[Territorial policy in Korea (9)] Seoul-Incheon looks to global business hub

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This is the 9th installment in a series of articles shedding light on Korea`s territorial policies - an integral part of the nation`s development strategy. Researchers from the Korea Research Institute for Human Settlements, a state-run institute committed to studying means of enhancing the use of national territory, will deal with about two dozen themes related to formulating the territorial development strategy. - Ed.



By Kim Tae-hwan



The Seoul-Incheon megalopolis has achieved exponential growth for the past half a century. The area has led in innovation national advancement to emerge as Korea`s economic center and a Northeast Asian business hub.

Its population has increased from less than 10 million in the 1960s to 24 million as of 2009. Seoul-Incheon`s gross regional product reached 409 trillion won ($348 billion) in 2007, accounting for 47.7 percent of the national GDP. Goods handled there make up 86 percent of the national total.

In terms of industrial structure, it is the center of knowledge and information-based service and high-tech manufacturing. Information and communication services and equipment, digital content and semiconductors have registered continuous growth there.



Seoul-Incheon also boasts Korea`s highest concentration of knowledge assets such as manpower and R&D. About 90 of Korea`s 100 largest companies and 68 percent of venture firms have their headquarters in the area. New patents issued in Seoul-Incheon exceeded 120,000, or 79 percent of all intellectual property rights issued domestically.

With its international business capability and management function enhanced, the megalopolis will have better conditions for international and knowledge-based businesses.

The Northeast Asian economy is fast expanding, becoming one of the world`s three largest trade zones along with the European Union and the North American Free Trade Agreement area.

Its contribution to the global GDP is expected to grow to 30 percent by 2020 from 21 percent in 2004. It accounted for 30 percent of global goods traded as of 2006 compared to 27 percent in 1998. Seoul-Incheon will play a more important role in line with the region`s growth.

So far, government policies on the megalopolis have focused on preventing concentration and curbing overcrowding.

Such restrictive policies had many negative side-effects. Stiff regulations have dampened corporate investment and hindered Seoul-Incheon from developing into a global hub with competitive strength. Location regulations caused many difficulties for high-tech industries, especially in hiring R&D manpower.

In line with changing internal and external environments, the Seoul-Incheon megalopolis is now required to chart a new development path.

Internationally, a new economic order characterized by globalization and a knowledge-based economics has made the concept of a global city-region an important geographical unit of competition.

Major cities like London, Paris and New York have emerged as core driving forces of the global economy. Seoul-Incheon should enhance its competitiveness against such global city-regions.

The rapid growth of Seoul-Incheon has also left it with an excessive concentration of population and function, incurring huge social costs in terms of housing, transportation and the environment.

This poses to the megalopolis another major challenge of promoting sustainable development and improving the quality of life.

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Deregulation to enhance competitiveness

The government has continued to improve regulations to address problems with the current policy and management systems of Seoul-Incheon.

On Oct. 30, 2008 the Lee Myung-bak administration announced a set of regulatory reforms for the megalopolis as part of more effective territorial policies to boost national competitiveness.

Firstly, the government has relaxed regulations regarding the establishment, expansion and relocation of factories.

Companies have been allowed to build and expand factories more freely in industrial towns which have been planned and developed by the government, even if they are located in areas subject to stricter counter-congestion rules.

The ceiling on the scope of expansion of existing factories, especially in the high-tech sector, was also raised in order to develop the city-region into a knowledge business center.

Secondly, government-developed industrial zones such as the Incheon Free Economic Zone were excluded from output restrictions that applied to ordinary industrial complexes.

The government also decided to permit construction of smaller (less than 10,000 square meters) knowledge, cultural and IT industrial complexes in Seoul, which already has mature conditions for such high-tech businesses.

Restriction on the total amount of plant construction was eased; the rule now applies to facilities larger than 500 square meters, in comparison to the previous 200 square meters.

Thirdly, the government plans to gradually revamp plant location regulations in environment protection zones on the condition that industrial facilities do not harm nature.

Environmental regulations will be methodically upgraded from restricting the location of certain facilities to controlling the kinds of materials emitted and their total amount.

For example, the government will approve more development projects - while ensuring their systemic planning - in areas where a ceiling for water pollution applies.

Other various unreasonable regulations hindering the development of Seoul-Incheon have been redressed.

Facility location rules in the IFEZ were mitigated in order to attract more investment. Financial firms in financial business districts and R&D institutions inside industrial complexes will be exempt from the congestion charge that is imposed on large buildings in other parts of the capital.

The rates for real estate acquisition and registration taxes on business start-ups (three times as high as the basic rates) will also be readjusted.

The plan also laid groundwork for mutually beneficial economic relations with other regions.

Economic gains from deregulation in Seoul-Incheon will be channeled into investment in other provincial areas. They will be used largely to support local governments` development programs. The central government will induce local entities to attract investment more actively and will develop institutional systems for a fairer distribution of resources.



Infrastructure policies to enhance competitiveness

In addition to efforts for sustainable development and regulatory reforms, the government is implementing measures to improve infrastructure for the megalopolis` competitiveness.

Building on its strong knowledge assets, namely high-quality human resources, R&D infrastructure, universities and research institutes, the government is building a mega-regional development base and infrastructure.

Under a new spatial strategy, each of the megalopolis` lower geographical units will be functionally specialized and linked with each other.

Seoul and its vicinity will be developed into a financial and international business belt.

Incheon and western coastal areas, where Incheon International Airport, Incheon Port and Pyeongtaek Port are located, will focus on maritime logistics businesses while the IFEZ will become an international business center.

Southern parts of Gyeonggi Province will become an IT, electronic and knowledge-based manufacturing base.

Seoul-Incheon is exploiting its ample innovation infrastructure to promote and cluster new businesses.

The government is developing and globalizing energy, environmental, bio-industrial and digital content, while trying to create knowledge-based business clusters.

One of the most important policies to make it a global business hub is the IFEZ plan. The project seeks to build an international business center by 2020 on 200 million square meters of land that includes Incheon International Airport, Songdo International City and Cheongna District.

Songdo is being developed into an international, knowledge-based and financial industry town. It will have knowledge, information and biological industry complexes as well as state-of-the-art bio-business centers and convention facilities.

Yeongjong District will serve as a logistics base supporting free trade at the airport and will become a new maritime tourism and leisure complex.

Cheongna District is being transformed into a multi-functional business city combining sports and leisure facilities, high-tech floral towns, top-quality transport and logistics infrastructure, and a convenient and comfortable living environment.

Another pillar for future competitiveness of Seoul-Incheon is the Gyeongin Canal which will link the West Sea and the Han River.

Scheduled to be complete by 2011, the new waterway will diversify transport modes currently resorting heavily on automobiles, thus drastically upgrading the logistics system of the megalopolis.

It will also help resolve congestion at Incheon Port and improve traffic conditions on inland transport networks. Containers from Busan and Gwangyang ports, steel from Pohang, cars from Ulsan and sand from Ongjin will be transported through coastal shipping.

The canal is expected to cut logistics costs, reduce air pollution and traffic accidents, as well as enable the nation to better handle trade with China and North Korea.

The Lee Myung-bak administration is pushing the mega-regional economic zone policy to promote greater links and cooperation among regions beyond administrative boundaries and to enhance regional competitiveness through economies of scale.

A recently issued mega-regional economic zone plan for Seoul-Incheon aims at developing it into a globalized business hub leading national development and the economy.

Key tasks are establishing mega-regional infrastructure and enhancing links of regional development bases.

On the side of the spatial structure, the plan pursues the formation of a dispersed structure of mega-regional living zones and their self-sufficient connection.

To reduce congestion and environmental costs, the plan seeks to nurture major growth axes and develop mega-regional base cities, regional base cities and sub-central districts at the intersections of growth axes.

It also calls for functional specialization of city centers and base cities as well as implementation of development strategies tailored for each growth axis.

Pubic transportation and transit systems such as express railways, highways, and bus rapid transit will be established in each growth axis to enhance their links with Seoul as well as the functional connection and networking between major cities. The plan is aimed at forming mega-regional living zones and enhancing their efficiency through those measures.



Ambition for smart growth

With the spread of globalization and increasing competition among large cities around the world, Korea should break from the conventional policies of restricting quantitative concentration and instead develop globally competitive central city-regions through systemic planning and management and integrated remodeling.

In this regard, the government seeks to introduce a plan-guided management system for the Seoul-Incheon megalopolis.

Unlike the previous spatial management, which centered on the central government`s strict regulations, a new plan-guided management system means that central and local governments should cooperate in establishing plans and jointly promote and manage the megalopolis` qualitative development and growth.

While previous management leaned towards uniform location regulations, the new system should focus on improving the quality of life and spatial rearrangements through well-crafted planning and flexible management.

A plan-guided management system requires cooperative governance between central and local governments so that they autonomously set objectives and manage operations through mutual consensus and broad participation in the processes.

Efforts should also be made to forge a mature social circumstance that enables the megalopolis and other provinces to overcome structural conflicts and promote mutually beneficial development.

In this regard, the transition to a plan-guided management system requires phased preparations and institutional improvements.

Experts have been pushing a joint study on the transition to the new system for more effective mid- and long-term management of the megalopolis.

The government-civilian council for policy innovation consisting of central and local governments, nongovernmental organizations and civilian experts is collecting diverse opinions and preparing for concrete measures including institutional reforms. The government plans to push the improvement of institutions step by step for the new management system.

The Seoul-Incheon megalopolis has developed for the past 50 years into a mega-city region leading Korea`s economic growth. It is located in a strategic base point that connects major cities that form a trans-border corridor of Northeast Asia such as Shanghai, Tianjin, Beijing, Dalian, Vladivostok, Seoul, Incheon, Busan, Fukuoka, Osaka and Tokyo.

The megalopolis will establish itself as the base to realize Korea`s ambition to become the center of not only Northeast Asia, but also the world.