Monday, October 27, 2008

Free economic zone in Songdo takes shape

As an international banker on Wall Street and in Tokyo, and as a mother who raised two kids in London, Min Hee-kyung knows what expatriates need the most.

Many years of relocating and sending kids to international schools greatly helped her in landing a job as a city marketer, she said.

"What expats are concerned the most with is education for kids and quality of life," said Min, who is director general of the Incheon Free Economic Zone`s Business Opportunity Bureau. In her recent two-hour long presentation for international investors, where the mayor of Incheon attended, she said she was bombarded with questions, mostly about educational facilities and living conditions.

The Incheon Free Economic Zone, comprised of the three regions of Songdo, Cheongna, and the island of Yeongjong, is the first free economic zone in Korea, designated by the government in 2003.

The IFEZ aims to transform these three areas into hubs for logistics, international business and leisure for the Northeast Asian region. The zone is a specially designated area to create a favorable business and living environment where foreign nationals can live and invest conveniently.

"Our best selling point is quality of life," she said. IFEZ is planned to be a self-sufficient living and business district featuring air and sea transportation, an international business center, financial services, international schools, hospitals, and shopping and entertainment centers.

Many regard the free economic zone as a test bed for Korea`s ambitious plans to transform itself into a global financial powerhouse. The plan to use the financial hub to draw global capital and financial professionals is vital to sustainable economic growth in Korea and the rest of Asia, experts say. In the wake of the global credit crunch, many regional companies have limited or no access to capital as they heavily rely on offshore financing.

"The crisis underscores the significance of the role of capital markets for the economy. Developing a financial hub will be strategically more important for Korea," said Kim Ki-hwan, chairman of Seoul Financial Forum.

Songdo will be the world`s first city to be designed as an international business district. It is the largest foreign real estate development project.

"If you look around Asia, many of the traditional cities such as Singapore, Hong Kong and Shanghai have created a financial hub," said Stan Gale, chairman of Gale International, the majority partner in the development of Songdo International Business District.

"Korea, located between China and Japan, is trying to make its own version and its first step towards a financial hub."

The conventional city development process starts creating residential districts, followed by the development of commercial property and office districts. In the case of Yeouido, it took more than five decades to make the area into what it looks like today. In Songdo, the whole process is taking place at the same time.

"We need to have a little bit of everything from the beginning," Min said. She travels abroad almost every month to hunt for potential clients. One of her toughest challenges in terms of promotion is reducing the perception gap between international investors and Korean residents.

"Most of international investors have an image of a rice paddy or production factories when they think of outside Seoul," she said.

Min has a long list of potential clients, including everything from multinational corporations, schools, museums and hospitals. Her target clients are those corporate executives who have plans to expand their Asian businesses, relocate some part of their operations or move their head offices into Incheon.

Still, Songdo is relatively inconspicuous outside of Korea and it may need more time to draw the attention of international investors, she said. Most industrial construction sites have been sold out. Some 100 foreign-invested companies, including 30 multinational corporations are expected to start their operations in 2010 and students and teachers from all over the world will pack into classrooms and university campuses.

"We`ll be able to move forward faster than now once we reach the tipping point," she said.

The new city is not just about new roads and parks and buildings, but the atmosphere and the cultural aspect of the city is another important pull factor to induce more international residents here.

"Bringing a more diversified pool of students here will definitely help us to make Songdo vital and full of life and create communities for international residents," she said.

A focused strategy, legal framework and a favorable eco-system are the critical success factors in setting up a financial hub, experts say.

"A differentiated value proposition is key to attract international investors," said John Meinhold, a global partner of A.T. Kearney.

The most challenging task to make Songdo into a truly international city is perhaps to change the way people think.

Many international investors find real estate-related regulations in Korea too complicated, calling for the need to cut through red tape. So far, the central and local governments have been too slow to make progress in their deregulation process.

"It is a complex issue, which would require extra work to deal with public sentiment and policy coordination between local and central governments," Min said. (27 Oct 2008) ◦

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