[FORUM]Special zones need special careAlthough faltering, Japan is an established economic superpower. Possessing great potential, China is growing at an amazing pace. Situated between these two countries, Korea is searching for its economic identity in the region and has come up with the idea of the "Hub of Northeast Asian Business." The realization of this idea will come in the form of "special economic zones" proposed by the government.
The plan is to designate five regions, including the Yeongjongdo area near Incheon International Airport, as special economic zones and turn them into the financial center of the distribution industry of the Northeast Asian economy. Foreign businesses that establish operations in these zones are to be given special privileges. They will be exempt from eight provisions, including some in the Labor Standards Act, and receive tax breaks. Residential areas for foreigners and hospitals and pharmacies will be established with foreign capital. An international school is also planned.
However, this government proposal has been criticized in several quarters. For beginners, those who emphasize fundamentals say that all regulations and practices of the nation should be transformed completely, not just those of certain designated areas. Others say special economic zones are found only in economically backward socialist countries like China and North Korea that want foreign investment but do not want their political system altered. Therefore, it is their policy to open the country only partially to the outside world. It is anachronistic that Korea, a member of the Organization for Economic Cooperation and Development, pursues such a policy, some say.
Fierce opposition from special interest groups has been voiced on specific issues. The labor unions have already declared war should the proposal be implemented, claiming exemptions on the Labor Standards Act provisions in the special zones is an "attempt to massacre labor rights." The unions have indicated that they would not hesitate to stage a general strike if necessary.
The Korean Medical Association has also voiced opposition to foreign medical institutes and non-Korean doctors being allowed to practice inside the special zones. They, too, have threatened more physical means of expressing their opinion. There is also the problem of discrimination among businesses. Korean businesses and already established foreign businesses are protesting that no efforts are being made to lessen their own problems with the labor unions, tricky regulations, high tax rates and the high-cost structure.
The solutions that the government has put forward in response have been vague at best. With this administration nearing its end, it is unlikely that the special economic zones will be established, some say. If the government believes that the special economic zones are inevitable, it should go ahead with its plan but follow up with efforts to improve the general management environment of the businesses in Korea.
In a survey conducted by the JoongAng Ilbo Economic Research Institute, foreign businesses in Korea cited labor-management problems and government regulations as their two biggest headaches. The same goes for Korean businesses.
It should also be pointed out that selection of the special zones and awarding privileges should focus on limited areas. It is unrealistic to establish five special zones when the source of investment is limited. If they were designated for political reasons, that would be all the more reason to reduce the number.
Choose one region with the biggest possibility of success and then proceed to another region after the first zone makes steady headway. The quality, not the quantity of the privileges given in the special zones should be emphasized. Concentrate on improving labor, regulations and taxes. If improvements are made on these issues within and outside the zones, it would lessen opposition from the domestic interest groups and leave a stronger impression on foreign businesses concerning Korea's commitment. Seeing the amazing speed of China's economic growth, special economic zone or not, the government should do its utmost to improve the business environment for Korean and foreign businesses alike.
The writer is the director of the JoongAng Ilbo Economic Research Institute.
by Ro Sung-tae