Korea Free Economic Zone Investment Bonanza
Waldorf Astoria Hotel – May 13, 2004

Comments by
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 economy. 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