[Failure Study] ① The Grounded 'Hallyu Dream', Background of CJ LiveCity Cancellation

CJ "Gyeonggi-do Provided Defective Land... Grounds for Contract Termination"
Governor Kim Dong-yeon "If Willing, Open to Communication and Cooperation with CJ"

Editor's NoteEntertainment companies desperately needed performance venues. CJ spoke of cultural patriotism. Gyeonggi Province did not hide its desire to attract a performance venue as the center of tourism and culture. Elected officials, including the governor of Gyeonggi Province, also publicly declared plans to build CJ LiveCity in northern Gyeonggi. However, after 10 years, the CJ LiveCity project in Goyang City, which was supposed to play a central role in the future of K-pop, was ultimately deemed a failure. What went wrong?

The CJ LiveCity project, which attracted public attention for nearly 10 years with plans to create the world's first K-pop dedicated arena and a comprehensive K-content experience complex, was officially canceled last July. CJ Group, the project owner, and Gyeonggi Province, including Goyang City where construction was halted, each blame the other for contract termination, citing illegal waste disposal issues on the project site and lack of commitment to the project.

CJ Live City Arena rendering. [Photo by Hanwha Construction]

CJ LiveCity was a project initiated in 2016 through an agreement with Gyeonggi Province to develop a 64,000㎡ (approximately 100,000 pyeong) site in Janghang-dong, Ilsandong-gu, Goyang City, into a complex content experience zone featuring a 60,000-seat K-pop dedicated arena, studios, a theme park, lodging, and commercial facilities. It was expected to be the largest development project in northern Gyeonggi with a total budget of about 2 trillion KRW, anticipated to create 200,000 jobs and generate approximately 30 trillion KRW in economic output over 10 years. It was also a long-cherished project of CJ Group Chairman Lee Jae-hyun, who dreamed of cultural patriotism (文化報國). However, the project was canceled on July 1st following Gyeonggi Province's announcement of contract termination. The next day, Gyeonggi Province announced plans to pursue a publicly led development.

Gyeonggi Governor Kim Dong-yeon stated, "CJ's overall construction progress was only about 3%, and the project plan was changed four times. In October last year, CJ requested contract termination for commercial and lodging land to the Ministry of Land, Infrastructure and Transport's 'Public-Private Joint Construction Investment Project Adjustment Committee' without consulting Gyeonggi Province, the contracting party," adding, "CJ LiveCity broke its promise to the residents and shirked responsibility as the construction party."

Overview of CJ LiveCity Project

Named the 'K-Culture Valley Complex Development,' CJ LiveCity faced obstacles such as the national political scandal, COVID-19, and administrative procedures since its inception as a Gyeonggi Province public project in 2016. Moreover, shortly after receiving construction permits for the arena and beginning work, in May 2022, a large amount of construction and industrial waste was discovered in the western section of the arena during excavation. The waste was illegally buried up to about 3 meters deep across a 237,401㎡ (approximately 70,000 pyeong) area near the arena construction site, requiring 50 months to remove.

Pollution of Hallyu Stream, which crosses the CJ LiveCity site, was also cited as a cause of project delays. Over the past decade, the stream had become essentially a sewage canal due to inflows of domestic wastewater and accumulated trash. Gyeonggi Province had planned to develop it into a waterfront park in 2011, investing about 27 billion KRW in construction. However, design errors incompatible with the surrounding environment have resulted in foul odors and a water quality rating of 4 to 5, with rampant pests.

Gyeonggi Province promised in 2017 to cooperate with Goyang City to improve Hallyu Stream as a public project, but no completion schedule has been set yet. It took two years just to reach this agreement. Due to industrial waste and river pollution, four years and two months were wasted on preliminary work alone, resulting in only 17% construction progress by the project deadline in June, according to CJ.

CJ LiveCity Promotion Status

Additionally, Korea Electric Power Corporation (KEPCO) notified that supplying large-scale power to the CJ LiveCity area would be difficult, posing a major crisis for the project. KEPCO later proposed installing a new Shin-Goyang substation as an alternative, but the substation's completion and power supply availability are not expected until after 2029, hindering project progress.

To resolve ongoing issues, CJ applied for mediation last year to the Ministry of Land, Infrastructure and Transport's Public-Private Joint PF Adjustment Committee, expressing willingness to accept a mediation plan that included reduction of delay penalties and rescheduling of construction deadlines. The committee recommended that delay penalties accumulated before the power supply notice be imposed on CJ, but penalties after the force majeure power supply notice be reduced. However, Gyeonggi Province maintained its position of non-acceptance.

Gyeonggi Province explained that exempting only CJ from delay penalties could lead to future allegations of preferential treatment or breach of duty. Furthermore, citing that the overall project progress over the past eight years was only 3% (17% for the arena), the province judged CJ lacked commitment and notified contract termination. The province also declared that future development would be carried out in cooperation with GH (Gyeonggi Housing and Urban Development Corporation), with operations transitioning to a public development involving domestic and international entertainment companies.

Citizens of Goyang are protesting in front of the Gyeonggi Provincial Government Building in Suwon, urging the original development plan of CJ Live City. [Photo by Ilsan Yeonhaphoe]

In response, local residents strongly opposed the decision. Those who had welcomed and supported the project for its economic impact and community revitalization protested on the 20th of last month, mobilizing about 80 vehicles in front of the construction site, lamenting that administrative conflicts between Gyeonggi Province and Goyang City led to the project's collapse.

A representative from the Ilsan Union who participated in the protest said, "If CJ LiveCity had been completed normally by June this year, the American singer Kanye West, who recently held a concert in Korea, might have performed a more spectacular show at the arena rather than at Goyang Sports Complex," adding, "I thought the CJ LiveCity project was an opportunity for Goyang City to shed its backward image and reputation as a bedroom town compared to southern Gyeonggi. Now, I feel not just disappointed but angry about how they plan to solve the massive funding of nearly 2 trillion KRW and content supply through public development."

CJ argues that under the 'K-Culture Valley Complex Development' basic agreement, Gyeonggi Province was originally obligated to prepare and supply the land in a condition suitable for facility construction before transferring the land. Since CJ has been paying annual land lease fees, the fact that Gyeonggi Province, as the landowner, leased the site despite its defects could constitute grounds for contract termination.

Beyond construction, CJ has steadily proceeded with planning, development, and operational preparations for the LiveCity project, including establishing the concept for Korea's first large-scale music-specialized arena and successfully collaborating with global entertainment company AEG. CJ has been working on forming a joint venture (JV) with AEG and opening a Korean office in Goyang City. CJ states that it has invested over 700 billion KRW in the project over the past eight years.

Gyeonggi Province and CJ LiveCity held the 'K-Culture Valley Arena Groundbreaking Ceremony' on October 27, 2021, at the K-Culture Valley theme park site located in Janghang-dong, Ilsandong-gu, Goyang-si.
[Photo by Gyeonggi Provincial Government]

CJ emphasized, "Gyeonggi Province blames us for project delays caused by administrative investigations by the provincial council and continuous delays in permit approvals during the project planning process," adding, "Even after the termination notice from Gyeonggi Province, we have continued efforts to resume arena construction through direct and indirect contacts with the province, repeatedly expressing our commitment and will to succeed."

Amid ongoing opposition from Goyang citizens and residents of the province, Governor Kim Dong-yeon recently expressed his stance on the project, marking a new phase in the issue. In response to a petition titled 'Request for detailed explanation, reconsideration, and timeline presentation regarding CJ LiveCity,' signed by 10,758 residents last month, Governor Kim said, "We will promptly proceed with the 'K-Culture Valley' project without changes to the housing development or other plans," and "If there is a clear will to proceed, we will communicate with CJ."

Meanwhile, on the 5th, CJ sent an official letter to Gyeonggi Province notifying acceptance of the province's decision to terminate the 'K-Culture Valley Complex Development' basic agreement, as announced by Kim Sung-joong, Gyeonggi Province's Administrative Deputy Governor 1, on the 9th.

CJ explained, "Considering that litigation over the invalidity of the agreement is expected to take more than five years, we will actively negotiate with Gyeonggi Province to normalize the project."