제주평화연구원

[caption id="" align="alignright" width="150"] Lee Sung-woo
Director General of Korea Maritime Institute[/caption]

In January 2005, the South Korean government declared Jeju the “Island of World Peace.” Evidently, the designation was made considering the geographical distinctiveness of Jeju Island as well as its elevation in status to a special self-governing province. Based on this consideration, the government has given Jeju the “Island of World Peace” title for the purpose of recognizing and publicizing the island as a globalized space beyond the national territory, which is visited and inhabited by people from different countries around the world. Now, fifteen years have passed since the “Island of World Peace” inscription. However, it remains doubtful whether Jeju has really become a society that enables unhindered access from across the world, while encouraging global citizens to engage in fair competition and inclusive growth for sustainable development, as expected earlier.​

To ensure fair competition and safe living conditions for people of different nationalities, Jeju, the “Island of World Peace,” - should be equipped with infrastructures that could facilitate free transport of goods, services, and people. Currently, however, Jeju lacks such infrastructures, which may explain why it has failed, despite its external development over the past 15 years, to make qualitative progress that would help global citizens peacefully coexist based on fair competition and inclusive growth. What would be the prerequisites for the free transport of goods, services, and people on a global scale? There could be many answers to this question, but the priority should be given to the logistics infrastructure and related networks. The transport of goods corresponds to freight, while that of services involves people who travel as tourists or for work. Although goods are generally transported by sea, land, or air, Jeju Island relies on marine or air transport due to its geographical distinctiveness. Currently, the biggest issue on Jeju revolves around the construction of the 2nd Jeju Airport to assist with the function of the Jeju International Airport, which is the world’s most congested airport. This appears to be a measure to better accommodate the massive influx of passengers flying to Jeju. However, the task which is as important and urgent as building the second airport would be securing Jeju’s shipping infrastructures and expanding the related networks.

Jeju Island, situated off the Ssouthern tip of the Korean Peninsula, is a beloved destination with a beautiful and clean natural environment and warm temperatures. Only fFew people seem to understand the geo-economic advantages of Jeju in terms of logistics, aside from its natural merit. Jeju is located at the junction of the sea routes between Asia and Europe, and between Asia and the Americas. It also lies along the North Pole route, the recently-emerging shortcut to Europe. While the island is mainly utilized for eco-friendly tourism, it has potential to play a pivotal role as an island harbor which connects Busan in Korea, Shanghai in China, and Tokyo in Japan. In other words, the transport of goods and services for the “Island of World Peace” can be facilitated and reinforced by transforming the island into a global logistics hub based on its geo-economic strength.

The Korean Peninsula lies at the intersection of maritime powers and their counterforces. Although the geo-economic condition has its merit, it is also considered disadvantageous in that the nearby superpowers have engaged in hegemonic struggles on and around the peninsula. Representative historic cases include the Mongolian invasion of Japan during the Goryeo period, the Japanese invasion of Joseon in 1592, and the confrontation between the United States, Russia, Japan, and China in the late Joseon period. It is my understanding that the term “peace economy” advocated by the current South Korean government aims at resolving Korea’s geopolitical risks by means of peace and utilizing its geo-economic advantages for economic growth.

The first step to overcome geopolitical shortcomings through geo-economic strengths is to utilize logistics. Logistics is an industry which enables a seamless flow of goods and services and eventually brings economic prosperity and political stability not just to the trade partners but also to the transit sites. As is well known, cities such as Singapore, Hong Kong, Rotterdam, and Hamburg feature histories where they have achieved economic prosperity and political stability as logistic hubs and made progress on fair competition and inclusive growth. Their advanced connectivity through logistics attracts goods and services, alongside global citizens and enterprises. These people and enterprises demand the conditions for fairness, security, and inclusiveness in the regions, which has ultimately transformed them into cities advocating world peace. The fact that the latest talks on inter-Korean economic cooperation first discussed the logistics sector reaffirms the aforementioned characteristics of logistics. That is, logistics issues such as connecting railroads on land and opening up or restoring shipping routes have been addressed as key agendas during the recent dialogues between North and South Korea.

Jeju is an iconic island which pursues the value of world peace. In this regard, it is necessary for Jeju to utilize its currently less-noticed advantage in maritime logistics as a meaningful means for realizing the peace that the island pursues. First and foremost, Jeju can serve as a hub of national and international logistics for freight that is transported from the Korean mainland, particularly from North Korea. During the previous inter-Korean talks, one of the first demands from Pyongyang was to allow North Korean ships to sail through the Jeju Strait. As the North has insufficient inland logistics infrastructures, it is essential that its ships pass through the Jeju Strait in order to move from the East Sea to the West Sea, and vice versa. As earlier mentioned earlier, Jeju is at the intersection of the world’s main trunk routes between East Asia and Europe and between Asia and the Americas. This implies that Jeju, as an island hub port for transshipment cargo, can contribute to a “peace economy” in Korea and Northeast Asia, and peace in the world beyond. My point here is not that Jeju should compete with its neighboring global hub ports such as Korea’s Port of Busan, China’s Port of Shanghai, or Japan’s Port of Tokyo. Instead, functioning as a hub port for integrated logistics, Jeju can distinguish itself from other ports that prioritize the economy of scale.

From this perspective, consideration should be given to the cases of Malta Freeport in the Mediterranean Sea of Europe and Freeport, Bahamas, in the Caribbean Sea of the Americas. Despite the large global ports nearby, these ports differentiated themselves as island shipment hub ports and have played critical sociopolitical roles while boosting the local economic growth. The geographical conditions of the two ports are similar to those of Jeju Island. However, they are the nodes of intersectional shipping routes, which helps ships to save time and reduce costs. The ports do not simply transport or connect freight but also enable the movement of passengers, including tourists. In this aspect, they are import cruise hub ports in the Mediterranean and the Caribbean Seas. Benchmarking the given cases, Jeju can strengthen its desirous role of a cruise home port which gathers both people and cargo, creating sufficient synergy effects in line with its tourism.

To build a system for lasting peace on the Korean Peninsula and in the Northeast Asia, Jeju should achieve its vision of an “Island of World Peace,” and this requires an expanded logistics network. Broadening the logistics network should be preceded by civil engineering projects. However, the projects should meet many other preconditions so that the new infrastructures can be interconnected. To connect the world through Jeju, the flow of goods and services needs to be as easy and convenient as in cities on the mainland. Since the logistics network of Jeju is separated from the mainland by sea, an integrated land-and-sea logistics would be the key to increase the efficiency of the network. The core of the integrated logistics is the “ro-ro” (roll on/roll off) method, which helps trailers and trucks (power-driven tractors) to move everything throughout the routes using ships.

It is a reciprocal transportation style where loading and unloading operations can be left out.

As there still exist differences in logistics-related systems between the Northeast Asian regions, including Jeju Island, transportation on trailers by car ferry requires no loading or unloading procedures. The consequential reduction in time and cost is effective in the logistics process with the possibility of additional reductions in logistics costs that should be paid for by the cargo owners, the transport companies, and shipping operators. Currently, multimodal land-and-sea transport projects are underway at the Korean Port of Busan and Incheon Harbor, between Korea and China since 2010 and between Korea and Japan since 2013. Through the projects, the freight volume between Korea and Japan surged by more than 10 times from 2013 to 2016. This is because the cargo delivery period was reduced by three or more days and the delivery cost by an estimated 30%.

Second, there should be global standards for logistics. Cargo is usually transported in containers. Products imported to Jeju or exported from the island are costly because Jeju commonly uses 10ft containers, while 20ft or 40ft containers are global standards. As containers of different sizes are used in Jeju, cargo must be unloaded and reloaded in other containers either at the Jeju Harbor or at the ports of the trade partners. Eventually, the loading and unloading process creates additional cost, which is the main reason for higher prices of products exported from, or imported to, Jeju, as compared to other regions. Meanwhile, Japan also transports a large volume of cargo in 12ft containers. The difference different would place a substantial burden of time and cost on connecting and revitalizing cross-border logistics networks.

Third, logistics should be improved by streamlining cargo clearance and facilitating international reciprocity. Cargo transported across borders is subject to strict clearance procedures due to smuggling and security issues. To be a transit hub for freight, Jeju should simplify necessary documents and secure compatibility through cooperation with all countries around the world. Particularly, it should maintain the safety, economic feasibility, and promptness of its clearance procedures by utilizing blockchain, big data, and other state-of-the-art 4th industrial technologies.

Lastly, the Jeju Harbor area and the cargo area of the Jeju International Airport should be designated as a free trade zone. The world’s major global logistics hubs including South Korea have free trade zones. The countries with free trade zones levy no tariffs on cargo that is imported to be processed or assembled within their free trade zone, and exported again. The applicable cargo is exempt from having to enter the country’s tariff zone. However, tariffs would of course be imposed on cargo immediately upon its sales in the country’s domestic market.

Many countries around the world designate and prefer free trade zones because they can perform business activities within the zones without concerns about tariffs. Time and cost are reduced by big margins as multi-national companies they (countries? Companies?) can access inexpensive local resources and a workforce, while and take advantage of geographical merits without paying tariffs. Second, reduction in time and cost occurs once again when they can process or assemble a mixture of the parts, they imported into the free trade zones with locally-manufactured parts. As clearance procedures are suspended, products that are to be exported through processing trade are of great benefit in the free trade zones. Finally, producers can benefit from using the zones in terms of taxes, which is why Hong Kong, where - many global enterprises are headquartered, - is a free trade zone in its entirety and Singapore has established a vast free trade zone behind the ports and airports. Likely, most of the regions that are located at logistically critical ports from the geo-economic perspective actively utilize the free trade zone system, regardless of whether their countries are developed or underdeveloped. Nevertheless, Jeju Island has established no free trade zone, nor a plan or designs for related ports and airports.

In the logistical sense, Jeju has just taken its first steps. Thus, Jeju should make the best use of its geological merit as an island and its conceptual merit as the “Island of World Peace.” By doing so, it can grow into the peaceful linkage between different regions in the world, while contributing to building peace in the Northeast Asia, a key region with recent global tension. In order for Jeju to become a true “Island of World Peace,” there should be many efforts, including: changes in local public awareness of logistics, forward-looking ideas of bureaucrats and experts, introduction of new logistical measures such as preemptive designation of free trade zones and international reciprocity of trailers, and national and international public awareness of Jeju as a hub of logistics. To this end, Jeju should design itself into a space for the free transport of goods, services, and people, by means of the currently-unnoticed geo-economic and symbolic merits in maritime logistics, with linkage to its existing strength as a tourist destination. If Jeju becomes a hub of logistics as well as tourism in the Northeast Asia and the world beyond, it will finally achieve its vision as the “Island of World Peace” in a true sense where fair competition and inclusive growth can be pursued simultaneously.

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Dr. Sung-Woo Lee is a director General at Port & Logistics Division, Korea Maritime Institute. He has been involved in various governmental projects, many of which are associated with shipping management, dryport planning and port logistics park development. He was previously affiliated with the Centre of Urban Planning and Environmental Management at the University of Hong Kong as a visiting professor. His interests include managerial and strategic aspects of international logistics and maritime transport, making business model based on SCM, possibility of Arctic logistics system and port-city interaction. He is also an advisor in related to logistics field for Korea government such as Ministry of Unification, Ministry of Land & Transport, Ministry of Industry, Commerce and Resource, and so on. His representative writings are Devolution, Port Governance and Port Performance, Ports in Proximity, Shipping & Port Condition Changes and Throughput Prospects with Opening of the NSR, Port & City, Challenges of the Changing Arctic, Maritime Business and Economics and so on.