Monday, February 21, 2011

Songdo, Korea A Model City For Honduras?

Juan Orlando Hernandez has a facebook page in which he chronicles the 63 person Honduran delegation's trip through Asia to visit model cities. First up is Songdo, Korea, or more properly, SongdoIDB.

Songdo is an international business district of 1500 acres (or 6 square kilometers) built on reclaimed land along Incheon's waterfront. It is part of the Incheon Free Economic Zone. It is a planned city developed by Gate International and POSCO E&C. The master plan developed by the design firm Kohn Pederson Fox includes 100 million square feet of commercial office space, retail shops, hotels, residences, schools and cultural facilities. There are currently $10 billion invested in its development. Its first phase opened in August 2009.

So why Songdo in Korea. The key here is the location. It lacks its own airport, but is only 15 minutes away from Incheon's international airport. From there, all the major business centers of Asia are close by. As their website says,
3.5 hours to a third of the world's population,

for which they call it an "Aerotropolis".

It is scheduled, when fully built, to have 22,500 luxury condominiums giving it a population density as great as, or greater than Tokyo (5600 people per square kilometer). Public and private schools will serve the populace, and it will have its own state of the art hospital system.
Residents can shop in an opulent retail mall or stroll through picturesque local markets.

But how exactly is this a model city in Paul Romer's sense and how will it help develop Honduras?

It is office space, not manufacturing. Its goal is to attract businesses to locate offices in it. It will provide only luxury housing, golf courses, charter schools and hospitals, and by its own description, "opulent malls". This is meant to cater to the rich.

The jobs created by such a city located in Honduras would be service jobs, store clerks, office cleaning staff and support staff, groundskeepers, caddy's for the golf course, and none of the people filling these jobs would benefit from the schools or the hospital, which are for residents. These kinds of jobs would be filled by non-residents.

And that brings up another factor in Songdo's success, its locate in a major metropolitan area, to provide the labor, connectivity, and service infrastructure that such a development requires to be successful. Such a development in Honduras would need to be located within commute distance of a major urban center like Tegucigalpa or San Pedro Sula, not the locations currently being discussed.

In some ways, Songdo is reminiscent of the Bahia de Tela resort project being implemented near Triunfo de la Cruz, Atlantida. The plan there is for up to five luxury resorts, housing, and a golf course. The Bahia de Tela resort project will not succeed without a place for its labor force to live nearby. It will need more semi-skilled and skilled labor than Tela and Triunfo residents can provide.

Songdo's success is predicated on its location as a central hub for businesses wanting to do business in all of north Asia, which houses a large segment of the world population. Honduras could be a hub for business, but likely only for Central America and perhaps northern South America, and it would have to develop better air service to do that. TACA airlines serves Central America well, but not frequently enough, from Honduras.

And then there's the infrastructure questions. Korea has sufficient reliable electricity, water, sewer, and so forth. Honduras does not, so all those infrastructure necessities would have to be added to any Honduran similar development.

Songdo is not a model city in Paul Romer's sense. It neither has, nor requires, its own rules, laws, or constitutional exceptions. It is an international business district located within a developed metropolitan area, leveraging that development, to provide luxury services to businesses.

Songdo functions within the laws of Korea, not outside them. Korea chose to modify their local laws to fit international business standards, not come up with new laws that only function within the Incheon Free Economic Zone.

Songdo seems like an interesting place to live, if you can afford it, but we don't see it as a viable model for development in Honduras precisely because of the way it leverages its location and the surrounding metropolitan area. Next?

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