Korea Free Economic Zone Investment
Waldorf Astoria Hotel – May 13, 2004
Keith W. Rabin
President, KWR International, Inc.
Good morning, my name is Keith Rabin, and I’d like to welcome you today
to Korea’s Free Economic Zone Investment Bonanza, organized by KOTRA and
the Korea Society under the sponsorship of the MOFE (Ministry of Finance and
Economy) of the Republic of Korea.
A little over ten years ago, I began focusing on Korea while helping to determine
initial areas of focus for the newly formed telecom finance division of one of
the world’s largest financial institutions. Based on the numbers, Korea
represented one of the most attractive markets in the world. It showed high growth
and demand – far beyond what one might imagine for a country of its size – both
on a per capita basis as well as when compared directly against larger economies.
Nevertheless, when we suggested Korea as a preliminary target -- it was quickly
dismissed as being closed and completely impenetrable.
The reason I mention this is today you are going to hear a lot about the steps
Korea has been taking to enhance its competitiveness -- including the development
of three free economic zones. Each has been designed to offer a range of special
advantages including tax, labor, regulatory, and other incentives.
The attractiveness of these measures, combined with Korea’s geo-strategic
location, helps to position the nation as an ideal “hub” and entry
point into one of the world’s most rapidly growing regions. In my eyes,
however, even more important are the advantages that can be gained by establishing
a presence in one of the most dynamic and exciting economies in Asia.
As my previous story illustrates, Korea has been an attractive market for some
time. What is different today, however, is that the nation has realized it can
no longer succeed without the input, participation and capital of foreign companies
and investors. It has been a leader in implementing economic, social and regulatory
changes and reforms. Foreign companies are now dramatically expanding their presence,
and increasing the scale and profitability of their operations in Korea.
In addition to the Gale Company’s investment in the Incheon FEZ, many of
you may be familiar with Citibank’s investment into KorAm, and Lone Star’s
into the Korea Exchange Bank. These are three of the higher profile direct investment
stories over the past year. There are also, however, many smaller investments
being made. The government of Gyeonggi province, for example, which surrounds
Seoul and borders Incheon, recently announced it had attracted $158 million in
foreign investment during a visit by its Governor to the United States last month.
There are also hundreds, if not thousands, of other U.S. companies operating
in Korea, ranging from major names such as Proctor & Gamble, United Technologies,
Starbucks, Microsoft, Monsanto, IBM and HP as well as numerous other public and
private firms of all sizes operating across almost every sector.
In addition to offering easy access to other points in Asia and an attractive
domestic market – Korea also now stands in the forefront of many of the
new technologies and applications that are forming the way we live our life today.
Many of you with children may not consider this to be a positive – but
Korea is a world leader in the development of online games. There are about 25,000
gaming rooms in Korea and I was surprised during a recent trip to Korea that
this activity is so popular that some of the competitions are even televised.
Furthermore, while it is no surprise that Korean companies are on the cutting
edge in sectors such as LCD displays, automobiles, mobile phones and other manufactured
products, the nation is also a leader in wireless and broadband applications.
Koreans spend twice as much time online as their counterparts in the United States.
Technology analyst George Gilder notes Korea has 40 times more bandwidth – and
a 75% penetration rate. Gilder reports around $450 billion of commercial transactions
in 2003 were conducted on the Internet in Korea – about a third of its
Interestingly he states “If (the U.S.) had a third of (its) economy
transacted on the Internet, versus our 2%, (many of) the business models that
were deemed quixotic and absurd because of the bubble would have succeeded. Grocery
transactions are done on the Web all over Korea. Webvan and those other dotcoms
would have prevailed there.”
We do not have time to engage in a full discussion about the many ways these
and other technologies are transforming Korea, the lessons learned, the advances
that are being made, the resulting economic, social and political implications
and the many interesting investment and business opportunities that are emerging
as a result -- but the key point is that in many ways Korea is a country that
provides a window into the future – and any decision to base an international
investment should be made – not only on the cost advantages that participation
in one of these three FEZ’s can offer, but also on the value that can be
gained through establishing a presence in a dynamic environment that can serve
to enhance and advance your overall business strategy and competitiveness.
I truly believe that Korea can provide you with that balance and would now like
to introduce you to our first speaker Mr. Young-Kyo OH, President & CEO of
KOTRA, who will deliver this morning’s opening remarks. Mr. OH has spent
most of his career energetically working for the industrialization of Korea.
Following an illustrious career rising through the ranks of the Ministry of Commerce,
Industry and Energy and its predecessor institutions, Mr. OH served as a Vice
Minister at the Ministry before assuming the Presidency of KOTRA in April 2001.
©2004 KWR International