[비즈한국] Concerns are being raised regarding the massive investment plan recently announced by Kangwon Land035250. Analysts suggest that given the company's recent decline in profitability and current financial standing, such a large-scale investment will be difficult to execute. Furthermore, Kangwon Land is currently facing a management vacuum without a CEO. Choi Cheol-gyu, the acting CEO (Vice President) of Kangwon Land, is set to complete his term in December. Critics point out that there was no need to announce a massive investment plan before the appointment of a new CEO.
On the 19th, Kangwon Land held the ‘K-HIT Project Vision Presentation’ at the High1 Grand Hotel and officially announced its comprehensive development strategy, the ‘K-HIT Master Plan.’ The core of the plan is to invest approximately 3 trillion KRW by 2035 to achieve 13 million annual visitors and 3.5 trillion KRW in annual revenue. To this end, the company presented plans including the creation of a ‘Grand Core Zone’ featuring world-class entertainment facilities, the development of an eco-friendly wellness resort, and the construction of a four-season leisure sports park.
Kangwon Land Vice President Choi Cheol-gyu stated, “The K-HIT Master Plan is a strategy that will determine the next 100 years for the abandoned mine region and a foundation for strengthening the competitiveness of the national tourism industry,” adding, “To carry this out successfully and on time, comprehensive, government-wide support is essential, such as exemptions from preliminary feasibility studies for new facilities, promotion as a national strategic industry, and deregulation of casino operations to global standards.”
However, some are voicing concerns regarding Kangwon Land's investment plan. The question of whether a 3 trillion KRW investment is even feasible is at the forefront. According to its quarterly report, Kangwon Land’s cash and cash equivalents stood at 162.1 billion KRW as of the end of September this year, falling far short of 3 trillion KRW. Profitability has also been declining recently. Operating profit fell 15.46% from 243.1 billion KRW in the first three quarters of last year to 205.5 billion KRW in the same period this year. Lee Hyun-ji, a researcher at Eugene Investment & Securities, evaluated, “The provision for performance-based bonuses for the second half of the year was higher than previously expected,” adding, “Profitability is somewhat sluggish due to increased expenses compared to last year, including honorary retirement payouts, advertising costs, and increased depreciation from safety reinforcement construction.”
It also appears difficult for the company to avoid criticism that a public enterprise is taking the lead in expanding gambling businesses. The ‘Grand Core Zone’ proposed by Kangwon Land is set to include a new ‘Grand Casino,’ and Vice President Choi Cheol-gyu has even publicly requested government support for it. In fact, Kangwon Land has long been embroiled in controversies regarding equity. This is because, while gambling for domestic citizens is prohibited under current law, Kangwon Land is the only entity permitted to operate a casino for them.
As critics point out the need for thorough planning and review of Kangwon Land's 3 trillion KRW investment, the current leadership vacancy is also drawing attention. Kangwon Land has been without a CEO for nearly two years since former CEO Lee Sam-geol resigned in December 2023. Although an executive recommendation committee was launched in August this year to appoint a new CEO, no significant progress has been reported to date.
Vice President Choi Cheol-gyu, who serves as acting CEO, also has little time left in his term, which expires on December 4th of this year. However, Kangwon Land has not yet posted a job notice for a new Vice President. Once Vice President Choi’s term ends, the company will face an unprecedented management crisis with neither a CEO nor an acting CEO.
The business world expects that Vice President Choi’s term will be temporarily extended until a new CEO or Vice President is appointed. This is because Article 28 of the Act on the Management of Public Institutions stipulates that “an officer whose term has expired shall continue to perform their duties until a successor is appointed.”
On the other hand, some suggest the possibility of Vice President Choi Cheol-gyu transitioning from acting CEO to a permanent CEO. This is because, while Kangwon Land's profitability has worsened, the company has seen some achievements, such as an increase in revenue, and there have been few major incidents. If Vice President Choi is appointed as CEO, he is expected to personally lead the execution of Kangwon Land's investments.
However, some analysts suggest that given Vice President Choi's career background, his appointment as CEO might be difficult. The CEO of Kangwon Land is appointed by the President upon the recommendation of the Minister of Trade, Industry and Energy, following a review and resolution by the Public Institution Operation Committee (P-IOC) based on the recommendations of the executive recommendation committee. The structure is one where the government’s stance is reflected absolutely.
Vice President Choi Cheol-gyu served as a policy advisor to the Minister of Gender Equality and Family in 2016 during the Park Geun-hye administration, and as a secretary for national integration in the Office of the President in 2022 during the Yoon Suk-yeol administration. Politically, he stands on the opposite side from President Lee Jae-myung.
Because of this, some point out that Kangwon Land’s 3 trillion KRW investment announcement was premature. A business official remarked, “Kangwon Land is not a company with a powerful owner; there seemed to be no need for management that will soon be stepping down to talk about an investment plan for the next 10 years,” adding, “The current management team created the plan, but the execution and responsibility have been left to the next management team.”
A Kangwon Land official stated, “Nothing has been finalized regarding the next CEO,” and added, “There were aspects where business was conducted in a disorganized manner due to the lack of a comprehensive development strategy, and we have now streamlined that. I believe the very fact that we announced the investment as a declaration of intent is a meaningful step forward for Kangwon Land.”