In an effort to vitalize the use of industrial complex, the Enforcement Decree of the Industrial Cluster Development and Factory Establishment Act (the “Enforcement Decree”) was promulgated on May 12, 2020 and took effect immediately. Notably, the Enforcement Decree lifted the entry barrier to a number of businesses which hitherto were not permitted in an industrial complex.
On August 13, 2020, the Industrial Complex Management Guidelines (the “Guidelines”) were amended to detail the conditions on which special zones can be designated and managed. Special zones will be open to all businesses permitted into industrial facilities areas under the Enforcement Decree (Notification 2020-129 issued by the Ministry of Trade, Industry and Energy (the “MOTIE”)).
Expanded Scope of Businesses Permitted in an Industrial Complex
The Enforcement Decree expanded the scope of businesses that may enter an industrial complex as follows:
Special Zones in Industrial Facilities Areas: Before the Enforcement Decree was promulgated, only those few named businesses were allowed within an industrial complex at the exclusion of all others. The Enforcement Decree overturned the restriction by opening the door to all businesses in principle, except for the few excluded ones (e.g., businesses engaged in speculative practices and housing business). The Guidelines designated special zones in industrial facilities areas (“Special Zones”) where all such permitted businesses will be allowed.
Areas Other Than Special Zones Within an Industrial Complex: Even in areas other than Special Zones, businesses may enter if designated by a MOTIE public notification if necessary to develop or promote new businesses or the fusion of businesses.
Designation and Management of Special Zones
The amended Guidelines were intended to provide specific directions in terms of managing Special Zones within industrial facilities areas. Every year from March 1 to March 31 starting next year (as currently expected), a designation application for a Special Zone can be submitted to an industrial complex management authority, following which the industrial complex management authority will review the application and decide whether to allow the designation. The industrial complex management authority, however, reserves the right to designate Special Zones without such application or review if it deems the designation is necessary to further the purposes of the industrial complex, vitalize local economy, promote the entry of new businesses or fusion of businesses within the complex, or otherwise benefit the national economy. Special Zones are designated by either establishing new industrial complex management plans or modifying existing ones, subject to the following requirements.
The total areas of Special Zones may not exceed 30% of industrial facilities areas set out in the industrial complex management plan.
Special Zones must make up at least 10% of the industrial facilities areas or be at least 50,000m2, unless situated within a national industrial complex, in which case it must make up at least 5% of the industrial facilities areas or be at least 300,000m2.
All land making up the minimum areas of Special Zones set out in number 2 of this list must be adjacent to each other (including where separated by a road or a canal).
All owners of industrial land to be designated as the Special Zones must consent to the designation.
Now that more businesses will be permitted into Special Zones under the Enforcement Decree and the amended Guidelines, we expect an increase in the use of industrial complexes in Korea as well as a synergy created by the diversification of businesses.