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New City Plans Pose Threat to Businesses

Posted June. 18, 2007 03:02,   


According to the CJ Group, the Ministry of Construction & Transportation, and the Province of Gyeonggi, the government has incorporated 220,000 pyeong of the 730,000 pyeong of land that the CJ Group purchased to build a logistics center in the development plans for Dongtan New Town.

The logistics arm of CJ Group, CJ GLS, and the construction arm, CJ Development, purchased the land last December. The land was set aside for its logistics center, which is part of their 300,000-pyeong logistics center development project.

The CJ Group had succeeded in attracting Mars PFV, an investment fund based in the Netherlands with more than 59 billion won under its control, as a partner to buy the land. CJ Group has a 19.9 percent stake in this fund; the other stakeholders are pensions, funds, and universities like Harvard University.

This project was backed by the province of Gyeonggi, which wanted to attract foreign investment. The province and CJ Group informed Mars PFV of their plans and had succeeded in winning permission to make the investment.

Samsung Tesco, which runs the mega discount store Home Plus, had already agreed to participate in the project. The U.S. logistics company ProLogix was also interested in buying a stake. With 33 percent of the land being designated as development land for the Dongtan New Town, however, the project is at risk to be cancelled.

“The CJ Group’s territory was located on top of mountains and we ruled that it would not be fit as a logistics center,” said the Korea Land Corporation, which along with the Ministry of Construction and Transportation, drafted plans for the Dongtan New City project. Their judgments are being criticized, because the CJ Group has responded that this is not actually so.

Volvo Truck Korea, which built a new 15 billion won headquarters on land nearby in March, is also worried because its whole building has been allotted as part of Dongtan New City.

“The government said that they wanted to attract foreign investment. Now it wants our headquarters after only three months. The shortsighted bureaucracy of this government led to this international embarrassment,” said Volvo Truck Korea executive Lee Sung-jong.

Ministry calls for businesses to comply-

The government explained that it could not notify the businesses of the new city plans and that it could not take into account details of all the territory.

“We will hold a survey to find out what these companies would prefer: either moving their facilities to an industrial area within the Dongtan New City limits, or move to nearby areas,” said a Ministry of Construction and Transportation official.

These measures will most likely not placate these businesses as the location of the logistics center is too important to change easily, and also because land prices in the area have risen sharply after the unveiling of the development plans.

“The Ministry of Construction and Transportation should have done more preliminary research before finalizing its new city plans,” a Gyeonggi Province official said. “We are doing all we can to not completely disappoint businesses. We are going to try to exclude these territories from the new city plans. If this fails, we will try to compensate for the damage incurred.”