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1 Nov. 4, 2004 The Implementing Strategy of Jeju Free International City as a Business Hub in Northeast Asia Gi-Choon Kang Cheju National University, Korea.

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Presentation on theme: "1 Nov. 4, 2004 The Implementing Strategy of Jeju Free International City as a Business Hub in Northeast Asia Gi-Choon Kang Cheju National University, Korea."— Presentation transcript:

1 1 Nov. 4, 2004 The Implementing Strategy of Jeju Free International City as a Business Hub in Northeast Asia Gi-Choon Kang Cheju National University, Korea

2 2 I. Introduction II. Overview of Jeju Economy III. Master and Execution Plans of Jeju Free International City (JFIC) IV. Foreign Direct Investment (FDI) attraction strategy V. Industrial development strategy VI. Summary and conclusions ContentsContents

3 3 Strength Nature-blessed environments Geopolitical location Strength Nature-blessed environments Geopolitical location Weakness Small-scale economy Declining competitiveness Weakness Small-scale economy Declining competitiveness Jeju Free International City Threat Fierce competition Market opening Threat Fierce competition Market opening Opportunity Emergence of NE Asia economic zone Increase in well-being demand Opportunity Emergence of NE Asia economic zone Increase in well-being demand I. Introduction

4 4 Master Plan of JFIC ( 01) Special Act on JFIC ( 01) Launch of JFIC ( 02) Feasibility Project ( 98) Making Jeju Island a business hub for NE Asia Master Plan of Jeju Development (1964) Five comprehensive development plans Master Plan of Jeju Development (1964) Five comprehensive development plans JFIC JFIC Promotion Committee JFIC Promotion Committee JFIC Promotion Bureau JFIC Promotion Bureau JFIC Development Center (JDC) JFIC Development Center (JDC)

5 5 Environmentally friendly tour & resort city Multi-functional city Increase in resident s income 7 Leading & 4 Promotion projects Jeju Free International City Philosophy of JFIC Philosophy of JFIC Protection of environment Protection of environment Preservation of local culture Preservation of local culture Promotion of economic development Promotion of economic development

6 6 Annual average growth rate of GRDP O Jeju s GRDP grew faster than the average for Korea for the period of , but growth lagged behind the Korea average for the period of O The AAGR for the agriculture, forestry & fishing industry was relatively high until 1995, but it decreased since then. O The AAGR of the service industry was relatively high for all periods. II. Overview of Jeju Economy JejuKorea GRDP (current) Agriculture, forestry & fishing Services

7 7 O The share of the agriculture, forestry & fishing industry decreased while that of the service industry increased for the period of O The share of the agriculture, forestry & fishing industry was 38.3% in 1985, but it has fallen to 17.7% by O The share of the service industry share was 39.3% in 1985, but it has increased to 57.2% by Ratio of GRDP in Jeju GRDP (current) Agriculture, forestry & fishing Services

8 8 O The share of employed persons in the agriculture, forestry & fishing industry was 41.4% in 1990, but it has decreased to 25.6% by O The share of employed persons in the SOC & other services industry was 54.4% in 1990, but it has increased to 69.8% by Employed persons in Jeju (Unit: thousand persons) Total239(100)248(100)261(100)281(100) Agriculture, forestry & fishing99(41.4)77(31.1)70(26.8)72(25.6) Social overhead capital & other services130(54.4)158(63.7)180(69.0)196(69.8)

9 9 O The Shift-Share model was used to analyze the industrial structure (weight) factor & growth (competitive) factor of the Jeju economy. O findings: - The weight factor (WF) negatively contributed to the growth rate of Jeju economy. - The competitive factor (CF) positively contributed to the growth rate of Jeju economy. But, its magnitude has continuously decreased for the whole period of O implications; - The industrial structure & the overall industrial competitiveness of Jeju economy are getting worse. Differential growth rate decomposition WFCFWFCFWFCF GRDP (current) Agriculture, forestry & fishing Services

10 10 III. Master and Execution Plans of JFIC O Vision of the Master Plan of JFIC O Objectives of the Execution Plan of JFIC - Establish an international tour & resort city - Strengthen the competitiveness of local industries - Provide a favorable investment environment O 7 leading projects - Key development strategy to provide economic stimuli across industries - Will play a catalytic role for the long-term development of JFIC - Will be implemented through private investment Int l exchange JFIC Culture & tourism Knowledge-based Clean industry Human respect Green residence Ecological environment 7 leading & 4 promotion projects

11 11 NameConceptSize & Investment Shopping OutletPremium shopping outlet complex offering luxury brand goods - Area: Approx. 165,000m 2 - Period: Investment: $61 Mil. Resort Type Residential Complex Master planned residential complex offering a leisure and medical care - Area: Approx. 727,000m 2 - Period: Investment: $365 Mil. Seogwipo Tourism Port Marine culture based waterfront- Area: Approx. 122,400m 2 - Period: Investment: $106 Mil. High-tech Science & Technology Complex R&D focused BT & IT complex for research, business, start-up and training - Area: Approx. 1,063,000m 2 - Period: Investment: $334 Mil. Ecosystem- Myth- History Theme Park Theme park utilizing Jeju Islands unique natural environment and cultural heritage - Area: Approx. 38,794,000m 2 - Period: Investment: $1.6 Bil. Expansion of Jungmun Tourism Complex Integrated resort & tourism area- Area: Approx. 101,180m 2 - Investment: $184 Mil. Establishment of an Airport Free Trade Zone Basis for the development of logistic industry relating to air cargo - Area: Approx. 323,400m 2 - Investment: $184 Mil. Summary of 7 leading projects

12 12 O 4 promotion projects - Health-Beauty Theme Town - International Culture & Entertainment Complex - Marine Tourist Complex - Leports Complex O JFIC Development Center (JDC) will serve investors - providing information & One-Stop support - reviewing business opportunities - offering advice on business plans - matching domestic & foreign partners Offering Supporting Reviewing Matching JDC

13 13 IV. Foreign Direct Investment attraction strategy O Importance of Foreign Direct Investment (FDI) - The Master Plan of JFIC calls for US$ 24.6 billion including US$ 15.5 billion of private capital investment (63%) for the period of The Execution Plan of JFIC requires US$ 2.7 billion including US$ 2 billion of private capital investment (74%)for the period of O FDI Inflow - Korea: America (39.6%), Asia (32.9%), Europe (26.5%) - Jeju: America (81.8%), Japan (16.6%) O FDI Investment - Korea: Service industry (59.4%), Manufacturing industry (40.3%) - Jeju: Tourism industry (99.9%) Total (98-03) Korea (A)8,85315,54215,21711,2929,1016,46766,472 Jeju (B) , ,460 Ratio (B/A,%) Trend of FDI (Unit: US$ million)

14 14 O Foreign Investment Promotion Law etc.: - Foreign Investment Zone, Free Trade Zone, Economic Free Zone O Special Act on JFIC: - Investment Promotion Zone, High-tech Science & Technology Complex, Airport Free Trade Zone CategoryEconomic Free Zone (EFZ) JFIC IPZHSTCAFTZ Investment Target Foreign investmentDomestic and foreign investment Target Business - Manufacturing, logistic & some tourism industry - More than $ 10 Mil. - Tourism industry in general - More than $ 10 Mil. - IT & BT industry - No lower limit on amount - Manufacturing & logistic industry - More than $ 10 Mil. Tax Incentives - Corporate, income, local taxes 100% exempted for the first 3 years, 50% reduced for next 2 years - Tariffs exempted for imported capital goods for 3 years - Corporate, income, local taxes 100% exempted for the first 3 years, 50% reduced for next 2 years - Tariffs exempted for imported capital goods for 3 years - Corporate, income, local taxes 100% exempted for the first 3 years, 50% reduced for next 2 years - Tariffs exempted for R&D related machinery and materials - Corporate, income, local taxes 100% exempted for the first 3 years, 50% reduced for next 2 years - Tariffs exemption area Comparison with Economic Free Zone & JFIC

15 15 O Some suggestions for FDI inducement strategy - flexible & practical - pre-designation of investment promotion zones - differentiated investment incentives (for example, a corporate income tax rate cut in tourism related business) - improvement of business environment

16 16 V. Industrial development strategy O National perspective (Specialized Tripolar Development System): - Cooperation & strategic alliances among JFIC and Economic Free Zones (Busan, Incheon) - Specialization & differentiation strategy JFIC: Tourism & resort Incheon: Logistics & business Busan: Logistics & finance O Local perspective - Dual strategy: Specialization in the short & medium term =>Tour & Resort Hub of NE Asia Diversification in the long-term =>Business Hub of NE Asia - Balanced strategy: Hardware Software Human resources Busan Incheon JFIC

17 17 NameVision/GoalInvestment Five Year Plan for Jeju Economic Development - Revitalization of the existing industry - Promotion of the knowledge-based industry - $ 7.35 Bil. - National expenses (13.6%), provincial expenses (11.5%), private capital (75.0%) Mater Plan for Jeju Science & Technology Innovation - Development of specialized strategic technology of Jeju - Expansion or improvement of Science & Technology (S & T) innovation capability - $ 593 Mil. - National expenses (71.0%), provincial expenses (21.5%), private capital (7.5%) Ten Year Plan for Jeju Technology Development in Bio- Industry - Cluster formation in BT industry- $ 609 Mil. - National expenses (73.0%), provincial expenses (23.0%), private capital (4.0%) Five Year Plan for Regional Innovation Development in Jeju - Selection of strategic industry - Selection of territorial industry - $ 4.7 Bil. - National expenses (28.6%), provincial expenses (9.3%), private capital (62.1%) Industrial development plans

18 18 O Derivation of implementing strategy: - SER-M model + RIS model Subjects Networking Environments Clustering Resources Interlinking Mechanism SER-M R IS Subjects Jeju people Central gov t Local gov t JDC Environments Incentives One-Stop service Pre-designation Deregulations Resources Core resources Knowledge region Networking Innovative agents Clustering Knowledge-based industries Interlinking Strategic & territorial industries

19 19 VI. Conclusions 2000 (A)2011 (B)Annual average growth rateRatio (B/A,%) Population (Thousand person) Real GRDP(USD Bil.) GRDP per capita(US$)7,89519, Visitors(Million person) Prospects of main indicators MissionVisionPassion Investor s concern Continuous support


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