Local Government / IFEZ Three Achilles' heels must be solved urgently Some observers say that the international affairs complex of the Incheon Free Economic Zone (IFEZ) is ineffective at inducing foreign investment. In response to this, CEO Lee Hwan-kyun of Incheon Free Economic Zone Authority (IFEZA) maintains that the Free Economic Zone must succeed by all means because it is a national-policy project which is an important part of national survival. He refuted detractors by saying: "Among investment inducement's difficulties at home and abroad too, IFEZA is gaining investment inducement outcomes worth $29.6 billion of a total of 33 cases as of the end of August, this year." CEO Lee, who concedes that there are many Achilles' heels in driving forward the Free Economic Zone's projects, said that he would like to point out three major bottlenecks. First is the Metropolitan area's regulation of the amount of penetration domestic corporations can have. In order to ease such regulations, Lee has committed himself to persuading the central government by various means that while solving the problem of Metropolitan regulation might be difficult as a whole, lifting regulations is directly linked to the success of the Free Economic Zone. The second Achilles' heel is the shortage of funds for the expansion of infrastructure. Lee points out: "Since Free Economic Zone's projects holds limitations with the local government's finances alone, the National treasury support from the central government is acutely necessary," explaining that in that respect, Incheon City is continuously asking for the enlargement of National treasury support from the central government. The third stumbling block is complicated administration regulations and the imperfection of the one stop service system. In order for foreign investors to set up a factory in the IFEZ, Lee explained that they must pass through many procedures and get many permissions through the Ministry of Finance & Economy (MOFE), the Ministry of Commerce, Industry and Energy (MOCIE), Incheon Metropolitan City, the Ministry of Labor, and the National Tax Service. He maintains that such administrative inconveniences should be quickly improved, adding that the settlement of the One Stop Service institution will be more important for foreigner investment enterprises. Regarding the biggest competitiveness or differentiating the strategy of Songdo International City, Lee notes that major cities' competition to secure an economic hub initiative in Northeast Asia is becoming more fierce. He added that in that respect, the Authority plans to concentrate all administration power on a program called Swift City Speed-up. In particular, the CEO reveals that the Authority is propelling a next-generation digital city paradigm with the objective of actualizing a Northeast Asian business hub as well as constructing a ubiquitous city for the first time in the world. Through three differentiating strategies in comparison with other competitive cities, Lee underscores that the IFEZA will do its best to construct the best international city by means of the most cutting-edge information city construction methods, agreeable ecology city design, and the most cutting-edge new traffic system introduction. CEO Lee, who explains that the realization of business hub country in Northeast Asia has been propelling as a survival strategy of Korean economy, concluded by saying: "Recognizing such importance for Korean economy, IFEZA's basic concept is to construct this area as the highest business hub city in Northeast Asia by forging the most attractive business environment and life environment so that global enterprises can invest freely and do their business conveniently." Officials looking to attract more foreign investment With the third Anniversary year of its designation as Free Economic Zone within the Republic of Korea as an impetus, the Incheon Free Economic Zone is seeking a new direction for inducing foreign direct investment. CEO Lee, gave a presentation entitled "From FEZs to a Northeast Asian Business Hub: Challenges and Future Directions," at an international seminar hosted by The Ministry of Finance & Economy, Republic of Korea (MOFE). The seminar was held recently to commemorate the third Anniversary of the Free Economic Zone's Designation. Lee said that IFEZ is equipped not only with geographical advantages in its placement adjacent to major trade centers such as China, Japan, Russia and of course the Seoul Metropolitan area, but also with competitive advantages that come from being connected to both a harbor and the world-class Incheon International Airport. It is reported that IFEZ is preparing a leap into becoming a cutting-edge industrial hub of Northeast Asian business logistics by maximizing the competitiveness the Incheon area holds and the positive effects that the Free Economic Zone provides. To this end, CEO Lee is underscoring that IFEZ pursues three differentiated development strategies called respectively Intelligent City, World's Best Amenities and Cutting-Edge Transit System. IFEZ's foreign investment inducement is now said to be a total of $14.8 billion including a $12.7 billion MOU (Memorandum of Understanding) and a $440 million LOI (Letter of Intent), according to Lee. Construction investments are numerous. In particular, the US-based Gale Company has the development construction of an international business area under way by teaming up with POSCO Engineering and Construction. They plan to build a convention center and an international school in a 1.73 million pyeong (5.709 million square meters) area. Another US-based company, VaxGen Inc., has embarked on a full-scale business operation since July 2005 by constructing new drug manufacturing facilities as well as a Research and Development center at a cost of around $150 million in collaboration with KT&G. Also, since beginning construction of a 12.3 km long bridge between Songdo and Incheon International Airport in 2005, England's AMEC plans to complete it by the forthcoming 2009. Finally, GM-Daewoo's auto research and development facility and Portman Holdings' construction plan of a 151 story business center are going forward, according to Lee. More foreign investors expected after three years In conjunction with this, Cho Soung-ik, deputy minister for FEZ at the Ministry of Finance and Economy proposes the following as a desirable development direction of Korea's Free Economic Zone: to propel continuous institutional improvements such as easing regulations so that foreigner management styles and life styles can be forged in tandem with the global standard; to accelerate the Free Economic Zone's development through streamlining administration procedures, all kinds of allotment reduction and exemption and enlargement of the national treasury; to induce foreign investment by means of strategic publicity as well as active overseas investor relations; and offering one-stop services for foreign investors by improving the Free Economic Zone support system. The amount of investment by foreign innovation industries is appearing to be very low within Korea in comparison to China and India, according to Stephen W. Braim, IBM Asia Pacific vice chairman. Foreign investors are wanting more effective and convenient venues to do business like the Free Economic Zone where reasonable expenses, convenient and efficient installation facilities, high levels of technology and development potential, and stable and effective regulation environments can be provided. In that regard, the Incheon Free Economic Zone needs to move toward a direction with its designated Third Anniversary Year as an impetus so that the Zone Authority can induce more foreign investment as pledged.