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May 23, 2008. Do We Need FEZs? Why?. Evaluation of the Past Five Years. What to Do. Do We Need FEZs? Why?. Newly designated FEZs. Existing FEZs. 1. FEZs in Korea. International trade; aerospace logistics. Cutting-edge manufacturing; logistics business with China.

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Do We Need FEZs? Why?

Evaluation of the Past Five Years

What to Do

Newly designated FEZs

Existing FEZs

1. FEZs in Korea

International trade;

aerospace logistics

Cutting-edge manufacturing;

logistics business with China

Parts and materials;

marine logistics

Cutting-edge manufacturing;

tourism and leisure

Advanced materials;

marine logistics

Service industry;

parts and materials

2. Why Not Make All of Korea an FEZ?


Aims to be a next Pudong

Korea’s FEZs


Rapidly emerging as China’s economic hub


Symbolizes economic opening of China

Hong Kong

Business hub of East Asia


Business hub of Southeast Asia


Rapidly emerging as economic hub of the Middle East


FEZs promote reform of regulations.

  • Special Act on the Development of Corporate Cities (2004)

  • Special Act on Jeju Special Self-Governing Province (2006)

  • Special Act on Support Measures for Land Returned by USFK (2007)

  • Special Act on the Establishment of Foreign Educational Institutions (2005)

  • Special Act on Jeju Special Self-Governing Province (2006)

  • Special Act on the Establishment of Foreign Medical Institutions(submitted to the National Assembly in 2007)

  • Special Act on Jeju Special Self-Governing Province (2006)

  • Special Act on the Establishment of Foreign MedicalInstitutions(submitted to the National Assembly in 2007)

  • Special Act on Jeju Special Self-Governing Province (2006)

3. Top Three Reasons We Need FEZs

  • Fair Trade Act (revised draft announced in 2008)



FEZs will help Korea catch up with competitor nations.

3. Top Three Reasons We Need FEZs

Level of


Number of years

in existence

8 years

12 years

16 years

20 years


FEZs will boost sluggish foreign investment.

Foreign investment trends

3. Top Three Reasons We Need FEZs

S. Korea


US$ billion

US$ trillion



Attractive investment opportunities

  • High value added industrial clusters

  • High profile airports and ports




South Korea



Favorable living conditions

  • International educational and medical institutions

  • High-tech cities and tourism facilities







Stagnant economic growth

Inconvenient transportationand housing

High corporate tax rate

Foreign Hospital Act yetto be enacted

Insufficient tax cutsand cash grants

Limits on

remitting profits overseas



Hong Kong


1. Place of Korea's FEZs

Excessive labor regulations and inadequate English skills

2. Evaluating the Past Five Years

1. Lack of economic freedomslower development

2. Lack of special incentivesinsufficient FDI

3. Lack of independence and expertiseinefficiency in management

No taxes

No labor conflicts

No mandatory employment of nationals

No limits on remittance of funds overseas

Swift response

Emphasis on capability

Development ofnew strategies

80% of players are foreign nationals

Excellent infrastructure and incentives


What to Do

Policy Objectives

Develop sites


international business hub

Attract FDI

Measures to Promote FEZs




investment climate


management efficiency

1. Shorten approval period

2. Expedite development of

new FEZs

3. Build highly advanced

Ubiquitous City

4. Enhance brand value of FEZs

5. Build more affordable

industrial complexes

6. Improve business environment

7. Lead rest of Asia in education

8. Promote medical services,

medical tourism

9. Increase availability of

housing for foreigners

10. Promote competition

among FEZs

11. Introduce Special Act on FEZs




committee or


Concerned central



Local FEZ


Municipal or

provincial leader



FEZ Committee


Concerned central






FEZ Committee


Municipal or

provincial leader

1. Simplify Approval Process

About 12 months

5 months

Move from sequential approval process to simultaneous/parallel approval process

Shift to coordinated deliberation system

Establish joint consultative body

Developers can apply directly to MKE for approval

Prompt establishment of new FEZ Authorities

  • FEZ Planning Office in each FEZ is preparing to launch FEZ Authorities

  • Three new FEZ Authorities will be launched within Q32008

Promote Differentiated Growth Model of FEZs

  • Yellow Sea FEZ to specialize in automobiles, IT, biotechnology, value-added logistics

  • Daegu-Gyeongbuk FEZ to specialize in knowledge-based services (eg. education, medicine,

  • fashion), manufacturing (eg. IT, materials)

  • Saemangeum-Gunsan FEZ to specialize in automobiles, shipbuilding, environment,

  • tourism and leisure

Support to attract investors and developers

  • Promote and distribute information on best practices

2. Expedite Development of Newly Designated FEZs

3. Develop Ubiquitous City

Build Ubiquitous IT Cluster

  • Cluster of related industries(22 companies to be established in 2009)

Create Ubiquitous Environment

  • Gale and Microsoft to build advanced ubiquitous city

Establish Necessary Facilities

  • Plans include consolidated city operation center, intelligent traffic system


4. Enhance Brand Power of FEZs

  • Promote eye-catching landmarks


  • Songdo’s 151-story Incheon Tower, Cheongna City Tower

  • Actively solicit bids from world-famous architects

  • Develop popular tourist destinations



  • Incheon’s Yongyu Muui area, Gwangyang’s Hwayang area, and Saemangeum’s Gogunsan Islands

  • Various theme parks and other cultural attractions

  • Publicize FEZs overseas



  • Run ads in overseas broadcasts, journals, and on the Internet

  • Advance the FEZ brand concept




Pudong, China


Shenzhen, China


5. Expand Supply of Affordable Industrial Complexes

Expand supply of industrial complexes on long-term lease for the exclusive use of foreign-invested enterprises

  • Supply will increase gradually, up to 10% of total industrial complexes

  • Rental fee: about 1-5% of the total cost of creating the industrial complexRental period: maximum 50 years

Purchase price of industrial complexes (1,000 won/㎡ )

Carry out reclamation work on Section 11of the Songdo area in Incheon

  • Work on Sections 1-10 is under way or already completed

  • Section 11 will be developed as an industry/university/research institute cluster

6. Create an Investment-Friendly Environment

Greater incentives for foreign-invested companies

  • Offer more corporate and income tax breaks over a longer period

50% for

2 Years

100% for 3 Years


50% for

2 Years

100% for 5 Years


  • Plan to increase incentive budget for strategic target

Ease regulations for the convenience

of foreign investors and workers

  • Set up special immigration desks for foreign investors

  • Simplify visa application procedure (Local FEZ Authority will process forms)

  • Target: 5 universities and 10 research institutions by 2012

7. Create an Attractive Educational Environment

Reduce regulations affecting foreign

educational institutions

  • Allow institutions to remit profits overseas

  • Ease restrictions on the proportion of local students admitted to foreign schools

  • Current maximum: 2%

  • Relax qualifications required of those who wish to establish foreign schools

Attract world-class educational institutionsto improve the living environment for foreign families

  • Support the establishment of three outstanding foreign schools

  • (primary and/or secondary level)

  • Provide financial support for an elementary and a middle school in Songdo,

  • where the need is urgent

8. Provide World-Class Medical Care to create a knowledge-based economic zone

Legislate Special Act on Establishment

of Foreign Medical Institutions that

Nurture medical tourism industry

  • Allows establishment of profit-orientedforeign hospitals

  • Foreign hospitals can offer a wider scope of subsidiary services

  • Any business established by a foreign national in accordance with the Commercial Act will be eligible

  • Hot springs, tourism and hospitality,international conferences, etc.

  • Allow profit-oriented medical services to foreign patients

  • Allows foreign doctors to provide long-distance medical services

  • Allows foreign doctors, nurses, and operators of medical equipmentto work in Korea

  • Contains special provisionsfor the importation of foreign drugs (U.S. FDA-approved drugs only)

  • Develop tailored medical tourism products

  • Promote target country-specific

  • marketing

9. Create Attractive Living Spaces to create a knowledge-based economic zone

High-quality housing complexes

  • Serviced residences, villages equipped with golf courses, and many other diverse choices

  • Sophisticated exterior and interior design

  • Various conveniences for foreign residents

Affordable, comfortable rental accommodation

  • The government will increase the supply of houses available for rent exclusively to foreigners

  • Homes will be set aside specifically for rent to employees of foreign-invested companies

  • Caps on rent and key money will be eliminated

10. Increase Efficiency by Promoting Competition to create a knowledge-based economic zone

Encourage competition among FEZs

  • FEZs will be eligible for operation funds and new project funds

  • Evaluation criteria: amount of FDI attracted, efficient use of funds, number of foreign educational institutions

  • Increase rate of support for operation of FEZs based on performance (40%→100%)

  • FEZs will be expanded or dismantled, and projects scaled up or down, based on performance

Enhance the expertise and autonomy of FEZ Authorities

  • Laws will be streamlined to permit hiring of more foreign experts

  • FEZ Authorities will have greater control over personnel management

11. Introduce Special Act on FEZs to create a knowledge-based economic zone

Specify more exemptions from currently required procedures

Specify additional exemptions from other laws

  • More development planswill automatically beestablished/modified to conformwith FEZ development plans

  • Rental Housing Act: Elimination of caps on rent, key money

  • A broader range of provisionswill automatically beapproved/authorizedwhen a development project isapproved

  • Immigration Control Act: Simplify visa application procedure

Future Plans to create a knowledge-based economic zone

  • Establish VIP lanes in airports for foreign investors

  • Establish three new FEZ Authorities

  • Facilitate operation of FEZ Committee

  • Create competitive environment for FEZs

  • Promote FEZs overseas

  • Offer more tax breaks

  • Shorten approval period

  • Enact Special Act on Establishment of Foreign Medical Institutions

  • Strengthen FEZ Authority’s control over personnel management

  • Simplify visa procedures

  • Facilitate hiring of more foreign experts

  • Increase funding to attract foreign educational institutions

  • Expand industrial complexes operating under long-term leases

  • Complete reclamation work on Section 11 in Songdo

  • Increase availability of rental accommodation for foreigners


26 to create a knowledge-based economic zone