Reasons to Locate Your Food Plant in South Korea

A new government-supported food zone has plenty of incentives, assets and a central location to woo Western processors.

By Dave Fusaro, Editor in Chief

Northeast Asia is an attractive and growing market for food and beverage processors throughout the world. But many companies would like to set up shop in this region without going through China. South Korea has a suggestion.

The South Korean government in 2007 decided food and beverage is a key industry to attract. Leveraging its geographic location with local agricultural resources, the Ministry of Agriculture, Food and Rural Affairs created the Korea National Food Cluster, a food-optimized industrial park nicknamed Foodpolis.

It's the first government-supported food industrial complex in Northeast Asia. The government devoted to it 2.3 million square meters (568 acres) of land in Iksan City, North Jeolla Province, about 100 miles south of Seoul, as well as universities with food research experience plus generous financial incentives. The government has earmarked $474 million for the project.

South Korea's President Park Geun-hye presided at the groundbreaking ceremony Nov. 24, 2014, and the government invited Food Processing to tour the area in October 2015. An aggressive marketing campaign starts this year to fill Foodpolis with food & beverage processors from around the world.

Its resources are compelling:

  • Two hours flying time to 50 major cities with populations of 1.5 million people each – a total of 1.5 billion people in close proximity.
  • An international airport (Seoul's Incheon) that offers same-day travel to China, Hong Kong and Japan, and a smaller airport (Gunsan) very close by.
  • Major Korean rail, ship and highway connections.
  • Seoul, the Korean capital and by some counts the world's second largest city, is two hours away by car and half that by bullet train.
  • Access to South Korea, itself, which in 2014 became the world's sixth biggest trading partner. South Korea has a growing appetite for processed food as well as some unique tastes and technologies, applicable throughout Asia, that might best be learned on Korean soil.

The Korean government has signed nine free trade agreements (FTAs) with more than 50 countries in the European Union, Assn. of Southeast Asian Nations (ASEAN) and the U.S., and these countries collectively account for 61 percent of global GDP, 46.2 percent of global trade and 39.7 percent of the global population. Those FTAs should be of use to any company locating in Foodpolis.

"The food industry is an emerging growth engine for Korea as many traditional manufacturing industries are increasingly losing vitality," Lee Jun-won, deputy minister for food industry policy at the Ministry of Agriculture, Food and Rural Affairs, said during our visit in October. "Foodpolis will play a crucial role. We will complete the construction of the cluster by the end of 2016, during which Korean and non-Korean companies begin operations."

Plans call for six government-sponsored support facilities:

  • Food Quality & Safety Center
  • Functional Food Evaluation Center
  • Food Packaging Center
  • Pilot Plants
  • Food Venture Center (rental plants to help small and middle sized companies with R&D activities)
  • Agency for Korea National Food Cluster – on-site to provide whatever other support is needed.

While those will need to be built as tenants move in, the government already has created temporary R&D support centers at Wonkwang University (for functional food evaluation) and Chonbuk University Iksan Campus (for food quality & safety and packaging). Those will be moved into Foodpolis as the site is developed. There also is a number of vocational schools and other universities nearby, providing a pool of highly educated students for work and research.

Government incentives include:

  • Corporate income tax exemption for 5 years (100 percent for three years, 50 percent for following two years)
  • 100 percent free from local taxes for 15 years (100 percent exemption on acquisition tax and property tax for 15 years)
  • No tariffs on capital goods imports for five years
  • "Exceptionally low rent environment" (land leases are free or at 75 percent reduction for 50 years.

Why Korea? The Korean government has a history of identifying, subsidizing and nurturing industrial segments that it deems strategic. It did that with cars and consumer electronics. To have the government make a similar commitment to food says a lot.

Korea itself is "an excellent test bed" for regional and global markets, according to the Ministry of Agriculture, Food and Rural Affairs. The country has a large population, a trend-conscious and demanding consumer base, westernized lifestyle and a world-class information technology infrastructure, enabling processors to adjust to consumer demands there before targeting other Asian markets.

Any North American food and beverage company with a global view knows Asian consumers are growing in numbers, per capita income, desire for processed foods and interest in foods from around the world.

So far, Korean companies Harim Corp., AZ System, Wonkwang Pharmacy, Joun Health and BTC have signed leases. Six foreign companies have filed paperwork to facilitate a move into Foodpolis, including Hampton Grains of the U.S. and Czech brewer Gold of Prague. In all, there are 113 memoranda of understanding with 52 international companies from 16 different countries and 61 domestic companies.

Foodpolis was inspired by similar R&D and manufacturing clusters around the world, including Food Valley in the Netherlands. If you're interested in learning more about this development, see website eng.foodpolis.kr or call +82 2 507 8257.

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