Ministry of Trade Industry and Resources

The Korean Cabinet approved a bill to amend the Act on Designation and Management of Free Trade Zones on May 20, 2026.

The amendment is designed to modernize aging production facilities in free trade zones and update their manufacturing-centered industrial structure so they can respond to rapid changes in the global industrial environment. It focuses on detailed rules for selling state- and public-owned land, giving companies a path to land ownership that can support new investment, while expanding digital transformation (DX) support to promote higher-value business activities.

1. Detailed Rules for Land Sales and Stronger Follow-Up Controls

Until now, the law allowed land sales in free trade zones, but no detailed procedures were in place. In practice, the zones operated on a lease-only basis, leaving resident companies without land ownership and limiting their ability to secure collateral, hindering new investments.

To address these constraints, the amendment sets out procedures and conditions for selling state-owned or public land and factory facilities, including sales prices and purchase eligibility. A restriction period on property disposal is introduced as a measure to prevent real estate speculation, as well as compliance enforcement fines for violations, such as failure to sign an occupancy contract or unauthorized disposal.

2. Support for Higher-Value Activities and Industrial Competitiveness

Since their introduction in 1970, free trade zones have operated mainly as manufacturing bases, limiting their ability to keep pace with changes in the industrial environment. The amendment grants occupancy eligibility to export companies in knowledge services, including information processing and R&D, to promote digital transformation among resident companies and attract higher-value businesses. It also lowers entry barriers by allowing exceptions to the standard building area ratio requirement, reflecting the fact that knowledge service companies do not require large factories. In addition, the amendment expands special provisions under the Customs Act beyond goods clearance to customs assessment and duty reductions or exemptions. It also introduces raw material taxation, strengthening tax benefits for companies in free trade zones.

The amendment is scheduled to take effect in May 2027 after revisions to the Enforcement Decree and related regulations. The Ministry of Trade, Industry and Resources (MOTIR, Minister JK Kim) will continue to support free trade zones so they can remain at the forefront of Korea’s exports and move beyond traditional manufacturing and logistics bases into advanced strategic hubs that bring together digital and service industries.