Promoting the Lifting of Lease Restrictions and Allowing Land Sales in Free Trade Zones
Assemblyman Yoon Hanhong of the People Power Party on April 30 proposed a partial amendment to the Act on Designation and Operation of Free Trade Zones, which would allow the sale of land and factories within free trade zones that have so far been operated only on a lease basis.
Free trade zones, first introduced in 1970, have been operated exclusively through leasing up to the present day. As a result, tenant companies have been able to lease land for long periods at low rents; however, because they do not own the land, it has been difficult for them to make investment decisions such as expanding factories.
For example, the Masan Free Trade Zone, which was converted to a national industrial complex last year through legislative efforts by Assemblyman Yoon, was expected to attract additional investment from tenant companies due to the increased building-to-land ratio (from 70% to 80%). However, it is reportedly still left neglected and underdeveloped.
Recently, the limitations of the lease-only model have become increasingly apparent, including facility deterioration and loan restrictions due to lack of collateral. As a result, there have been ongoing calls for permitting land sales in order to revitalize free trade zones and boost corporate vitality.
In response, Assemblyman Yoon has prepared this amendment in consultation with the Ministry of Trade, Industry and Energy and other relevant agencies. The amendment contains comprehensive improvements to the free trade zone system, aiming to promote autonomous corporate investment and attract high value-added industries.
The most significant change is the allowance of land and factory sales within free trade zones. Until now, the lease-only system has limited long-term facility investment and the ability to provide collateral. If sales become possible, the investment stability and asset utilization of companies are expected to improve significantly.
Additionally, new requirements such as mandatory tenant contracts and restrictions on property disposition have been introduced to curb speculative demand and ensure supply is focused on genuine business needs. The amendment also reportedly includes measures to support tenant companies’ digital transformation and transition to high value-added operations.
Assemblyman Yoon stated, "This amendment focuses on creating jobs, revitalizing the local economy, and transforming free trade zones into advanced industrial bases. By boosting investment sentiment among tenant companies and encouraging the entry of new businesses, it will serve as an opportunity to turn stagnant free trade zones, suffering from outdated facilities and sluggish investment, into hubs for high value-added industries."
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