[New Year's Interview - Commissioner Kim Ki-young of the BJFEZ Authority]

"This is the BJFEZ with the Trifecta of Infrastructure, Excellent Companies, and Highly Qualified Manpower."

- Creating a Global Business Ecosystem Leads to a Mecca for Fostering Future New Industries

 

- Focusing on the role of Northeast Asia's largest global logistics center based on Tri-Port

- Leading the creation of a global high value-added logistics business belt connecting the 'Wasung, Bobae, Dudong, Ungcheon·Namsan, Ungdong' districts

- Driving the local economy through the clustering of high value-added industries such as coffee and secondary batteries in the distripark of Busan New Port

 

In a New Year's interview, Commissioner Kim Ki-young of the Busan-Jinhae Free Economic Zone Authority (photo) said, "This year marks the 20^th anniversary of the Authority's opening, and we will build a Busan-Jinhae Free Economic Zone(hereafter referred to as 'the BJFEZ') that looks ahead to the next 50 and 100 years based on the experience of the previous 20 years. If we have drawn a sketch to lay the foundation for the zone's next 100 years, we will materialize the sketch one step at a time starting this year and make it a mecca for fostering high-tech and new industries in the future."

As the eighth commissioner of the authority, Kim has been praised for his contributions to transforming the BJFEZ into the largest global logistics hub in Northeast Asia, making the zone a world-class global logistics business center.

The BJFEZ Authority has been working tirelessly to create a "business-friendly zone and a livable zone" over the past year. As a result, the BJFEZ has been awarded the highest grade of 'S' in the performance evaluation of nine free economic zones nationwide by the Ministry of Trade, Industry, and Energy for two consecutive years. The BJFEZ was recognized for leading Korea's Free Economic Zones in investment attraction, including achieving the highest performance in Foreign Direct Investment (FDI). This achievement is the result of attracting investment through bold deregulation efforts and a swift transformation to new growth engines, as the Southeast region's industrial structure shifts from machinery and manufacturing to services and high-value-added logistics in line with rapidly changing global market trends.

"When Gadeokdo New International Airport in 2029 and Jinhae New Port in 2040 are completed, the BJFEZ will be located at the center of a large-scale 'Tri-Port' with global air logistics infrastructure, a mega-port, and a land transportation hub," said Kim. "With its unique location, the BJFEZ will become the largest global logistics hub in Northeast Asia, sought after by the world."

 

◆ Leap to the Largest Logistics Hub in Northeast Asia Centered on the Global High-value-added Logistics Business Belt

The BJFEZ Authority has begun to solidify its position with a strategy that utilizes the strengths of the center of the global logistics hub. This year, the authority aims to create a new growth axis for the Korean economy by connecting the Wasung District and the neighboring areas of Bobae Complex, Dudong, Woongcheon·amsan, and Ungdong into a 'global high-value-added logistics business belt'. "To create a global high-value-added logistics business belt, we will need to establish a careful strategy to connect them organically," said Kim. "Based on the comprehensive plan for strategic industry development established last year, we will do our best to upgrade the structure of existing industries and make it a mecca for the birth of new industries such as medical and biotechnology through a dramatic shift in location policies. Last year, to solve the shortage of logistics land in the Wasung District and create high-value-added for the future, we added logistics to the existing manufacturing industry and transformed it into a structure that enables the convergence of industries. This transformation has enabled the district to become a global high-tech high value-added logistics hub capable of handling both overseas direct purchases and reverse direct purchases.” The authority aims to establish a global high-value-added logistics platform centered around the Global Advanced high value-added Logistics Center in the Wasung District. To this end, the BJFEZ Authority plans to focus on attracting Global Distribution Center(GDC), fostering the cold chain logistics industry, and providing a global business environment.

The first initiative is the GDC. A global distribution center is a facility designed to import and store overseas goods expected to be ordered by customers, and to re-export those goods when overseas customers place orders. Its importance has increased due to the growth of cross-border e-commerce, especially following the recent COVID-19 pandemic, with growing interest in using Busan Port. Overseas e-commerce companies can reduce logistics costs and processing time by delivering orders locally from overseas logistics centers instead of splitting and delivering parcels from their home countries. Domestic logistics companies can generate revenue from storage fees and work costs during the sorting, storage, and repackaging process by importing e-commerce goods in large quantities.

"We will make the BJFEZ an optimal international logistics investment destination to attract global logistics centers of leading e-commerce companies such as Amazon and Alibaba to Busan New Port Distripark, establishing the zone as the largest global e-commerce logistics hub in Northeast Asia," said Kim.

Second, the authority will focus on the cold chain market, a high-value-added logistics industry, based on the comprehensive plan for strategic industry development established last year. According to global market research firm Statista, the global cold chain market is expected to more than double over the next five years, from US$ 221 billion (KRW 237.923 trillion) in 2020 to US$ 585 billion (KRW 659.646 trillion) by 2026, with a compound annual growth rate of 18%. In Korea, the cold chain sector, which was estimated at 49 trillion won in 2018 compared to the 120 trillion won logistics industry, is expected to grow to 195 trillion won around 2028, after which the cold chain sector will surpass the logistics sector.

In line with this industry trend, the BJFEZ Authority plans to form a 'Cold Chain Alliance' in the first half of the year with the participation of companies, institutions, and experts in the cold chain field to foster a cold chain logistics industry optimized for free economic zones. "Cold chain is a system that maintains the quality and freshness of temperature-sensitive products such as fresh food and vaccines by keeping them at low temperatures, and the cold chain logistics market has grown rapidly as consumer awareness and preferences for quality and freshness have increased," said Kim. "The BJFEZ is a destination with an unlimited potential for global cold chain companies such as Dongwon Loex Co.,Ltd and Korea Superfreeze, and has unlimited potential for the development of the cold chain industry."

In addition, he said, "Cold chain is a field that is expected to create large-scale employment as well as high value-added in the logistics industry, and we will strive to intensively foster the products and services of related companies such as low-temperature distribution and frozen containers so that it will eventually lead to the attraction of global logistics companies." "In order to expand the port distripark, which is absolutely insufficient compared to the demand of these industries, we will promote the expansion of the free economic zone centered on the Busan New Port," he said, expressing his intention to expand the free economic zone and improve the distripark location policy.

Finally, the BJFEZ Authority aims to create a settlement environment for high-level human resources and provide a global business environment. The authority will also establish a research and development facility for high value-added logistics, which will be used to develop industrial sites and research directions. Kim also emphasized the future new industry ecosystem, the best educational environment, and excellent living conditions for the growth of the aforementioned industries. "As high-tech and new industries grow, high-quality jobs will be created and talented human resources will continue to flow in," he said. In preparation for this, the BJFEZ Authority is focusing its administrative power on attracting global-class international business facilities, foreign educational institutions, and research and development facilities to create high-quality settlement conditions for talented workers to stay.

 

◆ Gone are the Days of Simple Warehousing: Kim Emphasized the Creation Of High Value-dded

Kim emphasized the creation of high added value in the port distripark through the establishment of a one-stop service system where logistics, manufacturing, processing, and export are carried out simultaneously within the free economic zone. "Simple storage-oriented logistics services alone are not enough to expand the competitiveness and profitability of companies," he said. "We plan to foster the high value-added logistics industry, including logistics and manufacturing, logistics and IT, to help companies add value and make it a center for regional economic development."

The first step is the creation of a coffee cluster in the port's distripark. Busan Port is the gateway for about 96% of imported coffee beans. However, logistics companies that import green coffee beans in the port distripark cannot directly roast or process the beans for export. In the long term, significant steps are needed to improve regulations in the port distripark in order to add value to the industry.

However, there are a number of challenges that need to be addressed. In the case of coffee, for example, there are many issues that need to be resolved to improve regulations, such as proving the loss rate during the roasting process. Since last year, the authority has been working in various ways to lay the institutional and legal foundation for the coffee industry to create high value-added. "This year, we plan to commision research to select five strategic high value-added logistics items, including coffee. The first step will be to standardize the loss rate, and based on this, we will continue to consult with relevant ministries and agencies to resolve issues to improve regulations one by one."

"In order to create high added value for companies and create jobs in the region, it is essential to revitalize the high value-added logistics of the distripark," said Kim. "If it is possible to provide everything from logistics to processing, related industries will gather in the port distripark, and we expect the entire region to form a huge industrial cluster." He showed his strong commitment to creating industrial clusters such as secondary batteries, starting with the coffee cluster in the port distripark.

 

◆ Port distripark, Which Is Insufficient Compared to the Overflowing Logistics Demand, Is Overcome by Expanding the Free Economic Zone and Improving Regulations!

In order to solve the problem of the lack of land behind the new port of Busan Port compared to the overwhelming demand for logistics, the expansion and designation of free economic zones have been launched. "As the high value-added logistics industry is attracting attention for its unlimited growth potential, we will develop the West Container, Jinhae Ungdong, and South Container distripark complexes to attract excellent port logistics companies and anchor companies to explosively grow the high value-added logistics industry in the zone," said Kim.

The authority is also striving to revolutionize so-called 'killer regulations' that are hindering companies' competitiveness and economic growth based on the pain points of tenants. Last year, the authority led to increased investment in logistics centers (KRW 50 billion → KRW 164 billion) by relaxing the building height limit (40m → 60m), and in June last year, it achieved another regulatory reform by relaxing the area limit for port distripark complexes (150,000㎡ leasable area for each port tenant). The aforementioned expansion of industries in the Wasung District is another regulatory innovation that has attracted KRW 2 trillion in investment. "I believe that one of the main roles of the free economic zone authority is to attract investment from excellent companies and help them grow and contribute to the local economy," said Kim, adding, "It is necessary to make improvements to excessive regulations that act as obstacles to corporate investment and business promotion, and to achieve regulatory innovation."

The BJFEZ is becoming an optimal location for business activities thanks to its logistics linkages such as ports, airports, highways, and railways, as well as active regulatory innovation efforts for the growth of tenant companies, such as easing building height and area restrictions.

In conclusion, Commissioner Kim said, "The BJFEZ will be positioned as the best logistics business base with the trifecta of 'logistics infrastructure, excellent companies, and high-quality manpower.' We aim to make it the world's best high value-added logistics business hub by revitalizing the port distripark and expanding the high value-added logistics infrastructure, and attract future growth engine industries by building industrial clusters such as automobiles, machinery, and high-tech parts. We will provide a global-level business environment by creating an environment for foreigners to settle down and establishing a deregulated and advanced management system."