NEW YORK With China's miraculous growth looming large across the Yellow Sea, South Korea is determined not be lost in the shadows of surging foreign investment and regional influence.
Secure as one of Asia greatest industrial powerhouses, South Korea has embarked on a bold, new economic and real- estate development plan to transform itself into the nexus of northeast Asian trade.
Just as Singapore has parlayed its location at the tip of the Malay Peninsula into an Asian transportation and communications hub, and Hong Kong promoted itself as a gateway to China, South Korea is positioning itself as the commercial epicenter of regional markets stretching from China to the Russian Far East.
To this end, Seoul has formed a series of free economic zones of its own while breaking ground on what some observers consider one of the most ambitious commercial development projects of the Pacific century a brand new megopolis called New Songdo City.
The sprawling city of the future will take a decade to complete, and is designed to outdo Shanghai's Pudong as an Asian gateway.
South Korea's gateway strategy is designed to leverage its geographic and geocultural advantages while offering a new, friendly business face to potential investors in the form of special enterprise zones in the southern part of the peninsula at Incheon, Busan/Jinhae and Gwangyang. Each has been designed to offer a range of special advantages, including tax, labor, regulatory and other incentives.
In an interview here last week, In-kang Cho, director general of the Korean Ministry of Finance and Economy the planning office for the free economic zones said after years near indifference and a "supplier oriented attitude outside investors" South Korea is making a "consumer-friendly, new policy change" to its direct foreign investment program called Invest Korea. The shift, Cho said, coincides with changes in South Korea's own trade balance, and the emergence of "China as our No. 1 trading partner."
China has surpassed the United States as its top trading partner. Cho noted that increase Asian trade has boosted South Korea's gross domestic product to over $476 billion. He expects the economy to grow by about 5.5 percent in 2004.
Keith Rabin, president of KWR International, a New York-based research and consulting company, who moderated a recent presentation by the Korean government highlinghting its investment program, elaborated on the shift in Korea's inward investment strategy. "What is different today is that the nation has realized it can no longer succeed without the input, participation and capital of foreign companies and investors. It has been a leader in implementing economic, social and regulatory changes and reforms. Foreign companies are now dramatically expanding their presence, and increasing the scale and profitability of their operations in Korea."
South Korea's foreign investment push starts with a strong base, including Citibank and Lone Star's investments with the Korea Exchange Bank. The government of Gyeonggi province, which surrounds Seoul and borders Incheon, recently announced it had attracted $158 million in foreign investment. Hundreds of U.S. companies operate in South Korea, ranging from giants like GM, Proctor & Gamble, United Technologies, Starbucks, Microsoft, Monsanto, IBM and Hewlett-Packard.
In addition to offering easy access to other points in Asia and an large domestic market, South Korea also stands in the forefront of many new technologies. Samsung is already ranked as the world's No. 2 chip maker. Along with the strides it has made in the Chinese market, South Korea is also a world leader in manufacturing flat-panel plasma displays and mobile phones. It is also the region's top producer of computer game software and has the highest broadband and Internet usage penetration in Asia thanks to heavy government subsidies.
South Korea is also major developer of online games. There are about 25,000 gaming rooms in South Korea, and last year Seoul was the host of the World Gaming Conference, the "World Cup" of online gaming.
When finished, New Songdo City will be Asia's newest jewel. Built on reclaimed land near Incheon, the site of South Korea's international airport, the project is a joint development of Gale International and POSCO E&C, the largest U.S. private development company and a leading Korean steel maker. Intended to attract regional headquarters operations for companies like Microsoft, Cisco and IBM, the new city will be home to nearly 50,000 residents and will offer a mix of hotel, retail, multifamily and office complexes.
South Korea's planned New Songdo City
Phase one, which begins this year, includes a 300,000- square-foot convention center, a 1 million-square-foot retail complex, a 1,000-room hotel, a 65-story Trade Center and 2,300 homes. When completed in 2014, the new Asian "hub" city will boast more than 72 million square feet of commercial and residential development space built at a cost of more than $20 billion.
To help encourage development, Seoul has granted the partners huge tax incentives and agreed to construct a six-mile long, six-lane bridge connecting New Songdo City to the new Incheon International Airport. It also agreed to build roads to ease accees to Seoul, 40 miles away. The Gale Co. has also secured agreements to develop an international school (K-12) with the Harvard Advisory Group and added a 20-acre site for a hospital and teaching facility developed with Harvard Medical International.
New Songdo City reportedly represents the single largest private development project in history. It is said to be the largest land reclamation project outside of the Zuider Zee in the Netherlands.
According to its developers, New Songdo City itself a free economic zone will be located within a three-hour flight from more than 30 percent of the world's population. It is also designed to attract not only foreign capital, but foreign residents.