Government Okay’s Samsung Plan for Plant Expansion in Capital Area

With respect to enlarging the Ki-hung factory of Samsung Electronics, previously having caused controversy because the plan goes against laws on land development and policy for balanced regional development, the government has now decided to allow the company to go ahead with building more factories in the capital area by the end of the year. This is conditional in that it will transfer some of its semiconductor assembly lines out of the Seoul area.

A senior government official said on Wednesday, “In principle, the government decided to allow large companies including Samsung Electronics, Ssangyong Motors, and Dongbu Electronics to build more factories in the metro area. For Samsung Electronics, in return for government permission regarding its plan, the company agreed to move part of its assembly line to local areas.”

“The government made the decision, taking into account the fact that the semiconductor producer is currently considering the transfer of its assembly lines to local areas,” the official continued. “The government positively accepted the company`s proposal in pursuit of the policy to prevent excessive concentration in the capital area and to promote more balanced regional development.”

Another official at the policy planning office at Cheong Wa Dae said, “The government`s decision was inevitable because Korea needs to increase its national competitiveness; although the prevention of excessive concentration of manufacturing plants in the metro area has been on the top of the list of government policy priorities. The government was told that if they refused to increase production in the Seoul area, the company would transfer its factories to China.”

“There are some lines in the Ki-hung factory which don’t necessarily need to be in one place,” the government official said. “These lines will be moved to local areas though alternative site have not been yet determined.”

Cheong Wa Dae said that the timing for factory expansion would be finalized by the end of this year, thereby, additional factories will have groundbreaking ceremonies from early next year. To that end, the special committee for balanced regional development under the direct control of the President will come up with detailed programs for balanced regional development after holding a tour of the provinces to gather various opinions on the matter.

Although the government defended its decision by saying it was inevitable for the government to pursue prevention of excessive concentration of factories in the Seoul area and to promote balanced regional development at the same time, the decision is expected to cause controversy given that some critics are accusing the government of meddling in factory site selection of the private company.

Regarding the government’s decision, Samsung Electronics said, “It is impossible to transfer some assembly lines to local areas because of the nature of manufacturing semiconductors, and on top of that, even we didn’t discuss the matter with the government.”

Against this backdrop, today`s decision is expected to face a considerable impasse, as the president`s special committee for balanced regional development said that it is desirable for the government to apply the same standards for other companies regardless of industry.

Currently, Daegu City, Gangwon Province, and North Chungcheong Province are against the plan saying that the government`s decision to allow the building of factories in the capital area decreases their chances to attract investment in their regions.

Young-Hae Choi Tae-Han Kim yhchoi65@donga.com freewill@donga.com