More on the Economics of Free Economic Zones and Reclamation

Nial Moores PhD, Birds Korea, January 8th 2014


Following on from last month’s article in the Wall Street Journal (http://www.birdskoreablog.org/?p=11510), Birds Korea would like to thank an overseas expert for sharing three additional links to media articles from 2012 and 2013. These published articles suggest, again, that the nation’s Free Economic Zones (FEZ) are failing to attract adequate domestic or overseas direct investment. They are not successful economically.

Of huge concern, many of the nation’s Free Economic Zones (e.g. in Incheon, Pyeongtaek, Saemangeum, Gwangyang) are being constructed in Ramsar-defined internationally important wetlands. Reclamation (i.e. the conversion of natural wetland into land and artificial wetland by mechanical means) in these areas has already resulted in massive social and environmental costs. Reclaimed areas then require further massive investment (in infrastructure) before they can even be used by industry or in some cases by agriculture. Is this sustainable development? Is this truly in the national interest?
As many people have been saying for years: we need much more good development (development that improves the nation’s social, environmental and economic well-being), and much less bad development.

 

The Korea Herald, June 12th, 2012.
“FEZs totter with meagre foreign investment: Government curtails areas and projects, postpones additional designation indefinitely”, http://view.koreaherald.com/kh/view.php?ud=20120612001267&cpv=0

  • …According to the Ministry of Knowledge Economy and the Planning Office of Free Economic Zones, foreign direct investment in six free economic zones from 2004 to the first quarter of 2012 amounted to $4.11 billion. The nation’s total foreign direct investment reached $98.41 billion over the same period, meaning the six zones took up a mere 4.47 percent of the country’s total foreign direct investment. In the case of the Incheon Free Economic Zone, which boasts the fastest pace of development among the six, foreign direct investment as of late April 2012 amounted to $2.7 billion, or 50 percent of all the zones. The Busan-Jinhae FEZ chalked up $1.32 billion and the Gwangyang FEZ $700 million. The remaining three zones marked poor performances. The six zones have shown little progress not only in light of the absolute investment amount, but also in inducing high tech, high value-added companies…Incheon, which hosts the nation’s No. 1 FEZ…is in severe financial trouble. Fiscal difficulties stemming from lavish projects have stopped Incheon from pushing ahead with large construction and international events. […] Presently, Incheon Metropolitan Government is mired in debt, with its amount marking 2.7 trillion won and the ratio 40 percent…

 

Yonhap News Agency, July 4th 2013
“Gov’t spurs development of Saemangeum reclamation area”, http://english.yonhapnews.co.kr/national/2013/07/04/16/0301000000AEN20130704003251315F.HTML

  • …The government kicked off its drive Thursday to build agricultural and tourism facilities […]. As part of the effort to create some 81.7 square kilometers of agriculture land by 2020, which accounts for about 30 percent of the total reclamation area, the government began building infrastructure on Thursday such as irrigation channels, streets and reservoirs. The first phase of the project aims to complete construction of 15.1 square kilometers of farmland by 2017 with a budget of 145.6 billion won, the [Prime Minister’s Office] said. In a move to transform the region into a tourism hub, the government also plans to begin construction of a massive leisure complex near the seawall within this year. […] “Along with pushing for government-led projects, we will strive to lure investment from private entities,” said [Kwon Tae-sung, chief of the Office for Saemangeun Development Planning under the arm of the Prime Minister’s Office.]

 

Yonhap News Agency, July 31st, 2013
“China still big chance for Korean companies [via Saemangeum, Finance Minister Hyun OhSeok says]”, http://english.yonhapnews.co.kr/business/2013/07/31/11/0502000000AEN20130731004700320F.html

  • [I]nvestment figures remain lacklustre [in Saemangeum]. Hyun said that the government is working on crafting measures to stimulate the country’s free economic zones. They include scaling down the size of the FEZ in the Saemangeum area for improved efficiency and management. In order to accelerate the development of the Saemangeum area, the government will work hard to build necessary infrastructure including a seaport and a large-scale logistical complex that will help with exporting goods produced in the region, Hyun added.

 

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