IFEZ becomes epicenter of Korea’s global appeal

Guest Reports

Published: 16 Oct. 2023, 10:01

IFEZ becomes epicenter of Korea’s global appeal

Over the past 20 years, Incheon has become a hub for foreign investment

The establishment of the Incheon Free Economic Zone (IFEZ) marked its 20th anniversary on Oct. 15, celebrating the remarkable history of Incheon's growth as an economic hub in Korea.

IFEZ is a special economic zone designated by the government with the aim of actively attracting foreign investment.

For companies located within this zone, benefits include tax reductions, regulatory relaxation and administrative support. IFEZ was designated as the first economic free zone in Korea on Aug. 11, 2003.

For the past 20 years, IFEZ has turned what was once a mud flat along the west coast into a thriving city, characterized by impressive skyscrapers and a magnetic attraction for foreign companies and investors.

By improving the business environment for foreign companies and the living conditions for foreigners, it has grown as a pivotal spot for businesses, connecting Korea and the world.

The IFEZ will now progress towards the specialized development of Songdo, Yeongjong and Cheongna.

Songdo International Business District is striving to become a hub for international businesses and a global biopharmaceutical center. The development concept for the Yeongjong International City includes air logistics, tourism and a leisure complex. Meanwhile, Cheongna International City is targeting the development of finance, high-tech companies and a distribution hub.

IFEZ is currently progressing its development plans in accordance with the 3rd Basic Plan for Free Economic Zones provided by the Ministry of Trade, Industry, and Energy. These plans aim for completion by 2032 and are centered around core strategic industries such as biotechnology and health care.

The development rates are as follows, Songdo International Business District has reached 86.6 percent, Yeongjong International City is at 80.8 percent and Cheongna International City is at 93.6 percent.

The landscape of the Incheon Free Economic Zone 20 years ago and today. [IFEZ]

Left: Incheon Global Campus Right: Incheon Startup Park [IFEZ]

Attracting foreign investment

Notably, the Incheon Free Economic Zone Authority (IFEZA) is considered to have effectively achieved its core objective of attracting foreign investment.

First, in the case of foreign direct investment (FDI) performance, IFEZ, as of the end of July, has attracted a total FDI of $14.8 billion, surpassing 70 percent of the total reported amount of $20.8 billion in the nine Korean Free Economic Zones as of the end of the previous year.

The number of foreign-investing companies has also increased from the initial three to the current 206, a growth of nearly 69 times. This further validates that IFEZ has evolved into a world-class FEZ that drives economic growth and job creation not only in Incheon but throughout Korea.

In addition, to successfully attend to the global issues including the climate, 15 international organizations such as the Green Climate Fund (GCF), have found a home in the IFEZ, cementing the city’s status as a global location centered around international organizations.

Education hub

Especially, IFEZ is putting effort into nurturing talent to transform into a solid innovation city.

Incheon Global Campus (IGC), now under development with the goal of attracting world-renowned educational institutions, has made significant strides. It has successfully attracted five prestigious foreign universities in New York State University (SBU), George Mason University, Ghent University, University of Utah and the Fashion Institute of Technology (FIT).

By offering programs optimized for the fourth industrial revolution era, including computer science, data science, game design, film and video studies, biotechnology, fashion design, the institution seeks to produce talents capable of engaging in global high value-added businesses.

As of the end of April, the enrollment rate at these five foreign universities was reported to be as high as 89.3 percent, building expectations to create a synergy effect with the local industry.

Also, the establishment of international and foreign schools, such as Chadwick International School in Songdo in 2010, Dalton Foreign School in Cheongna in 2011, and more recently, Calvin Manitoba International School in Songdo in 2023, have significantly contributed to strengthening IFEZ's status as a competitive educational hub.

The international and foreign schools also provide incentives for foreign workers and their families to settle down in Korea without the hassle of trying to find adequate schooling for their children.

Notably, the IFEZA is currently working on launching Harrow School for the first time in Korea. The prestigious institution founded in the United Kingdom in 1572, is known to have produced many renowned figures, including former U.K. Prime Minister Winston Churchill.

Many other higher education institutions, such as Yeongjong Golden Terra City International School, are planning on launching their campuses, through Incheon’s active communication with foreign schools.

Building bio

In the bio field, Songdo aims to become the world’s bio center.

Songdo Bio Cluster, which is scheduled for completion by 2030, is a cutting-edge bio mega plant which is anticipated to create spillover effects between bio companies.

The project, which is under development on an area of two million square meters (21.5 million square feet) in Songdo, has secured investment from Celltrion, Samsung Biologics and SK Bioscience — Korea’s big three bio companies.

Along with domestic investments, sustained investments by global raw material companies in large-scale research, development and manufacturing have firmly established Songdo as a global bio-cluster.

Recently, Lotte Biologics has also inked a land supply agreement for the construction of a biopharmaceutical plant in the Songdo's 11th district by 2030, boasting a remarkable total production capacity of 360,000 liters of antibody drugs.

In fact, the achievements in the Songdo Bio Cluster are noteworthy. It has already secured the world's largest biopharmaceutical production capacity in a single city, standing at 1.16 million liters as of this year. For the past five years, the cluster was in charge of 43 percent of the total domestic export of medical substances.

With the completion of Samsung Biologics’ 6th, 7th and 8th facilities, this capacity will reach a huge 1.7 million liters.

Ultimately, this is expected to contribute to the creation of an ecosystem for bio innovation in Korea. So far, the cluster has led to over 100 industries, academia and research institutions employing more than 10,000 people, with a combined revenue of seven trillion won ($5.2 billion) in 2022.

Starting up

Incheon Startup Park, opened in Feb. 2021 is also continuing its success on establishing a cooperative ecosystem for startups.

It offers comprehensive support for startups, fostering the growth of unicorn companies through public-private collaboration. The park collaborates with over 40 organizations to assist startups with validation, investments, and global expansion.

Attracting promising startups to Incheon, and promoting job creation through startup nurturing, more than 422 startups received support and the program attracted investments worth 208.6 billion won.

The Incheon Startup Park is looking for international expansion through global partnerships, getting closer to its vision of creating a Korean version of Silicon Valley.

Over the past 20 years, IFEZ has achieved significant milestones in establishing smart cities that provide public services integrated with ICT (Information and Communication Technologies).

IFEZ is committed to further implementing smart and sustainable city models in Incheon and have a vision for 'IFEZ, the Global Future City, and Smart Innovation Hub' by 2030. Under the 2030 IFEZ Smart City Development Strategy, it is currently working on the first phase development project.

It involves designing a smart city model and building smart city infrastructure to create a safe and convenient urban environment for citizens, thereby moving toward a citizen and business-centric approach.

Art and Culture

After the opening of the Art Center Incheon Concert Hall in November 2018, the ongoing second phase of the Art Center Incheon is expected to establish itself as a representative multicultural facility in the global cultural city.

Currently, a feasibility study conducted by the Korea Local Administration Research Institute (LIMAC) is steadily progressing, and the second phase of the Art Center Incheon aims to open in 2027. This expansion includes the Art & Tech Center and Opera House besides the concert hall.

Transforming Cheongna and Yeongjong

Cheongna International City is also undergoing a transformation in its landscape. Ambitious plans are in progress, including the 'Cheongna G-Tech City' project, with the goal of turning Cheongna into a Silicon Valley for the gaming industry.

Additionally, there is vigorous progress in substantial projects, including the construction of Starfield Cheongna, a new landmark that combines a next-generation sports, culture and entertainment complex with a mixed-use shopping mall.

Furthermore, Cheongna has seen the commencement of new projects, including the BMW Research and Development (R&D) Center and Costco Cheongna.

The long-standing issue of Cheongna City Tower, which had been delayed for a long time, saw a change in the existing business approach.

Instead of selecting a private business operator, an agreement with LH (Korea Land & Housing Corporation) means it will directly select a construction company for building the tower and IFEZ will manage and operate it after construction, marking a significant turning point in the project's progress.

In Yeongjong International City, an ongoing project to establish a large-scale integrated resort is expected to significantly contribute to the creation of a world-class tourism city, and the revitalization of the local economy.

Inspire Entertainment Resort, with an investment of approximately 1.9 trillion won, is being developed on a 430,000 square meter site in the third international business district on the western side of Incheon International Airport Terminal 2.

The resort includes a hotel, an arena which will be a specialized performance venue, and other facilities, and it is expected to be completed by the end of the year and commence operations.

Inspire Resort, along with two other complex resorts in the region, is considered essential infrastructure for transforming Yeongjong International City into a key tourism hub in Northeast Asia.

After initial delays, the construction of a third bridge — 3rd Yeonyuk Bridge — linking Incheon with Yeongjong, is also sailing smoothly with plans to complete it by 2025.

This bridge, with a total project cost of 650 billion won, will be one of three bridges that connects Yeongjong and is the only one planned to include sidewalks and a bicycle lane. The bridge has a length of 4.681 kilometers and a width of 30 meters, featuring six lanes for traffic in both directions.

Moreover, there has been favorable consensus aimed at transforming the third bridge into a global tourist attraction, akin to the Tower Bridge in London, U.K., and the Sydney Harbour Bridge in Australia.

The bridge will feature a distinctive architectural design, and on top of the main tower, it will include a world record-setting sea-view observation deck at a height of 180 meters, an edge walk, and specialized scenic features a media facade.

It will serve as a tourism platform that allows visitors to experience and enjoy the sky, land and sea while walking across the bridge.

Challenges ahead

As IFEZ celebrates its 20th anniversary and aims to achieve its next major leap, there are many challenges that need to be addressed.

First and foremost, there is an urgent need for soothing regulation on the part of the central government.

A need for improvement in the mandatory regulations requiring feasibility studies and investment assessments for new projects with a total project cost of over 500 billion won within the Free Economic Zones (FEZs) is suggested.

FEZs are government-led projects designed to boost national competitiveness, determined through discussions among central ministries and reviewed by the Free Economic Zone Authority.

To accelerate the implementation of these successful projects, regulations should be amended to streamline administrative procedures.

Additionally, the reinvestment of development profits in Free Economic Zones (FEZs) needs to be expanded.

Currently, the regulations allow for the reinvestment of development benefits in infrastructure and public facilities' establishment costs.

However, as FEZ projects have matured and the necessary infrastructure and facilities are already in place, it's difficult to find suitable areas for reinvestment.

To address this, the Ministry of Trade, Industry, and Energy should revise the regulations to include the use of development profits for the maintenance of infrastructure and public facilities.

A new ecosystem

Incheon Free Economic Zone Authority believes that, in a situation where competition among nations and cities is intensifying, it is crucial to create new breakthroughs and lay the foundation for the leap to a world-class city through diverse investment strategies.

In line with this, IFEZ plans to establish a new industrial ecosystem with a focus on nurturing high-value-added businesses, including K-content, the gaming industry, expanding the Songdo Bio-Cluster, and creating a future-oriented medical complex.

Kim Jin-yong, the commissioner of the Incheon Free Economic Zone Authority, said: "To have created a city at such a rapid pace in the 20 years since the designation of the Free Economic Zone is remarkable and unprecedented in the history of urban development worldwide, and it is a success story on both a citizen and a national scale.

“Now, our goal is to surpass the cities of Hong Kong and Singapore and become a world-leading city with a focus on life sciences, health and anti-aging. We will strive to enter a phase of coexistence in which civic engagement, in collaboration with industry, academia, and government, together achieve balanced growth. To this end, we will embark on concrete planning and vision-setting to make this a reality,” said Kim.