[비즈한국] The "LG Household & Health Care Future General Industrial Complex" project, which LG Household & Health Care051900 intended to build in Cheonan, has been delayed for over 10 years. Eventually, the Cheonan city government, having run out of patience, recently urged for a resolution at the LG Group level. This has raised the possibility that other LG Group subsidiaries, rather than LG Household & Health Care, may move into the industrial complex.
10 Years of Delays, Cheonan City: “Response Requested by End of June”
According to Bizhankook’s reporting, Cheonan city recently urged LG Group to come up with a response regarding the long-term delay of the Future General Industrial Complex project. It has demanded that the group take responsibility and find a solution for the industrial complex project that LG Household & Health Care has left neglected for over a decade. A Cheonan city official stated, “We have even received a response saying they will grasp the overall details of the project at the group level and then proceed after prior consultation with Cheonan city.”
LG Household & Health Care signed a Memorandum of Understanding (MOU) with Cheonan city in December 2014 to build the Future General Industrial Complex and purchased a site (388,000㎡) in the Guryong-dong area of Dongnam-gu. The goal was to build production facilities and R&D centers by 2017. However, even 10 years after planning the complex, no proper construction has begun.
LG Household & Health Care has extended the development period several times by obtaining approvals for changes to the industrial complex plan. Through a plan change approval in 2016, the development period was extended to 2018, and it was pushed back to 2020 after another change approval in 2019. In 2020, they applied for another change, delaying the completion date to 2022.
LG Household & Health Care stated that the repeated delays were due to regulations. An official explained, “Although the project preparation period has been long, the project was delayed due to processes such as permits.”
In reality, the Future General Industrial Complex project was hindered by environmental regulations. About 6% of the total project site was classified as a water source protection zone, which is a restricted area for factory establishment, putting the project in a position where it had to be scaled down. Cheonan city and South Chungcheong Province continuously requested deregulation from the Ministry of Environment, and with the environmental regulations lifted last August, there were expectations that the project would gain momentum.
However, 10 months after the regulations were lifted, LG Household & Health Care remains lukewarm about the project. Although all foundation work, such as ground excavation, was completed in December 2022, they have not yet started the actual construction of the factory.
Finally, a frustrated Cheonan city has demanded a response at the LG Group level. They requested that if it is difficult for LG Household & Health Care to continue the project, the group should review the construction of the complex as a whole. A city official said, “Since the factory construction continues to be delayed, we held a meeting with the administration and LG representatives in early April. We asked for a review of whether other LG Group subsidiaries could enter the industrial complex if LG Household & Health Care faces various external issues.”
The deadline for the response regarding the delay requested by Cheonan city is the end of this month. As of now, LG has not submitted the relevant documents. An LG Household & Health Care official stated, "We plan to submit the response by the end of this month."
The Cheonan city official explained, “We confirmed that the group level is sending official documents to its subsidiaries and collecting their opinions. We expect to receive their feedback by June 30th, regardless of what the plan is. However, the key will be how specific that feedback is.”
Slump in Chinese Performance Hinders New Investment
Industry experts believe that it is difficult for LG Household & Health Care to engage in new investments at this time. Until 2021, the company recorded solid performance driven by the growth of the Chinese cosmetics market, but the situation has changed significantly since then. The prolonged COVID-19 pandemic and the slowdown of the Chinese economy have deteriorated its overseas business performance.
The analysis is that they cannot help but be lukewarm about the Future General Industrial Complex project, which was originally prepared for exports to the Chinese market. An industry official said, “When the overseas cosmetics market was booming, they needed to build a factory to meet export demand, but with exports to China plummeting, they are unable to find the right timing for new investments.”
If LG Household & Health Care abandons the development and other subsidiaries move in, the originally planned eco-friendly beauty theme park is expected to change significantly. The Future General Industrial Complex was originally intended to be developed as an “eco-friendly beauty theme park” by establishing cosmetic ingredient farms, R&D centers, and advanced production facilities in harmony with the surrounding natural environment, with plans to make it a tourist attraction for both locals and foreigners.
Among major LG subsidiaries, not many are currently in need of new domestic factories. LG Display034220 planned large-scale investments to strengthen its OLED technological competitiveness but recently decided to invest in its Paju plant. LG Innotek011070 and LG Energy Solution373220 appear to be focusing on overseas investments.
Cheonan city expects that LG Household & Health Care will come up with an appropriate countermeasure, as they are unlikely to consider selling the land. A city official explained, “LG Household & Health Care would face many issues, such as taxes, if they cannot establish a factory after buying the land. They cannot ignore that part. We must take measures according to the Industrial Location and Development Act. We also have to examine if there are restrictions on disposal for the purchased land, but since there hasn't been any such discussion, it seems they are not considering selling the land.”
LG Household & Health Care stated, "We are not aware of any plans to sell the land," adding, "We are organizing our response to Cheonan city. Since there are matters to discuss with the city, it is difficult to publicly reveal the company's position just yet."