The Dunchon Jugong Reconstruction Complex in Gangdong-gu, Seoul, the largest reconstruction project to date, is facing a construction halt crisis. As conflicts over project costs between the association and the construction companies reach a peak, the Dunchon Jugong Construction Team (including Hyundai Engineering & Construction and three other companies) has announced a construction stoppage starting from the 15th. The photo shows the reconstruction site on the 14th. Photo by Hyunmin Kim kimhyun81@
[Asia Economy Reporter Kim Hyemin] The Ministry of Land, Infrastructure and Transport and the Seoul Metropolitan Government have launched an on-site investigation into the Dunchon Jugong reconstruction project in Gangdong-gu, Seoul, where construction has been halted. Following local governments, the central government is also stepping in to mediate the conflict, drawing attention to how this investigation might impact the Dunchon Jugong situation.
According to the maintenance industry on the 23rd, the Ministry of Land, Infrastructure and Transport, Seoul City, and Gangdong-gu Office will conduct a joint inspection of the overall operational status of the Dunchon Jugong reconstruction association from today until July 3.
The inspection was originally scheduled for July, but the schedule was moved up following complaints from some association members concerned about increasing damages due to the construction halt. The joint inspection team will review the association’s selection and contracts with service providers, borrowing of funds, budgeting and execution including accounting, general assembly meetings, information disclosure, and overall operations. In particular, they plan to examine the conflict factors between the association and the construction consortium that escalated into the construction stoppage.
The investigation results are expected to affect the association, the construction consortium, and internal conflicts within the association. Some association members dissatisfied with the association’s stance, which is firmly opposing the construction consortium, believe this investigation could serve as a form of pressure on the association. If operational issues are found during the inspection, the association’s legitimacy could be shaken. An industry insider said, "This could lead to a new phase such as the dismissal of the association head and the election of a new executive team."
On the other hand, the association’s executive team views this investigation as an opportunity to prove the association’s transparency. After the joint inspection was announced, the association sent a message to members stating, "It will be revealed that the association is unrelated to corruption and is being operated transparently."
The Dunchon Jugong reconstruction site has been under a construction halt since June 15 due to conflicts between the association and the construction consortium. The root cause is a difference in stance over the increase in construction costs, but the dispute has escalated into an emotional confrontation over whether to recognize the cost increase contract signed between the former association head and the construction consortium.
The situation facing the association and the construction consortium is not favorable. The construction consortium plans to remove all construction heavy equipment, including tower cranes, by July, raising concerns that the construction halt could be prolonged. Especially, the loan maturity of 700 billion KRW for the project is due on August 24, and if no agreement is reached by then, extending the loan maturity will be difficult. Each association member must repay more than 100 million KRW of the project cost, and if they fail to do so, the lending consortium (a group of lending financial institutions) may demand subrogation payment from the construction consortium, which in turn could claim indemnity from the association, potentially worsening the situation uncontrollably.
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