South Korea free economic zones (KFEZ) aim to increase regional and national commercial competition and foster balanced regional growth. This project is being managed by Korea’s economic zone planning office.
The Korean government offers a range of tax advantages to foreign businesses and individuals, as well as a less demanding regulatory framework, a comfortable way of life, and quick administrative services.
South Korea Free economic zones aims to create social and economic organisations that set the pace for trends globally and offer a range of incentives.
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DIFFERENCE BETWEEN SOUTH KOREA FREE ECONOMIC ZONES AND SOUTH KOREA FREE TRADE ZONES
South Korea Free Economic Zone
Free economic zones are unique areas meant to aggressively attract foreign investment by enhancing the business environment and home environments for foreign businesses, as well as enabling commercial activity and investment through regulatory relief.
The Korean government offers a number of tax breaks to foreign enterprises and individuals, as well as a simplified regulatory system, a pleasant living environment, and prompt administrative services.
South Korea Free Trade Zone
Free trade zones are areas designed to attract manufacturing and logistics enterprises in industrial complexes, airports, ports, distribution complexes, and cargo terminals, and they generate synergies by connecting businesses.
Tariffs on foreign commodities and some domestic items imported into free trade zones are reserved, and a value-added tax rate of zero is imposed. As a result, businesses who want to export products created using imported foreign raw materials don’t have to go through complex return procedures.
WHAT ARE THE TERRITORIES OF THE SOUTH KOREA FREE ECONOMIC ZONE?
As of today, there are nine different territories or areas that are under the South Korea Free Economic Zone. Here is a map that covers those territories, as well as their designations, for a better understanding of it.
| Districts | Location | Year Started | Airports/Ports | Main industries |
| Incheon | Incheon | 2003 | Incheon International Airport, Port of Incheon | IT, telecommunications, international banking, tourism, and recreation |
| Busan - Jinhae | Busan Gyeongsangnam-do | 2004 | Gimhae International Airport, New Port of Busan | Shipbuilding and marine logistics |
| Gwangyang | Jeollanam-do | 2004 | Yeosu Airport, Port of Gwangyang | Materials, marine logistics |
| Geonggi | Pyeongtaek | 2008 | Pyeongtaek Port, Dangjin Port | Value-added logistics, car components |
| Daegu/Gyeongbuk | Daegu Gyeongsangbuk-do | 2008 | Daegu International Airport | Medical, educational, and knowledge-based |
| Chungbuk | Chungcheongbuk-do | 2013 | Cheongju International Airport | Automobile components, tourism |
| East Coast | Donghae Gangwon-do | 2013 | YangYang International Airport, Donghae Port | Logistics, tourism and IT components |
| Gwangju | Gwangju | 2021 | Gwangju Airport | AI and smart technology |
| Ulsan | Ulsan | 2021 | Ulsan Airport, Ulsan Port | Hydrogen Industry |
WHAT ARE THE INVESTMENT ADVANTAGES FOR BUSINESSES IN SOUTH KOREA FREE ECONOMIC ZONE FOR EACH TERRITORY?
Each territory of the South Korea Free Economic Zone provides different investment advantages. This is to ensure various types of business can flourish in their respective sectors. A summary of the advantages can be seen below.
Incheon
- It is easy to obtain new opportunities for the company using growth engines such as Semiconductor, Display, and Automotive.
- Skilled labour is simple to get by.
Busan-Jinhae
- A world-class logistical hub that connects major seaports across the world.
- A stunning natural setting and resort and recreational amenities make this a popular place to reside in.
Gwangyang
- New Business Expansion Opportunities based on proximity to raw materials and high-tech manufacturing industrial locations.
- The mix of natural environment and urban infrastructure forms the basis for corporate development.
Gyeonggi
- It is easy to obtain business opportunities using growth engines such as Semiconductor, Display, and Automotive.
- Hyundai Mobis, IKEA KOREA, ESR Kendall Square, and Sumifru Korea are global companies.
Daegu/Gyeongbuk
- Daegu Gyeongbuk Free Economic Zone, located in the industrial and economic centre, has developed an Industrial Cluster that includes IT, electricity, electronics, automotive, shipbuilding, petrochemical, and chemical sectors within a one-hour drive.
- The location is near to China, Japan, and Russia, and it has access to significant cities across the world with a combined population of more than one million people within a four-hour flying span.
Chungbuk
- A combination of the top six government-funded healthcare and medical agencies, biomedical facilities, the high-tech medical complex, major research support facilities for the high-tech medical complex, and other biomedical infrastructure components.
- The ideal location for multinational firms engaged in research & development and product manufacture.
East Coast
- Tax breaks as incentives (customs: 100% for 5 years).
- Monetary assistance (FDI ratio, 30% or more).
Gwangju
- The AI convergence complex will include an ecosystem specialised in artificial intelligence convergence, enhancing the region’s three key sectors’ innovation and technological competitiveness.
- Korea’s largest national data centre will be built.
Ulsan
- With the Ulsan National Institute for Science and Technology (UNIST), a world-renowned institute for hydrogen-related research and development, Ulsan possesses outstanding people resources for the R&D industry.
- The authority provides incentives such as tax breaks, cash grants, and deregulation to accommodate foreign-invested enterprises.
If you would like to know more about the investment advantages for businesses that operate in each of the territories of the South Korea Free Economic Zone, or you are interested in setting up a company in South Korea, contact Relin Consultants. We are always looking forward to assist you.
WHAT ARE THE INCENTIVES FOR BUSINESSES THAT OPERATE IN THE SOUTH KOREA FREE ECONOMIC ZONE?
Many rules are relaxed in these zones to increase freedom and provide businesses control over their commercial activities. These zones also serve as special economic zones, offering a variety of investment opportunities in order to attract international investment aggressively. Among the incentives that are offered can be seen below.
| Category | Tax | Period and Rates of Tax Reduction or Exemption | Requirements for Tax Deductions or Exemptions | |
| Foreign-Invested Company in Free Economic Zone | National Tax | Tariff | 5 years from the import notification date | Capital goods that are imported |
| Local Tax | Acquisition Tax | Up to 15 years under ordinances: 100% | Manufacturing: At least USD 10 million Tourism: At least USD 10 millionLogistics: At least USD 5 millionMedical institution: At least USD 5 millionR&D: At least 1 million | |
| Property Tax | ||||
| Financial Support | Cash Grants | a) Decide by negotiation, but support at least 5% of FDI.b) Establishment fee for factory and research facility, employment, education and training subsidyRequirements: - Foreign-invested enterprises with at least a 30% foreign investment ratio c) Decide after reviewing engagement in new growth engine industries, technology transfer effects, and job creation. | ||
| Infrastructure Support | Road, train, airport, port, sewage, waste disposal, and other modes of transportation.Requirements: -50% government funding; 100% if agreed by the Free Economic Zone Committee | |||
| Foreign education,Research institution Support | Expenses for international education and research institutes' preparation, start-up, and construction.Requirements: -Meet assessment criteria such as reputation and contribution to the growth of Korea. | |||
| Rental Fees | a) For 50 years, lease government-owned land (renewable for an additional 50 years)b) The rental cost is 10% of the site value. | |||
| Other support | Relaxed labour regulations | a) Exemption from implementing required terms when hiring persons’ subject to employment protection, such as people with disabilities, men of national merit, and elders, among others.b) Exclusion from restrictions governing the duration and obligations of sent personnel, as well as unpaid leave, etc. | ||
| Free foreign exchange transaction | Clearance for a USD 10,000 or less direct current transaction. | |||
| Exclusion of application of the Seoul Metropolitan Area Reorganization Planning Act. | a)Exclusion from restrictions on activities in overconcentration control regions and growth management regions stipulated in theSeoul Metropolitan Area Readjustment Planning Act. b) Exemption from overconcentration charges, total quantity limitation on population-concentrating infrastructures, and regulation of large-scale development plans | |||
Do note the above incentives varies from time to time.
FAQs
South Korea has what kind of economy?
South Korea has a mixed economic system that combines individual freedom with centralised economic planning and government regulation. South Korea is a signatory to the Asia-Pacific Economic Cooperation (APEC) and the Asia-Pacific Trade Agreement (APTA).
Is South Korea a developed economy?
At its 68th Trade and Development Board meeting on July 2, the United Nations Conference on Trade and Development (UNCTAD) voted to categorise South Korea as a developed and advanced economy.
Why is South Korea economically successful?
South Korea’s demanding education system, as well as the development of a highly motivated and educated populace, have played a vital role in the country’s high-tech boom and quick economic advancement.
Which nations and South Korea have free trade agreements?
ASEAN, Australia, Canada, Chile, China, Colombia, India, New Zealand, Peru, Singapore, the European Union, the European Free Trade Association (Norway, Switzerland, Iceland, and Liechtenstein), the United States, Turkey, and Vietnam are among the countries with which Korea has free trade agreements.
How many free zones are there?
There are eight free economic zones in Korea. They are: Incheon FEZ, Busan-Jinhae FEZ, Gwangyang Bay Area FEZ, Yellow Sea FEZ, Daegu-Gyeongbuk FEZ, East Coast FEZ, Chungbuk FEZ and Saemangeum-Gunsan FEZ.
What is a free economic zone in Korea?
By enhancing the living and business environments for foreigners in South Korea, Korea Free Economic Zones are intended to foster balanced regional development and strengthen national competition for firms.
Does South Korea have free trade zones?
Yes, South Korea has free trade zones (FTZs). FTZs are designated areas where foreign goods can be imported, stored, processed, and re-exported without being subject to the same tariffs and regulations that apply to goods entering the country through other ports of entry.
As of 2021, there are 8 free trade zones in South Korea, which are located in Incheon, Busan, Gwangyang Bay, Yellow Sea, Daegu-Gyeongbuk, Hwaseong, Jeju, and Pohang. These FTZs offer a range of benefits to businesses, including reduced tariffs, simplified customs procedures, and streamlined regulations.
South Korea’s free trade zones have played a significant role in promoting trade and investment, particularly with its major trading partners such as China, Japan, and the United States. They have also helped to attract foreign investment and stimulate economic growth in the country.
What are the four special economic zones?
The term “Special Economic Zone” (SEZ) is used to describe a type of designated area in a country where business and trade laws and regulations are different from the rest of the country. The goal of an SEZ is typically to attract foreign investment, create jobs, and promote economic growth. There are many SEZs around the world, but the term “Four Special Economic Zones” usually refers to the following four SEZs in China:
Shenzhen SEZ: Established in 1980, Shenzhen SEZ was the first of the four SEZs in China. It is located in Guangdong Province, adjacent to Hong Kong, and is known for its electronics and manufacturing industries.
Zhuhai SEZ: Established in 1980, Zhuhai SEZ is located in Guangdong Province, adjacent to Macau, and is focused on high-tech industries and tourism.
Shantou SEZ: Established in 1981, Shantou SEZ is located in Guangdong Province and is focused on textiles, garments, and electronics.
Xiamen SEZ: Established in 1980, Xiamen SEZ is located in Fujian Province and is focused on high-tech industries, logistics, and trade.
These four SEZs played a critical role in China’s economic reforms and opening up to the world. They have been instrumental in attracting foreign investment, promoting exports, and creating jobs, and have served as models for the establishment of SEZs in other countries.
Which countries have free zones?
Many countries around the world have designated free zones or free trade zones (FTZs) to attract foreign investment, stimulate trade, and promote economic growth. Some of the countries with free zones include:
United Arab Emirates (UAE): The UAE has several free zones, including Dubai Airport Free Zone, Dubai Media City, and Dubai Internet City. These zones offer tax exemptions, simplified regulations, and other incentives to businesses operating within them.
Singapore: Singapore has several free zones, including the Jurong Port Free Zone and the Changi Airport Free Zone. These zones offer tax exemptions, simplified regulations, and other incentives to businesses operating within them.
China: China has several special economic zones, including Shenzhen, Zhuhai, Shantou, and Xiamen. These zones offer tax exemptions, simplified regulations, and other incentives to businesses operating within them.
Malaysia: Malaysia has several free zones, including the Port Klang Free Zone and the Kulim Hi-Tech Park. These zones offer tax exemptions, simplified regulations, and other incentives to businesses operating within them.
Jordan: Jordan has several free zones, including the Aqaba Special Economic Zone and the Jordan Industrial Estates Corporation. These zones offer tax exemptions, simplified regulations, and other incentives to businesses operating within them.
Panama: Panama has several free zones, including the Colon Free Zone and the Panama Pacifico Special Economic Area. These zones offer tax exemptions, simplified regulations, and other incentives to businesses operating within them.
Turkey: Turkey has several free zones, including the Istanbul Ataturk Airport Free Zone and the Mersin Free Zone. These zones offer tax exemptions, simplified regulations, and other incentives to businesses operating within them.
These are just a few examples of countries with free zones. Many other countries around the world also have designated free zones or FTZs to attract investment and promote economic growth.
Which country has the most free zones?
The United Arab Emirates (UAE) has the most free zones of any country in the world. As of 2023, the UAE has more than 45 free zones, which are spread across different emirates, including Dubai, Abu Dhabi, Sharjah, Ajman, Fujairah, Umm Al Quwain, and Ras Al Khaimah.
The free zones in the UAE offer a range of benefits to businesses, including tax exemptions, simplified regulations, and other incentives. Many of the free zones in the UAE are focused on specific industries, such as technology, media, logistics, and healthcare, among others.
Some of the most well-known free zones in the UAE include Dubai Airport Free Zone, Dubai Media City, Dubai Internet City, Dubai Healthcare City, and Abu Dhabi Global Market, among others. These free zones have played a significant role in attracting foreign investment, promoting exports, and driving economic growth in the UAE.
