Chapter 400 |
The South Korean government announced it would proceed with the full-scale development of the new Saemangeum city in partnership with OTK Company.
Nam Pung-hyeon, Commissioner of the Saemangeum Development and Investment Agency, and CEO Kang Jin-hoo signed an MOU regarding the establishment of the Saemangeum Development Corporation and shook hands.
Following the announcement, the world's attention turned to Saemangeum.
“Saemangeum? Sounds familiar, where is it?”
“Is that the place with the world's largest reclamation project?”
“They’re going to develop it into a new city?”
“Are they trying to create a city like China's Pudong or America's Silicon Valley?”
Unlike IBs, PEFs, and pension funds that actively invest in real estate in major global cities, Kang Jin-hoo, the world's wealthiest man, had shown little interest in real estate investment. Yet now, he had suddenly stepped forward to develop a new city on barren reclaimed land.
Global corporations and investors unfolded maps of Korea and focused on Saemangeum.
“It's all owned by the South Korean government.”
“Can't we buy some land?”
“Currently, it's only being sold to companies for industrial use. To purchase, companies must directly move into Saemangeum, build facilities and factories, and conduct business operations.”
“Review investment plans immediately.”
Domestic and international companies that had previously hesitated immediately declared their intention to invest, and employees at the Saemangeum Development Agency were screaming with joy at the flood of inquiry calls.
Meanwhile, OTK Company employees like Park Sang-yeop and Jung Gi-hong went to the United States to contact relevant companies.
Park Sang-yeop met Leslie Bayzle, President of 'Disney Parks, Experiences and Products.' It's a subsidiary of The Walt Disney Company that handles Disney theme parks, products, and content.
“Saemangeum, being adjacent to China and Japan, is an optimal location to attract Asian tourists. Furthermore, it's a city poised to become the future hub of East Asia, combining finance and high-tech industries. Korea, with a population of 50 million and a per capita income exceeding $30,000, has a vast domestic market, so if Disneyland were to come, it would surely succeed. Above all, CEO Kang Jin-hoo is personally driving this project with great interest.”
The government had even set aside land for a theme park in Saemangeum and had pleaded with related companies to invest, due to the significant economic benefits, including tourist inflow, that a theme park would bring.
Disneyland had also received several proposals, which they had declined at the time, citing the construction of Shanghai Disneyland as an excuse...
President Bayzle nodded immediately.
“Thank you for the excellent proposal. Our teams are already reviewing it favorably. We hope Disney will continue to collaborate with OTK Company in various fields going forward.”
***
If you added up all the new city development plans announced by various countries, there would be hundreds. Saemangeum had been just one of them, but now, the situation had changed.
Kang Jin-hoo declared he would make Saemangeum an international financial city and Korea's Silicon Valley.
The announced plans were astounding. OTK Company itself planned to relocate its headquarters, move the OTK Research Institute, establish the world's largest battery production and research complex, build a new TWR research lab, a venture cluster, Korea's largest convention center, and a video production studio.
According to the announcement, Saemangeum would host all sorts of tourist and leisure facilities, including Disneyland, Universal Studios, and resorts, and indeed, the respective companies confirmed they were reviewing investments.
If development proceeded as planned, it was predicted that at least 200,000 people would move out of Seoul alone within ten years.
With this, the relentless rise in housing prices in the Seoul metropolitan area, which the government had struggled in vain to control, finally hit the brakes.
Everyone had believed, and continued to believe, that there was no place, nor would there ever be, that could replace Seoul and the metropolitan area. That's why everyone had tried so desperately to buy an apartment in the capital region.
But now, the situation had changed. Speculative demand vanished, and buyers who were about to make panic purchases, fearing they’d never own a home otherwise, all shifted to a wait-and-see approach.
- Shouldn't I be buying a house in Saemangeum instead of Seoul?
- Whoa! They say Disneyland and Universal Studios are coming too.
- My company is also reviewing setting up a factory in Saemangeum.
- LOL! Because Kang Jin-hoo is doing it, all companies are now reviewing investments in Saemangeum. This is insane!
- This is the OTK effect, no, this is an impact, this is a fact.
- Dad joke, not funny --;
- No matter how much they develop Saemangeum, it can never replace Seoul and the metropolitan area. Even if they cram companies in, it'll just lead to more weekend-only couples, like Sejong City.
- Think about it. People in the provinces want to go to Seoul to enjoy cultural life. But if what Kang Jin-hoo says is true, Seoulites will be going to Saemangeum for cultural activities. Then there’s no reason to insist on living in Seoul.
- We have to wait and see, but buying a house in Seoul right now is crazy. Listen to your hyung~
- LOLOL Aren't all the speculators screwed now?
Multiple-property owners who had taken out huge loans to buy several apartments rushed to put their properties on the market, but no transactions occurred.
Land speculators were in the same hot water.
Typically, when a new city development plan is announced... no, even before it's announced, speculators flock to the area.
Speculators had already bought up large tracts of land in the planned sites for the 3rd New Towns and built numerous unauthorized structures. Sure enough, when the Ministry of Land, Infrastructure and Transport announced the 3rd New Town plan, the speculators rejoiced inwardly while staging protests against it.
“Withdraw the 3rd New Town development!”
“Forced land expropriation is an infringement of property rights!”
“Oh no! I built this house with my life savings to live in a country home. Now you want to tear down my house to build apartments!”
“You can’t take my land, you scoundrels!”
Of course, they weren't genuinely opposed; it was all to get even a penny more in land compensation.
But now, it looked like the 3rd New Town development might actually be withdrawn!
If demand in the metropolitan area could be dispersed through Saemangeum's development, there was no need to insist on the 3rd New Towns. Although no official cancellation had been announced, land purchase negotiations had been halted.
The startled speculators screamed.
“If a new city is developed in Saemangeum, we’re all dead!”
“Development should be in the metropolitan area! Why Saemangeum?”
“This is a waste of taxes!”
“It’s preferential treatment for the Honam region to gain votes!”
“This is collusion between the government and OTK Company!”
“We must stop this at all costs!”
Multiple-property owners and speculators immediately flocked to the front of OTK Company's headquarters. Speculators from the provinces chartered tour buses to come up.
They unfurled banners and, with headbands tied tightly, shouted forcefully.
“Proceed with metropolitan development as planned!”
“Proceed! Proceed!”
“Kang Jin-hoo, immediately withdraw the Saemangeum new city development!”
“Withdraw! Withdraw!”
“Stop the environmental destruction of Saemangeum!”
“Stop! Stop!”
“Protect housing prices for the common people!”
“Protect! Protect!”
***
The front of OTK Company headquarters had long become a famous spot for protests.
Now, even speculators were flocking here to demonstrate. Surprisingly, there were quite a lot of them. Hundreds had gathered today alone, and their numbers were growing.
Taekgyu looked down at the scene and asked.
“Weren't those people protesting to stop the 3rd New Town plan before?”
I shook my head.
“I guess they weren't sincere about that.”
“Hmm, are they tsundere?”
“Something like that.”
“But why are there so many real estate speculators in this small country?”
Is it because it's small?
Actually, there's no clear line between investment and speculation, but many people consider investment good and speculation bad.
However, while people say 'real estate speculation,' they don't say 'stock speculation.'
This is due to the unique characteristics of real estate as an investment target.
Generally, for other commodities, whether the price goes up or down, those who bought them reap the profits or suffer losses. For those who didn't buy, it doesn't matter if a manipulated stock gets delisted or if Bantcoin hits 30 million won.
However, with real estate, those who didn't buy suffer the most, both when prices soar and when they plummet. When prices soar, living costs rise accordingly, and when they plummet, jeonse deposits or security deposits become precarious.
“Those people are a problem, but the real issue was that the country condoned it.”
Korea has a structure that makes it incredibly easy to make money from real estate.
For example, consider someone living in a 1 billion won jeonse (lump-sum deposit rental) and earning 500 million won, versus someone living in a 1 billion won owner-occupied house whose value increases by 500 million won each year.
Who would people rather be?
Obviously, the latter is far more advantageous. To earn 500 million, one must work that much. But while the house price rises by 500 million, the homeowner does no labor at all.
More importantly, there's tax.
An annual salary of 500 million is subject to an income tax of nearly 50 percent. But for real estate, capital gains tax isn't paid until it's sold (though property tax is paid). Even if sold, capital gains tax is significantly lower than income tax.
So, it's natural for people to prefer unearned income over earned income.
When an opportunity to make money is right in front of you, isn't it stranger not to take it?
While verbally condemning multiple-property owners as speculators, it was the government that created a system allowing people to take out 80 percent loans, buy ten or twenty properties, register as rental businesses, and aim for capital gains.
Capitalism runs on human self-interest. The government's role is to regulate that self-interest with laws and taxes so it doesn't harm society as a whole.
After the Heo Chang-min administration took office, housing prices in Seoul and the metropolitan area skyrocketed by tens of percent. Among the employees, the fortunes of those who owned homes in Seoul and those who didn't were starkly divided.
Real estate shocks the economy when it rises, but it delivers an even bigger shock when it falls. Already, talk of multiple-property owner bankruptcies, bank insolvencies, and damages to jeonse tenants was emerging.
The opposition party and some media outlets blamed me for this, and speculators were shouting for me to compensate for their fallen housing and land prices.
“They’ve been asking you to make a statement for a while now. What are you going to do?”
“Is there really a need for that?”
At my words, Taekgyu wagged his finger.
“You can’t do that. They came all this way to protest; of course, you have to give them an answer. This won’t do. I’ll have to do it for you.”
Taekgyu scribbled something on a note and called a building security guard.
“Please deliver this to the protesters as OTK Company’s official stance.”
“Understood.”
A moment later, a commotion erupted among the protesters who received the note.
Some people shouted in anger.
“Kang Jin-hoo, come out now!”
“Are you messing with us?”
“Get on your knees and apologize!”
I looked at Taekgyu, startled.
“What did you write?”
Taekgyu shrugged.
“Just the disclaimer that always appears on stock market broadcasts.”
“What’s that?”
“Investments may result in loss of principal depending on market conditions. The final responsibility rests with the investor, and our company bears no responsibility for investment outcomes.”
“……”
***
The political sphere was in a head-to-head confrontation over the supplementary budget bill proposed by the government.
The ruling New Politics Party argued that the supplementary budget needed to be executed to revitalize the economy for ordinary people, while the opposition party opposed it, claiming it was a populist budget aimed at next year's general election and an attempt to cover up policy failures with taxpayer money.
In fact, the criticism that the supplementary budget was populist was accurate. No citizen would dislike the government spending money.
For that reason, a supplementary budget had never failed to pass before, and it was highly likely to pass this time as well.
Opposition lawmakers, as well as ruling party lawmakers, meticulously strategized on how to steer the supplementary budget review to their advantage. If they were going to spend populist money, shouldn't they try to bring as much of it as possible to their own districts?
But amidst this situation, the government suddenly announced the Saemangeum new city development plan!
The Liberty Korea Party felt as if they had been blindsided.
Just moments before, Saemangeum's development had seemed like a distant prospect. No one had thought any tangible results would emerge within the current administration's term.
But Kang Jin-hoo stepped in, and the situation changed. With his capital and influence, he could certainly create a new city on a barren plain.
Even though no formal contracts had been signed yet, talk of an international financial city and Korea's Silicon Valley was already circulating.
What if this became a reality?
It would have positive effects in many aspects, such as alleviating excessive concentration in the metropolitan area, achieving balanced national development, revitalizing the construction industry, promoting economic growth, increasing employment, and boosting foreign direct investment.
However, for politicians, whether it benefits their own re-election and party is more important than whether it benefits the country and its people.
The Blue House and the ruling party managed their expressions, anticipating a rise in approval ratings.
Although Saemangeum is located in Honam, a stronghold of the progressive camp, it was the Democratic Liberal Party, the predecessor of the Liberty Korea Party, that first initiated the development. As it was an item agreed upon by both ruling and opposition parties, it had continued as a national project even as administrations changed.
The Liberty Korea Party itself did not oppose the Saemangeum development, but if it were led by the current government and the New Politics Party, it would not help their approval ratings at all; it needed to be led by the Liberty Korea Party.
The government requested a supplementary budget from the National Assembly for Saemangeum development.
The supplementary budget amounted to a whopping 17 trillion won!
It was the largest supplementary budget in history, an increase of 10 trillion won compared to the previous one. Eighty percent of this was allocated for Saemangeum reclamation site construction, as well as for roads, railways, ports, and airports.
Other development plans in the existing supplementary budget proposal were pushed back or fizzled out. The opposition party immediately rebelled against the mega-supplementary budget.
The Liberty Korea Party threatened not to cooperate with the supplementary budget or the normalization of National Assembly proceedings without an economic hearing, insisting that Deputy Prime Minister for Economy Jeong Ki-soo, Blue House Chief of Staff for Policy Lee Eung-gwan, and Kang Jin-hoo must attend.
Representative Yeon Nakyeong said,
“The government is deceiving the public as if all problems can be solved simply by passing a supplementary budget. Shouldn’t they first convince the public about whether there were any mistakes in economic policy so far and why a supplementary budget is necessary? A supplementary budget without an economic hearing is absolutely unacceptable. Furthermore, according to the Saemangeum development plan announced by the government, while it takes the form of public development, the leadership of the development is effectively in Kang Jin-hoo's hands. This is clear preferential treatment for OTK Company! Our Liberty Korea Party will thoroughly investigate this on behalf of the people!”