Understanding Industrial Locations

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Understanding Industrial Locations

Understanding Industrial Locations

The forms and business category of the relevant company should be considered when selecting the location of the foreign-invested company. State-managed industrial complexes and general industrial complexes are planned sites in which major customers and related facilities are clustered. It is relatively easier to secure a factory site there, and they offer optimum conditions for operating a business. There are separate sites developed to attract foreign direct investment. Foreign-invested businesses may preferentially consider operating their business in foreign investment regions, free economic zones, and free trade zones that have been developed to attract foreign direct investment. They may also consider other planned locations or individual locations equipped with advantageous conditions depending on the business categories they plan to operate.

Types of locations that may be considered by foreign investors

Industrial locations may be divided into planned and individual locations. For example, in case of a manufacturing business that is most commonly considered in selecting industrial locations, a production facility should be put up. The factory establishment and permit/licensing procedures vary by location. When a factory is established on an individual location, the permit or licensing procedure is complicated. Note, however, that the factory establishment period and permit/licensing procedures are simplified in industrial parks or other planned locations that have been developed to facilitate the procedure for permitting/licensing manufacturing businesses. When a candidate location is found, it is necessary to examine the restrictions on land use as to factory establishment or construction and environmental regulations as follows.

Factory Establishment Procedures for Planned Location and Individual Location

※ Source: Korea Industrial Complex Corporation www.kicox.or.kr (Compilation of Industrial Location 2020)

Planned Location and Individual Location

Korea has been promoting industrial location policies to secure areas for production and operation, select quality locations, and recommend factory establishment in industrial complexes for the sake of systematic management. However, if it is unsuitable to establish a factory in an industrial complex due to reasons such as business conditions and land prices, it is possible to purchase a separate site and obtain necessary licenses and permits to establish a factory.

Planned Location (Industrial Complex)

An industrial complex is an area designated and developed under a comprehensive plan to collectively set up industrial facilities and support facilities for employees and users. Assistance is provided to companies wishing to secure factory sites and find partner companies and human resources through clustering and the smooth supply of raw materials and parts. In recent years, industrial complexes have striven to establish industry-academia linkages and connect various support facilities.

Industrial complexes differ by location depending on the purpose of construction, while there are differences in the way industries are managed from location to location. Even within the same manufacturing industry, different business types can be located in different locations, while regulations for operation and management may differ by complex.

For example, despite being designated as an industrial complex, a foreign investment zone (industrial complex-type) and a national food cluster can exist within according to a "basic management plan" for each complex. A free trade zone, the Saemangeum zone, and INNOPOLIS are operated according to respective regulations, for example. Occupancy requirements for free trade zones are defined in the Act on Designation and Management of Free Trade Zones.

In the same context, industrial complexes cannot accommodate all location types. Specialpurpose regions are redundantly or individually designated, or industrial parks are designated in a special-purpose region. Representative examples are foreign investment zones and free economic and trade zones, which are industrial locations developed to attract foreign direct investment.

Individual Location

Individual location refers to any location except one within a pre-designated and developed location. In the event that a company purchases or leases land outside of an industrial complex or in a building in an urban or residential area, a factory can be established via acquisition of authorizations and permissions for altering usage. When a company selects an individual location for manufacturing purposes, it is possible to occupy the location as a factory or Type II neighborhood lifestyle facilities (manufacturing establishment) under the "Enforcement Decree of the Building Act." However, since the whole property is designated as a "special purpose area" under the "National Land Planning and Utilization Act" and thus can be restricted from area to area, ascertaining the building use as well as restrictions as prescribed by the Act and local government policy should take precedence for new construction. Areas restricted for factory establishment can be altered to special purpose areas through an alteration of the "urban or county management plan," although approval from an urban planning committee is required.

※ Refer to "Standards for Factory Location" or Enforcement Decree of the National Land Planning and Utilization Act about the type of business by usage and location.

Pros and Cons of Industrial Complexes and Individual Locations

Individual Location : Status, Industrial Complex, Individual Location
Status	Industrial Complex	Individual Location
Pros	Favorable SOC conditions including infrastructure Simplified procedures for factory establishment permission Ease of exchanging information and technology between corporations due to close proximity Reduction of distribution costs Government support is easier compared to individual locations	Affordable land acquisition Available to occupy at the desired time and place Potential to locate near market Small-size location available Ease of sale and disposal of factory site
Cons	Simplified procedures for factory establishment, although there are restrictions on sale and disposal of the site	Complicated authorization and permission procedures for factory establishment Fewer incentives including tax exemption and financial support compared to industrial complex Burden of installation of necessary infrastructure including road and water supplies falls on the company Difficult to control environmental factors near factory