[VIEWPOIINT]Can Busan become a real hub?With the opening of the planning office of the Busan-Jinhae Free Economic Zone last month, activities to create an international corporate environment and attract foreign capital and businesses to the zone began in earnest.
Finally, the running start for a leap to becoming the business and logistics hub in Northeast Asia has begun.
The office plans to develop special economic zones in Gangseo, Busan, and the city of Jinhae, South Gyeongsang provinces, to attract shipping, logistics and distribution industries as well as high-tech businesses.
In the designated zones, foreign businesses will enjoy quality administrative service and several incentives, including 50 percent income and corporate tax exemptions, to provide an optimal business-friendly environment.
The free economic zone development project, which spans 2,500 acres of land, will be pursued in three stages.
The first phase, which is scheduled to be completed by 2006, will include construction of six container dock berths at the new port in Busan and an 825,000-square-meter logistics facility. In addition, the office plans to create a transport network and attract multinational transport companies to the area.
By 2010, transportation systems, such as railroad and light rail transit, will be build, and facilities to house foreign companies, from a residential complex to an international office compound, will be completed.
The last phase, which will end in 2020, completes the project by developing the area south of the new port and gradually creating a logistics distribution center and residential complex in the Jisa and Ungdong areas. During phase three, the office plans to invest 26.6 trillion won ($23 billion) in the project, which would create jobs for 1.52 million people and generate production of 95 trillion won annually.
The launch of the planning office and the projects it is pursuing are generating rosy hopes. But will the project proceed as planned, and can we accomplish the goal of becoming a hub of Northeast Asia?
In fact, the goal of the planning office to establish a hub is no simple objective. Essentially, Busan and Jinhae would have to compete with the emerging port of Shanghai as well as existing regional logistics hubs in Hong Kong and Singapore. The conditions are not so promising.
Busan has already been pushed to fifth place in container handling volume, and Shanghai has taken third place. The obsolete industrial structures in Busan and South Gyeongsang province are not optimal to attract foreign companies. Also, Busan is the last to move into the race to become the regional hub. Not only foreign rival cities but also Incheon, which has similar conditions, have already joined the competition.
So the first priority should be to establish solid finances for the project. Local autonomous government bodies are supposed to pay for the ordinary expenditures and the project expenses of the office.
But 32 percent of the additional project expenses of 7.7 trillion won needed by 2020 should be met by inducing foreign and private capital. The success of the project largely depends on whether the office successfully attracts those commercial investments.
The second task is maintaining the organization. The planning office is made up of civil servants dispatched from local governments. Can the makeshift organization and work force really do the marketing job of attracting private and foreign investment and luring foreign companies to the region?
The office needs to seriously study how it could create a flexible organization with independent management of staff and finance so that it can fully integrate the creativity and commercialism of the private sector.
And finally, the office needs to reconsider the time frame of the development of the free economic zones. Its rivals in Northeast Asia already have support systems with more liberal regulations. If Busan and Jinhae fail to secure a competitive edge in the near future, attracting foreign capital and businesses will get even more difficult.
The next two or three years are the most critical period that will decide the making or breaking of the project. The planning office needs to review the development plan closely and reduce the required time as much as possible.
Many Asian cities are competing to gain a dominant position as a logistics hub of Northeast Asia. Each city pledges that winning the competition is directly related to its survival.
Let’s hope that the Busan-Jinhae Free Economic Zone is successfully developed and the dream of the hub of Northeast is realized in Korea.
* The writer is a professor of logistics systems engineering at Korea Maritime University. Translation by the JoongAng Daily staff.
by Lee Cheol-yeong