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South Korea Building National Food Cluster Around New Food Safety Center

Two hours south of Seoul by comfortable and quiet train ride is Iksan City, where the Korea National Food Cluster is being built just east of town. JD Kim, assistant manager for the investment promotion team of the agency for the project also known as “Foodpolis,” stays busy running tours back and forth between the development site and Iksan City Hall.

His passengers are coming from around the world, mostly from the food industry, academia and foreign governments. They come to Iksan not only to kick the dirt upon which Foodpolis will rise, but to learn more about what might be a huge business opportunity. South Korea has already invested more than $500 million in the idea, which it has been working on since 2007.

Meeting with San-Jai Lee, director general of the Foodpolis promotion assistance agency, inside a chilly Iksan City Hall office quickly warmed by the flames around a large gas-heated teapot, visitors learn that road and utility construction is about to get under way on the nearly 900-acre site that is to become the center of Northeast Asia’s food market.

At the center of Foodpolis will be three research and development centers: one for food packaging, one to evaluate food functionality, and the third, which will be the centerpiece – a new national center for food quality and food safety. The R&D centers will give food companies operating out of Foodpolis a whole package of one-stop services.

For a project that has yet to rise out of the ground, Foodpolis is generating an amazing amount of interest. After meetings with Lee, 88 companies have signed agreements to explore development at Foodpolis.

Among the most recent to sign on is Netherlands-based TNO Nutrition and Food Research Institute. It plans to establish an Asian headquarters or research center in the food cluster by 2015. Other Foodpolis enlistments already include 23 Asian companies, including nine from China.

Lee says the goal is to attract 160 domestic and international food companies and research institutes to Foodpolis. The country is making the investment in the project both to help its small- and medium-sized food companies find their legs in the export market and to expand South Korea’s exports.

In making its food cluster move now, South Korea is offering both Japan and China a timely option.

While a fading memory in the Western hemisphere, the March 11, 2011, earthquake that triggered a tsunami that heavily damaged Japan’s six-reactor Fukushima plant has remained in Asia’s news ever since. Cooling systems in the Fukushima reactors were knocked out, leading to meltdowns and the release of radioactive water. These releases have created public doubts about the safety of fish and produce from the region in and beyond Japan.

China’s food safety mishaps have also stirred doubts among its own consumers and have certainly caused its exports to be shunned in outside markets. Foodpolis offers food companies from Japan and China the possibility of sourcing both product and process outside of the two countries at a location generally viewed as having the best food safety record in northeast Asia.

When a prospect is interested in Foodpolis, whether they’re from China, Japan or elsewhere around the world, South Korean executives are able to reach into a goodie bag of incentives. Foodpolis is in a Foreign Investment Zone, offering companies that locate there a 100-percent exemption from South Korea’s corporate income tax for three years, with a 50-percent reduction for two additional years.

Local taxes, including those for acquisition and registration and property taxes, can be waived for 15 years. The tariff on capital goods raised from acquisition of new stocks is also offered an exemption. Land leases will be reduced by 50 percent, or may possibly be provided without charge for periods of 50 to 100 years.

Iksan and the surrounding Jeollabuk-do Province are Foodpolis sponsors, along with the South Korea Ministry of Agriculture, Food and Rural Affairs. The two local governments also have incentives to offer, including 5-percent investment bonuses and up to $600,000 each in employment and education subsidies.

Lee said the Foodpolis location was chosen through a competitive process, and Iksan/Jeollabuk-do emerged as the winner. Now, if it all comes together, the region known for its rail, air, and seaport access, stands ready to benefit from the 23,000 jobs and the $4 billion in added gross national product that South Korea expects will follow.

(Editor’s Note: Dan Flynn recently visited South Korea as a guest of Foodpolis, the National Food Cluster.)

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