Thomas White Global Investing
Green Reports

September 23, 2009

The Green Report


South Korea Provides Boost to Green Projects
South Korea Green Projects

The sun was just setting on the island, bathing its bogs and trees in a golden light. All around there was a serene silence, punctuated by the tweeting of birds and the buzzing of insects. Located around 35 miles away from Seoul, South Korea’s capital, Songdo was once nestled on this quiet and sleepy island. Eight years later, the scene is different. Buzzing with activity, the island has been transformed into a trendy urban center and a developing eco-city.

Known as New Songdo City, the $35 billion metropolis spans 1,500 acres, making it one of the largest private real estate ventures in the world. With 40% of the work completed, the first phase of the complex opened in August 2009, replete with a sprawling park, hotel, apartments and a convention center. The city is slated to be completed in 2014, and is designed to be a trade hub linking financial giants Shanghai and Tokyo nearby.

But what makes New Songdo most attractive is that it is being developed as a sustainable city with more than 40% green space, including a $220 million park spanning 100 acres. It incorporates around 16 miles of bicycling lanes, is stocked with charging stations for electric vehicles and is fitted with a waste collection system that eliminates the need for trash trucks, apart from a host of other features.

In January 2009, South Korea launched its $38 billion economic stimulus package, with over 80% of the total earmarked for green investment. Spurred by the United Nations Environment Program (UNEP), which had urged governments to increase spending in the green sector, the initiative was further expanded into a ‘Green Growth Plan’ or ‘Green New Deal,’ worth $83.6 billion and spanning five years. Initially, the UNEP had called for an investment amounting to 1% of the South Korea’s GDP, but the country’s ambitious plan doubled the investment. South Korea’s aim is to become one of the top seven green economic powers by 2020; it is believed this goal that can be achieved by lowering the usage of fossil energy from the current 83% to 61% by 2030, while increasing the use of renewable energy by 11%. South Korea also seeks to boost its energy self-sufficiency rate from the current 4.2% to 40% by 2030.

The country seems to have taken its green projects quite seriously. Apart from Songdo, South Korea is expanding the Incheon Free Economic Zone encompassing the islands of KangHwa and OnJin-gun, to the northwest of Seoul. Conceived as a self-sufficient and sustainable development, the 300 sq km project is designed to be the epicenter for the green industry, manufacturing photovoltaic panels and wind turbines. The development will be home to biomass energy generation and use of hydrogen fuel cells. Upon completion, which is another ten to 15 years away, the eco-city will house 320,000 residents.

The global credit crunch considerably slowed down South Korea’s growth in 2008. Its economy tanked 3.4% year-on-year in the third quarter of 2008, the country’s worst performance in a decade, and foreign investments sank 40% in the first quarter of 2009. In an international conference in Seoul recently, World Bank Senior Vice President Justin Lin said that Asia’s fourth largest economy “should turn the current global slump into a golden opportunity to become one of the world’s leading economies by promoting renewable energy.”

This is where the eco-cities in Songdo and the Incheon Free Economic Zone come into the picture. Aiming to attract business with their cutting edge technologies, the eco-cities will boast radio frequency identification and wireless networks that will link all major residential, business, medical and governmental information systems. A 7.4 mile long bridge will link Songdo to Incheon Airport, facilitating the flow of business.

Abandoning its 60-year long manufacturing and export-oriented approach, President Lee Myung-bak said the government will promote “low carbon and green growth” as the nation’s new vision. Apart from planning eco-cities, over the next four years South Korea will incorporate 2,500 mile long bicycle lanes into its cities, and by 2020 plans to expand subway, railway and electric car ownership to reduce greenhouse gases from transport by 20%. But skeptics question the wisdom of constructing long cycle paths, which they believe stand to benefit the cement industry more. Critics fear that South Korea’s carbon footprint is liable to go up, ironically, due to the spurt in construction. Green groups claim that the world’s 13th largest economy uses twice the amount of cement as Japan and is ranked three times worse in energy inefficiency.

No doubt, President Lee will face challenges as he convinces skeptics and transforms South Korea’s image from an energy-intensive industrial nation to a green yet technically advanced country. New Songdo City will be a good start.

 

 


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