Development of Sustainable Cities- Issues & Solutions -

H. Kwon

June 2010

I Busan Metropolitan City

II u-City Busan

IV

III

Legal Perspectives

V Suggestions

Business Model

Busan

Busan Metropolitan City

Self-sufficient Market

u-City Busan : Overview

Innovations with U-IT Technology • To create a new growth engine for the city • To improve the quality of life for all citizens

The City Innovation Project : Future-oriented City Development

New City!

u-City Busan : Progress

Issues to be solved• Fail to appeal to the public • Short-term based projects• Small scale projects → Lacking durability•Difficult to secure profitability → Difficult to attract private investments

u-Fire Service : Multi-service Provisioning Platform•High Speed Broadband Communications Network → Transmission speed ↑100 times

u-Infra•Wi-Fi Zones (24) : Wireless Internet Access (Free of Charge)• CCTV Integration System Phase I, II•Multi-dimension Urban Space Information Service System• Busan Information Highway : 319 organizations, 1,278㎞

Emission Reduction• Land Fill Gas Power Plant (2,775㎡)

- Power Generation Capacity : 5 MW/hr (1MW/hr x 5)- Project Cost : USD 7.92 million → Wholly invested by private investor- Project Period : 2001~2020- Electricity Generation & Sales (2009) : 20,178 MW, USD 1.93 million - Benefit to the City (2009) : USD 87,000, LFG Reduction

Initiated 28 Projects in 5 Core Areas• Total Investment : USD 74.33 million (Gov’t 52.4%, City 41.1%, Private 6.5%)

Industrial Complex

Knowledge-based City

Multipurpose LogisticsComplex

GB 50㎢

20㎢

4㎢

9㎢

Business Models : Green u-City Development

Busan Green u-City• Purpose : Green u-City for Green Growth• Objective : 67.8% Low Carbon City , 70,000 Knowledge-based jobs• Area : 50㎢• Project Cost : USD 500 million• Unit Projects

- Smart Community (Public Administration, Medical Services, Education)♦ Integrated Video Call Center, Mobile Treatment, Video-based Green u-Education

- User-friendly Public Transportation♦ Green u-Bike, Smart Transportation Station, Eco-Pass- Recycled Energy / Resource♦ Green Integrated Data Center, Smart Building Management, Eco-Milage- Integrated Intelligent Disaster Prevention / Safety Management♦ Smart Video Controlling System, Integrated City Management- Green u-Logistics♦ Real-time Logistic Information Infrastructure, Green Logistic Management

Gov’t Lead

Private Partnership

Innovative Projects

• Integrated Intelligent Crime Prevention / Facility Management (5) • Green Urban Mobility (3)• Green u-City Network

EfficiencyProductivity

ProfitabilityAttractiveness

VisionaryCollaboration

Experience, Speedy Process

Precise Business Model, Global Promotion

Global Test-bed, New Projects

• Smart Community (3)• Green Urban Mobility (2)• Energy/Resource Mgmt (1)•Green u-City Integrated Control Center

• Green u-Logistics (3)• Energy/Resource Mgmt (2)

USD 98 million

USD 146 million

USD 208 million

USD 452 million

Green u-City Development : Budget

Project Type Characteristics Projects (No.) Budget (est.)

Ubiquitous Infra - Public services,fee based projects

Province innovationprojects to balanced development

Basic Planning Stage- Strategy, execution, u-Experience projects

CityGov’t

Investment of $452 Mil.

Green u-City Development : Investment Barriers

• Competing projects / facilities

• Short-term Contracts

• Financing Cost

•Difficult to receive gov’t funds / subsidies

• Project Feasibility

• Initial Investment vs. Production Payment

• Project / Payment Guarantee

• Technology

•Human Resource

• Rules & Regulations

• Culture

City and/or Responsible Authority

Developer

JV / SPC / AMC

Lease Fees / Profit Sharing

Land Lease

Land release /Co-development /

Investment

Land Lease

Lease Fees / Profit Sharing

Green u-City Development : Shared Investment

Legal Perspectives : Public & Private Infrastructure Investment

Private Participation in Infrastructure – PPP Act• August 1994 Enactment of Act The Promotion of Private Capital into Social Overhead Capital Investment Act

• Jan. 1999 Revision of Act The Act on Private Participation in Infrastructure- Risk Sharing, Minimum Revenue Guarantee

• Jan. 2005 Amendment of Act Expansion of investor profile & facility types- Introduction of BTL Scheme, Diversification of PPP Project

Purpose of Act : To enhance efficiency & transparency• To provide infrastructure & public services by creating cooperation and partnership

between public & private sectors

Track Records – 475 Projects• Completed 97 Return-oriented and 33 Lease-based projects

Investment Issues : High Risk, Low Profitability, Evaluation Procedures

PPP Scheme

Ubiquitous Urban Infrastructures

Legal Perspectives : Foreign Investment

Foreign Investment Promotion Act – FDI• September 1998 Enactment of Act

- 55 Amendments since enactment• Investment Methods

- Purchasing stocks, extending a long-term loan, contributing to a non-profit corporation

Foreign Investment Zones• 2-types : Stand-alone, complex

Restriction of Special Taxation Act• Reduction of or exemption of taxes : Corporate, Income, Acquisition, Registration, Property• Exemption from customs duties, special consumption tax, VAT• Tax reduction or exemption for capital increase

Other Incentives : Cash Grants, National/Local Property Lease & Rent Reduction

Investment Issues : Foreign Investment Restrictions (Schools, Postal Service, etc)

Legal Perspectives : Ubiquitous City Development

Ubiquitous City Construction Act•March 2008 Enactment of Act

- 5 Amendments since enactment• Purpose of Act

- To develop u-City by improving the general urban infrastructures through convergences with the advanced information, communication technology

- To develop competitive city & to promote sustainable growth- To develop u-City that provides u-Services

Target Projects• New city development or urban rehabilitation/urban improvement of existing cities

u-City Developer• Central /local government, Korea Land & Housing Corporation, Public Corporation

(Local), Private Partners

Investment Issues : Financing Plan, Subsidy/Loans

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1

2

3

5

Risk Diversification

Business and/or project convergence

Export / Sell, Import / Buy Technologies

Create demands, work with technology, get a long term commitment

Business Model Development

Suggestions

Thank You.