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Last Updated:[05-01-2010 23:06:17 EDT] Zoom in Zoom out Back to Tradenews

S-Korea Plans 2nd Capital City with Incentives to Investors

tradenews The changed plans for Sejong city, located about 130kms south of Seoul, from administrative township to a science-business one will take off after a nod from the parliament with incentives for all establishments including domestic as well as foreign investors. Relocating or start up Firms, educational institutions and universities will be offered tax benefits, subsidies and low land prices, and foreign players could even opt for cash rewards.

Under the incentive package, the prime minister’s office (PMO) announced the proposal carried under-developed land to be made available to investors for about $114 per square meter. Nonetheless, according to some sources if one includes the development cost it would be just fractionally cheaper than the average land cost in nearby industrial parks.

Firms relocating from Seoul metropolitan area will get extra benefits such as government subsidies for investment, employment and training, it said. The enterprises will also be exempted from income tax and corporate tax for the first three years, and receive 50 percent tax cuts for the next two years.

Besides, their acquisition, registration and property taxes will be exempted for the first 15 years. Whereas, Foreign-invested firms will be allowed to choose from the subsidies, rent cuts and cash rewards.

Top players from the corporate and education spaces have already lined up to open shop in the new city project. Samsung Group and Woongjin Group are reportedly among the businesses seeking to operate in Sejong city. Korea University and the Korea Advanced Institute of Science and Technology also plan to open new campuses here.

Within months after Chung Un-chan assumed office as the premier of South Korea, he pledged the administrative town project, approved by the National Assembly in 2005 during Roh Moo-hyun administration would be scrapped. It is learned that Grand National Party, the governing party's second-largest faction was opposed to the revised plan. However, the Chung Un-chan administration believes creating two capital cities can achieve faster economic growth.

On the flipside, Korea's free economic zones (FEZs) are concerned over the government's plan to provide a wide variety of incentives to Sejong city. The plan to run the city like an FEZ is expected to deal a death blow to the already struggling zones. It should be noted that Incheon, home to the country's largest FEZ, has attracted only 1 percent of its total investment from foreigners.

It is feared Sejong project would grab prospective foreign investors away from Incheon and other FEZs. Even committed funds may flow out to the new township if the incentives and business potential are found to be more attractive.

A spokesman from the PMO’s office admitted that they planned to designate Sejong city as an international science business belt and build industrial, medical and educational infrastructure to make it almost like a free economic zone. The government is scheduled to announce the final master plan of the project by next Monday.

By Jose Roy

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