countries,” the chairman said. “We expect to begin operations in 2018. We are currently negotiating with the Korean government over detailed plans.”
When asked about why he decided to create a food processing plant in Foodpolis, he said BGX will be able to secure a variety of high-quality and safe locally-produced farm products there.
“We picked Korea as our first overseas investment destination because Chinese consumers view Korean food as high-quality and safe,” Guoxiang said. “Foodpolis has all the necessary business and residential infrastructure for foreign companies. Also, the cluster is located closer to the Gunsan Port and the new Saemangeum Port, making it easier for us to ship our goods to China.”
The chairman said BGX and other foreign companies can benefit from a wide range of incentives provided by the Korean government.
“Korea’s overall business environment is very good and highly-efficient. The country is also clean and safe, creating an optimal residential and business environment,” he said. “We have been satisfied with the support offered by Foodpolis authorities. The cluster offers everything that food product manufacturers and processers need.”
Companies, domestic and foreign, are exempted from paying corporate tax for the first three years in the cluster and then receive a 50-percent discount for the following two years. Investors are also exempt from property taxes for 15 years.
After the ratification of the Korea-China Free Trade Agreement, more Chinese companies will invest in Korea, Guoxiang said.
“More Chinese businesses will invest in Korea as it would become easier and less costly to produce food items in Korea and ship them back to China,” he said. “The investment procedures will be simplified. The trade volume will expand and trading costs will decline.”
Hampton Grains
John Kwak, CEO of Hampton Grains, headquartered in Anaheim, Calif., said the company will build grain processing facilities on a 21,000 square-meter-site inside Foodpolis.
The firm operates grain farms as well as buys wheat, soybeans, corn and other grains from other farms in the United States, Canada and numerous South American nations. Its sales reached 100 billion won in 2014.
“We are currently waiting for the report on the protein levels of rice and the quantities we need for organic rice. Once we receive that data, we can move forward,” Kwak said. “We don’t have an exact date yet, though our current goal is to start operations in the cluster in early 2017, producing organic rice protein powder.”
The CEO said the firm’s operations in Foodpolis will target the global dietary supplement markets, particular the United States and Europe, adding that everything it produces in the cluster will be shipped elsewhere.
“Hampton Grains has distribution channels established in North America so once we develop products in Korea, we can easily send them through our distribution channels,” he said.
Kwak then said he is satisfied with the level of support he has received from Foodpolis authorities.
“This is our first overseas investment project, and the cluster support center has been very professional and has provided valuable insight. We expect that the center will help us find employees and construction firms to build facilities,” the CEO said.
Lukas Mikeska, managing director of Gold of Prague, poses with Lee Ju-myung, director general at the Ministry of Agriculture, Food and Rural Affairs, after the two signed an agreement at the Lotte Hotel in central Seoul on Feb. 25. The Czech brewer plans to set up a brewery inside the Korea National Food Cluster in Iksan, North Jeolla Province, in 2017. / Courtesy of Ministry of Agriculture, Food and Rural Affairs
Gold of Prague
Lukas Mikeska, managing director of Gold of Prague, said the Czech beer company decided to build a brewery in Foodpolis because it is strategically located for easy export to the Chinese and Asian markets.
“Foodpolis is an ideal entry point for foreign investors for many reasons. First, great beer needs great water. The water source in the cluster is simply ideal for making beer,” Mikeska said. “We have been paying attention to the rapidly growing beer market in Korea, China and other Asian countries. We will produce beer in accordance with traditional Czech brewing method, using only hops, malt, and water.”
The director said Gold of Prague plans to start producing Czech-style beer products after the completion of the brewery factory in late 2016.
“It is not just about land lease and tax breaks. For us, it is about the Foodpolis authorities who are assisting us in navigating through the local business and regulatory environments,” Mikeska said. “Our cooperation with the food industry cluster has been excellent. Gold of Prague has met many exceptional people in Korea, who are working hard to create the food industry complex, which will transform Asia’s food industry landscape.”
He also said Foodpolis authorities have been efficient in handling problems facing Gold of Prague and other foreign companies, adding that Korea’s business environment is better than those in the relatively slow-moving Europe.
“In the future, we need more active support from Foodpolis in getting construction permits and handling other administrative matters. We expect to get the same level of professional assistance,” Mikeska said.