By offering education and medical services to foreign workers, as well as administrative services in English, the FEZs are also well positioned to attract investment away from Singapore.

Korea has already designated the island of Jeju, a famous beauty spot, as an international city offering tax breaks for foreign companies and their workers. Jeju’s international reputation is growing, having hosted a series of international conventions this year – including the Asian Development Bank’s AGM, which attracted visitors from more than 60 countries.

The scale of the plan is highly ambitious, and is based upon the blueprints for Silicon Valley in the US and Japan’s Tsukuba Scientific City. Once the plan has been shown to work in attracting investment, it is expected that the FEZs will become a template for the economy as a whole as the government rolls out the same rules and regulations to the rest of the country.

In return for investing a minimum of $30m, foreign manufacturing companies will enjoy financial and other incentives. For tourism and logistics companies, the required investment is lower, at $20m and $10m respectively.

The Incheon special economic zone in the north revolves around the international airport, the creation of an international financial services district and Songdo’s “intelligent city”, which will include a 60-storey world trade centre, 60 office buildings, deluxe hotels, shopping malls and a golf course, due to be completed by 2008.

“The economic zones are a strategy to make Korea more attractive in the eyes of foreign investors and we’re doing our best to draw them to the country,” says Chung Chang-bok of the Incheon Metropolitan Government’s Songdo development department.

The project includes a technology complex to house research centres and venture start-ups alongside the Korean Institute of Technology. Two more complexes, for biotechnology and for knowledge and information will be built by 2008.

The development of the Busan-Jinhae free economic zone on the southeastern coast involves turning a 104m2 area into a high-tech industrial and logistics hub in three stages – the first scheduled for completion by 2006. The project includes a logistics park surrounding the port, due for completion by 2006, an industrial and R&D park, a leisure resort that capitalises on the beachfront, 60 schools and several hospitals.

The 89m2 Gwangyang Bay zone in the south will concentrate on maritime logistics, distribution and manufacturing. The project involves 24 complexes, the first to be completed by 2006, all linked by radically upgraded rail, road and airport infrastructures. Like Busan, this zone will include residential, leisure and tourist facilities, complete with schools and medical facilities. It will also be home to a specialist institute for training logistics professionals.

These projects, which have high-level political backing, are supported by a package of generous financial incentives, including exemptions from land fees income and corporate tax for the first three years and a reduced rate of 50% in the following two years. Incentives include simplified administrative procedures, heavily subsidised land leases on government owned land, tax breaks and linguistic support.

Cash grants will also be handed out to companies that make greenfield investments, particularly in high-demand fields, such as high technology, parts and materials and research & development (R&D).

In May, the government unveiled plans to grant cash subsidies to foreign companies setting up R&D facilities proportionate to the number of Korean employees. The state will pay part of the wages for up to 100 jobless Korean graduates of engineering universities and graduate schools, who are hired by foreign-owned R&D centres.

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