SEOUL, April 19 (UPI) -- Can South Korea be another Singapore? The Asian country, once known as the Hermit Kingdom for insularity and xenophobia, is preparing to step into the global limelight by pushing for an ambitious bid to transform itself into the most popular destination of business travelers in the Asia-Pacific region.
The South Korean government recently unveiled a master plan to develop the country into a new business hub in Asia, surpassing Singapore and Hong Kong.
But its hopes of playing a new economic role may face many hurdles as cynics played down the 20-year-project citing lacks of merits and critics blasted it as a political scheme for upcoming crucial elections.
Under the blueprint, a total of 130 square kilometers of land on the country's western coast, just west of Seoul, will be designated as a special economic zone in which foreign enterprises would be given a bevy of benefits and incentives.
This is the first time that South Korea has created a special economic zone for foreign investors. The development plan, which will be completed by 2020, is modeled after Singapore, which has been serving as a hub for international trade and business by linking Asia to Europe, the Americas and other parts of the globe.
Government officials described the project as a "grand strategy" for economic survival at a time when South Korea is facing grave challenges from neighboring China, an emerging economic powerhouse, as well as Japan, the world's second-largest economy.
"Considering China is becoming a black hole sucking up the regional economy, Korea could be oppressed by China and Japan if it fails to find a new economic role in Northeast Asia," said Jin Nyum who masterminded the plan before his resignation as the finance and economy minister earlier this week.
Many economists and business leaders here welcomed the project as an alternative development model for South Korea that lacks in natural resources. "The project is necessary for Korea sandwiched between two big countries," said Kim Sung-shik, an economist at private LG Economic Research Institute.
Ahn Choong-yong, the president of the Korea Institute for International Economic Policy, a government-run think tank, also said the special economic zone would help the South Korean economy keep an upward momentum. "Korea has pivotal position in Northeast Asia as it is located between the two giant markets of Japan and China," he said.
"Its geographical position would benefit Korea," a ministry official said. Seoul, which is within 2 hours' flying time of Beijing, Shanghai and Tokyo, can serve as a bridge among Korea, Japan and China, which together produce 20 percent of the world's gross domestic product, he said.
In a news release, the Finance and Economy Ministry said foreign companies doing business in the special economic zone would receive various benefits such as a reduction in corporate tax. Residential complexes and accommodation facilities, including schools, hospitals, pharmacies and casinos, will be constructed exclusively for foreign businessmen and their families.
English, along with Korean, will be declared the official language of the zone and the government will issue its paperwork in both Korean and English. People will be able to use major international currencies such as U.S. dollars, Japanese yen and EU euros in the area.
In an effort to maximize its geographical merits, South Korea also plans to revive the Silk Road by linking itself to China and Russia. The country has already agreed to reconnect a railway line across the heavily fortified border with rival North Korea. President Kim Dae-jung calls the railway "Iron Silk Road," saying it will give the country a link to Russia's trans-Siberian railway, through which South Korea can deliver products to Europe.
But not a few analysts cast doubt on the feasibility of the project, saying it was likely motivated by political purpose to cope with the local elections in June and a presidential election in December.
"The idea of Northeast Asian business hub is nothing new and the project can be considered as aimed at winning votes," said Lee Eon-oh at private Samsung Economic Research Institute.
The government has yet to estimate how much budget will need for the project and how to finance it. "I am doubtful about the project," an economic professor said on condition of anonymity.
In 1998, President Kim Dae-jung's government scraped a plan to develop Incheon, a western port city, into an international free trade city. "This blueprint also can be wasted after elections," he said.
Some analysts express concerns that the project would aggravate the concentration of economic means and populations in Seoul and its sprawling metropolitan areas. The government has maintained a decentralization policy over the past two decades to achieve balanced regional development.
"The new development plan means abandoning of the decentralization policy," said Hwang Hui-yon, professor at Chungbuk University located in far south of Seoul.
Foreign businessmen advise South Korea to take more drastic measures for foreign investors and businessmen. The American Chamber of Commerce in Seoul has called for reduction of the ceiling on the personal income tax rate from 36 percent to 20 percent to compete with Hong Kong (17 percent) and Singapore (28 percent). But the government has turned down the demand.
Analysts say the success of the project will depend on how many foreign businesses South Korea will attract to the planned special zone. In an effort to entice multinational companies to establish its regional headquarters in the proposed zone, the government would "significantly" ease regulations on foreign, officials said.
The government will also ease foreign exchange transactions, including more relaxed disclosure rules, to make the country's currency market similar to those of Singapore or Hong Kong.
"We hope these measures will help increase foreign direct investment here and achieve a goal of becoming the business hub of Asia," said the international finance chief at the finance and economy ministry.