SEOUL, KOREA - Free trade zones across the country are losing their appeal with few companies setting up shop there. Of the seven cluster-type free trade zones, new ones established after 2005 including Yulchon (South Jeolla Province), Gimjae (North Jeolla), and Donghae (Gangwon) are almost lying empty. Existing ones like Masan (South Gyeongsang), Daebul (South Jeolla), and Gunsan ((North Jeolla) are having difficulty retaining tenant firms.

 

 

For example, Daebul Free Trade Zone set up in 2008 saw its total export amount plunge to US$350 million last year from $450 million in 2011. As many as 31 firms with operations there are still open but virtually no business to speak of. A tenant at the zone said, "Several companies went bankrupt recently and had to go through an auction to sell off their properties."

 

As for Gunsan Free Trade Zone, 30 firms set up shop in the total 1,256,000-square-meter site, with the occupancy rate of 85.3 percent. Since early this year, however, four or five firms have cancelled their lease contracts. The total export volume has also shrunk to $390 million last year from $420 million in 2012. The situation is no different for Masan Free Trade Zone, the first-ever free trade zone in Korea given the designation in 1970. After the closure of Nokia TMC recently, it is facing the biggest crisis of the past 44 years.

 

The newest free trade zone in Gimjae, established in September last year, has thus far invited only one firm, farm tractor maker Kubota Korea. The 992,000-square-meter site that cost the local government 70 billion won is almost abandoned. Donghae Free Trade Zone, opened in 2006 with the investment of 44 billion won in the 248,000-square-meter site, is maintaining the occupancy rate at 20 percent. The free trade zone in Ulsan that has recently completed selling the lots has scaled down by 50 percent in 2012.

 

A person familiar with free trade zones said, "The bad performance of free trade zones was entirely due to the central government that designated the zones without thinking about business feasibility. Most zones were built in faraway areas that companies wouldn't like to move in and failure was expected even before the first shovel hit the ground."

 

Nam Ki-beom, professor of the University of Seoul, said, "These days industrial zones are transforming fast into urban clusters that double as entertainment and rest centers as well. Unless free trade zones change this way, they wouldn't be able to succeed."