The government will designate Incheon International Airport's approximately 2.1 square kilometer logistics and cargo terminal areas as a free trade zone in a bid to develop Incheon into a logistics hub of Northeast Asia.
Companies operating in the zone, scheduled to open in the first half of 2006, will be entitled to a variety of tax breaks including no customs and exemption from corporate and income taxes, the Ministry of Construction and Transportation said.
"This will spur domestic and foreign companies to increase investments to a significant extent," the ministry said.
Manufacturing, logistics and retail and wholesale companies will be allowed to do business in the one-square-kilometer airport logistics complex, while local and foreign airlines and global logistics firms are to operate in the remaining 1.1-square-kilometer cargo terminal area.
Among benefits that apply both to Korean and overseas businesses, the government will exempt customs when companies export locally produced goods or import overseas facility equipment.
Moreover, foreign manufacturing and logistics companies, which invest more than $10 million and $5 million in the free trade zone, respectively, will be exempt from corporate, income, property and land taxes for the first three years and will receive a 50-percent cut for two years.
If overseas manufacturing companies invest more than $30 million and logistics firms spend more than $10 million, they will receive a tax break for the first five years and a 50-percent reduction for two years.
Three foreign and eight Korean companies have already decided to do business in the airport logistics complex, while two new global logistics companies - DHL and TNT - have agreed to enter the cargo terminal area where local and foreign airlines are already operating.
The German-based Schenker, one of the world's leading providers of integrated logistics services, has agreed to invest 8.4 billion won over some 9,240 square meters in the airport logistics center. Delivery giant DHL has inked an agreement with the airport to invest 31 billion won to do business over 25,000 square meters inside the cargo terminal complex.
The government said it will expand the free trade region to cover a maximum 4 square kilometers by 2020. "Another 3 million tons of cargo, 30,000 new employees and 2 trillion won of added value will be created," the ministry said.
Incheon International Airport handled 2.13 million tons of international cargo in 2004, the world's third-largest after Hong Kong's Chet Lap Kok Airport and Japan's Narita Airport.