[VIEWPOINT]Special zones require special care

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[VIEWPOINT]Special zones require special care

The government recently selected areas near Incheon International Airport and Gwangyang bay and Busan's new harbor as special economic zones. It presented various plans to upgrade the business and living environments in those zones. The economic zones have become a topic of public conversation. Everyone seems interested in the issue, especially what kinds of benefits the economic zones will bring and how to achieve the goals.

In a word, the main purpose of the economic zones is to "recruit" -- recruit as many foreign companies as possible. There are significant direct and indirect effects from recruiting foreign companies. Among the direct effects, Korean firms can learn advanced management know-how and technologies from foreign companies in Korea.

Also, there would be the indirect effect of having a chance to review the efficiency of our economy through competition with foreign firms in the domestic market. However, in the case of the economic zones, the indirect effects would be limited because foreign firms are isolated from domestic companies.

On the other hand, foreign companies in these zones will create jobs and provide opportunities to learn advanced technologies, which will boost Korean workers' income and Korea's economic competitiveness. These effects are the most important benefits of the economic zones.

Thus, through the costly expansion of social infrastructure, tax breaks for foreign firms and expatriates and providing special services, including educational and medical services, many foreign companies might be lured to the economic zones. They would provide many new job opportunities to Korean workers, making the economic zones successful.

Nonetheless, we should note that foreign companies see rigid labor markets and a disruptive management-labor relationship as the biggest difficulties in doing business here.

Above all, unless these labor conditions change, Koreans will find the employment opportunities limited, even if many foreign companies enter the economic zones. Nevertheless, it would be next to impossible to take measures that can be applied only to special economic zones, such as prohibiting union activities in foreign companies as happened in the past in the Masan export free zone.

If the government has the will to develop Korea into a business center of Northeast Asia by establishing the economic zones, it should start by implementing policies to create productive management-labor relationships and flexible labor markets within the legal boundaries.

Of course, foreign firms would appreciate any special benefits they can have inside the economic zones. However, we should not forget that an overall social environment in which laws are respected, abided by and enforced transparently and positive attitudes by the public toward foreign companies are equally important.

Living conditions outside the economic zones, such as naming streets to make navigation by foreigners easy and building facilities for foreign residents, will also affect foreign companies' decision on whether to move into the economic zones.

In fact, although the government decided to build the economic zones as an alternative to the present system of accommodating foreign businesses, our ultimate goal is to make the entire country a special economic zone. The government should have a firm commitment and strategic outlook to realize this goal and enforce policies, accordingly.

If the government has the will to make our country a business center of Northeast Asia, it probably can immediately execute some of its existing ideas across the country. The ideas include allowing international high schools and branches of foreign universities to locate in the economic zones and expand English-language and other foreign language FM radio services to provide domestic and international news and practical local information.

Finally, if the government implements polices with a strong belief and determination to transform Korea into a country with the most favorable business environment in Northeast Asia, Korea can become the regional hub of shipping, transportation and finance.


The writer is the chairman of the Institute for Global Economics.

by Sakong Il

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