[Outlook]Untie the hands of free economy

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[Outlook]Untie the hands of free economy

Korea used to draw attention from the world as a rising economy, known as one of Asia’s four little dragons. Later, China, India, Russia and Brazil rose and were given the nicknames “Chindia” or “BRIC nations.”
These days the world is paying attention to the “Post-BRIC” countries for their growth potential. Vietnam, Pakistan, Kazakhstan, Turkey, the Republic of South Africa and Mexico are included in this category.
In this era of globalization, capital can be transferred freely across borders, fueling unlimited competition among countries to create new economic opportunities.
In 2003, Korea cleared legal hurdles and designated Songdo, Cheongna and Yeongjong, in Incheon; Busan and Jinhae and Gwangyang Bay as free economic zones, joining the competition to attract international capital. After a couple of years what is the reality here, particularly compared to other rival countries?
The initial goal for free economic zones was to create special zones where economic activities can go on autonomously. The ideals of no tariffs, no visas, no labor disputes, using English as an official language (along with Korean), and using and sending foreign currencies freely were not reflected fully.
The goal was to free these zones from domestic laws, institutions and practices in order for foreign companies and businessmen to work freely, by global standards.
Unfortunately, these free economic zones are far from being free from domestic laws, institutions and practices. All development activities in these zones are subject to local government decision-making for urban planning or evaluations on environmental effects. The Incheon free economic zone is subject to Seoul metropolitan area zoning laws, which are designed principally to prevent urban sprawl.
Even if they want to allow foreigners to buy apartments before Koreans do, there are no ways to do so due to the current law on housing. Under the new real estate measure released by the government on Jan. 11, construction companies must publicize building costs for apartments. There are ceilings on apartment prices as well. Free economic zones are not exempted from the measure.
Free economic zones are no longer included in the national government’s major projects designed to have effects for a hundred years to come, but have become local development projects meant to resolve urgent problems in local areas. The office of economic free zones has even been put under the supervision of a local government, which was controversial, even in the planning stage.
Those responsible for managing free economic zones must do their best to attract foreign capital, but they are not free from the personnel affairs of the local government. If the head of the local government is replaced, strategies for the free economic zone tend to change.
In the free economic zones, apartments for locals or citizens from other regions were the first to have been built. The other day, when builders were going to sell apartments in the Songdo area, thousands of people waited all night in line. This incident well describes the reality of a free economic zone. Free economic zones have turned out to be for no one but ourselves.
If you look at other countries, you can learn that the success or failure of a free economic zone depends on the people, institutions and organizations who run them. China, Russia Kazakhstan and Vietnam, former socialist countries, have been able to attract foreign capital and achieve economic growth by opening their doors.
But that was not because new resources were found in these countries. They had the same resources as before, but the countries’ philosophies and visions have changed. The institutional environment has adapted to support these changes.
This is the same with Hong Kong, Macao, Singapore, the Netherlands and Ireland. They all have few resources.
The person in charge of a free economic zone in Dubai said if your investment can create new business opportunities you can do anything that you want to do in a free economic zone. Korea should learn from this example.

*The writer is a professor of urban planning at the Graduate School of Environmental Studies, Seoul National University. Translation by the JoongAng Daily staff.

by Choi Mack-joong

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