In 2008, South Korea’s Ministry of Agriculture, Food and Rural Affairs launched an ambitious project with the aim of cementing the nation’s footprint in the global food trade and most importantly, positioning the country as the import and export hub for food and beverage products in Northeast Asia.
The Korean National Food Cluster, also known as Foodpolis, is a US$500 million initiative located in Iksan, about two hours south of Seoul by train, that covers 3.6 million sq m of land space. Expected to be completed by 2016, the cluster plans to attract over 150 domestic and international food companies and 10 research centres, and will produce an output of US$15 billion annually and generate 22,000 new jobs.
According to the agency responsible for the promotion of the project, South Korea’s geographic location will provide companies with convenient access to the developed and lucrative markets of China and Japan.
Northeast Asia Gateway
The world’s food market is expected to hit US$6.4 trillion by 2020, up from US$5.1 trillion in 2010 and the Asia Pacific region is expected to constitute up to 40 percent of it. There are 1.5 billion people living in Northeast Asia and the region accounts for 20 percent of the GDP, 25 percent of the total population and 20 percent of the total trade volume of the world. By 2020, the region is expected to account for one-third of the world’s total trade volume.
Products can be delivered from Iksan to more than 60 megacities with a population of one million or more within a two-hour flight. On top of that, South Korea has concluded eight FTAs with 47 countries that collectively account for 61 percent of the global GDP, 46.2 percent of the global trade and 39.7 percent of the global population.
South Korea is the world’s eighth largest trading nation in 2012, with annual trade volume exceeding US$1 trillion for two consecutive years. In 2012, total exports from the country amounted to US$548 billion, while total imports were US$519 billion. According to the Korea International Trade Association, the country’s top trading partners in 2012 were China (US$1.966 trillion), Japan (US$949 billion), the US (US$943 billion) and the EU (US$910 billion).
Chris Devers, Miami, US
Chris, Shenzhen, China
The cluster will feature three dedicated research and development centres that will provide companies assistance and recommendations on food quality and safety, food functionality and food packaging. Beyond technical assistance, the Korean government will also offer a series of investment benefits and subsidies for participating companies.
Foreign companies will receive 100 percent national tax (corporate tax and income tax) exemption for the first three years and 50 percent reduction for the following two years, 100 percent local taxes (acquisition tax, registration tax and property tax) exemption for 15 years and tariff exemption.
The concept of creating a food cluster is not something new. In recent years, there have been similar projects in Europe, such as the Danish Food Cluster and on a bigger scale, EU’s Food Cluster Initiative. According to the results released by the European Commission in 2011, the creation of such clusters is effective in generating innovations, sharing knowledge and creating new opportunities using the same resources that are available.
Kim Ji Hyun, team leader of the food quality and safety department of the project, said that although South Korea is quite advanced in food science and technology, many of the SMEs in the country are not utilising or aware of them. That is something that her team hopes to change by linking companies in the cluster with academic institutions.
“Based on the requirements of the companies, we can offer them recommendations and solutions,” she added.
Jung Jun Jae and Lee Jai Hong, manager and team leader of the food packaging team, explained that companies can make sure of the latest packaging technologies to ensure that their products stay fresh longer so that they can be exported to other markets.
Partnership With Companies
As of 2013, the food cluster has already signed MOUs with 88 companies, including 38 from overseas. Recently, it signed MOUs with nine Singaporean food manufacturers with product offerings such as soy sauces, rice noodles, kaya, barbecued meat and fish pastes.
William Tan, MD of Hock Lian Huat, said that due to South Korea’s stringent restrictions on imported animal products, the food cluster offers the opportunity for the company to manufacture its product in the country before distribution to other markets like China.
According to Cheong Zhaoyang, centre director of the North Asia & Pacific Group at IE Singapore, which facilitates overseas growth of Singapore-based companies and promotes international trade, the agency performed extensive suitability research before recommending any brand from setting foot in the country.
Frank Tsang, Hong Kong
“We ensure that there is no product overlap and that the products appeal to the local customers before making recommendations to companies,” he said. Recently, he paid a visit to the site of the food cluster to check on the progress of the construction work. “It is good to finally see something concrete. A few years ago, the area was just a piece of dirt.”
The completion of the project would coincide with the establishment of the ASEAN Economic Community (AEC). For manufacturers in Southeast Asia, this may be a good opportunity to expand their networks in both directions. It remains to be seen whether the AEC will offer direct competition to the cluster or whether they can complement each other to create an extensive trading and logistics network across Asia. The strong support and investment provided by the Korean government gives foreign companies plenty to leverage on, regardless.