AboutFressTradeZoneOffice

What is a free trade zone office

• In the1970s, a group of developing countries adopted a free trade zone office (FTZ) or export processing (EPZ) zone as part of their industrial policies in the hope of attracting foreign investment and technology. In the process, FTZ or EPZ produced significant economic results in manufacturing production, job creation, technical transfer, the acquisition of advanced management skills and the promotion of domestic technological development through competition with foreign companies in addition to　the introduction of foreign investment. So more countries decided to set up FTZs. FTZs have developed into multi-function areas where logistics and commerce are carried out in addition to operating conventional functions like manufacturing bases. The center of the global economy has moved to Northeast Asia and Gunsan is regarded as an ideal launching pad to advance into the Chinese market and an excellent base of international logistics because it is located in the　center of Pan-Yellow Sea Area. Against this backdrop, Gunsan Free Trade Zone office was set up to maintain competitive advantages and attract foreign investment in consideration of the escalating competition for Chinese markets and competition among neighboring countries.

Overview of Free Trade Zone office (FTZ)

• Meaning of FTZ

- A specially designated area in a country where tariffs or bureaucratic requirements are eliminated or lowered to promote international trade, foreign investment and production

- FTZ was established to introduce global standards and provide a favorable environment for foreign investments.

Types of FTZ

- Production-oriented FTZ: To promote foreign direct investment in the manufacturing industry (Masan and Iksan FTZ, Export Processing Zone of Taiwan, etc.)

- Trade-oriented FTZ: To promote international trade through the reduction of regulations and requirements (Hamburg in Germany, Amsterdam and Rotterdam in the Netherlands, etc.)

- Complex FTZ for production and trade: A mix of trade and production-oriented FTZs. All economic activities are allowed. (FTZs in the U.S., Hong Kong, Singapore)

Types of FTZ

- Free export zones were established in Masan in 1970 and Iksan in 1973.

- Although a free export zone is an effective system to attract foreign investments and promote exports, it is required to transform itself in order to respond to changes in the Korean economy and the　globalization of the world economy.

- Despite the fact that the convergence of manufacturing and logistics is one of the recent global trends, the existing free trade zone office is still centered on the manufacturing industry, and thus there is lack of space for logistics. In particular, excessive logistics cost was incurred in Iksan because　it is an inland city.

- Therefore, the Korean government introduced a free trade zone office that includes logistics functions in addition to the manufacturing processes by reforming the related laws and regulations.

Economic benefits

• Promote foreign investment by building a specialized investment environment

- A free trade zone office furnishes various functions and comprehensive supports like low-priced land, a bonding service, combination of production, logistics and distribution, and one-stop services by an administrative agency.

- Companies can start business at the same time with an easy move-in thanks to the advance supply of low-priced land. A company can benefit from a free trade zone office if it meets the qualifications of tenant no mater how small its investment. So, it is suitable to attract foreign investments.

Hub of international trade

- Revitalize international transactions by combining processing and manufacturing with logistics and distribution within a free trade zone office.

- Enhance the competitiveness of local companies by strengthening business relationships with foreign companies in a FTZ

Contribution of balanced regional development

- A FTZ may serve as a major means of regional industrial promotion and regional development by allowing local autonomous governments flexible management of FTZ, whether it be production-based, trade-oriented or multi-functional.

Development of industrial structure

- The move-in of world-renowned multinational companies with global technology and markets will contribute to the introduction of new capital materials, promote the transfer of advanced technology, disseminate advanced management techniques, which, in turn, will raise the competitiveness of domestic companies and develop industrial structures.