[Reporter’s Notebook] Disclose the Hwaseong International Theme Park Business Agreement

Business Agreement Signed Differently from Public Offering Guidelines
Allegations of Project Land Purchased at Bargain Price
Repeated Refusals and Denial of Groundbreaking Delay

Recently, the Korea Water Resources Corporation decided to hold the Shinsegae Group responsible for the delay in the groundbreaking of the Hwaseong International Theme Park complex development project based on the public offering guidelines. They decided to impose a development delay penalty amounting to 5.6 billion KRW annually. However, the Shinsegae Group is resisting, stating that "we cannot acknowledge the occurrence of the development delay penalty." Their basis is the business agreement made with the Water Resources Corporation. A Shinsegae representative said, "Since the project is proceeding according to the business agreement, it is not a delay in groundbreaking."

The business agreement includes matters related to the project plan and development schedule based on the public offering guidelines. According to Shinsegae's logic, it means that the construction period and development schedule were arranged differently from the public offering guidelines when the business agreement was made. In other words, Shinsegae has effectively admitted that the business agreement was concluded differently from the public offering guidelines.

Our outlet has already confirmed that the business agreement was indeed concluded differently from the public offering guidelines. This was during the signing of the land sale contract for the tourism and leisure land where the theme park will be built. According to the public offering guidelines, the land sale price had to be finalized after reflecting the developer’s, i.e., Shinsegae’s, project plan and conducting an appraisal. However, the actual business agreement, proposed by Shinsegae, did not properly reflect project plans such as the relaxation of floor restrictions. As a result, the land appraisal value was underestimated, allowing Shinsegae to purchase the project land at a bargain price.

To secure the original business agreement document, the reporter requested the National Assembly to obtain the original and also filed an information disclosure request with the Water Resources Corporation. However, the Shinsegae Group repeatedly refused disclosure, citing reasons related to management and trade secrets. The Water Resources Corporation also appeared to be cautious about Shinsegae’s stance. Previously, the Water Resources Corporation rejected our information disclosure request regarding the business agreement, explaining the reason as follows: "The private developer (Shinsegae Group) does not consent to submission, and our corporation has a confidentiality obligation, which could lead to liability for damages."

According to the public offering guidelines, the initial business agreement should have contained many unfavorable terms for Shinsegae. It should have strictly applied matters related to contracts with global-level intellectual property (IP) owners and license agreements, and explicitly stated that the business agreement would be terminated if the contract failed. However, judging from the current situation, it is doubtful whether such unfavorable terms for Shinsegae were properly included in the business agreement.

The Hwaseong International Theme Park complex development project is a public interest project. The main point is that private capital is invested in land owned by a government-affiliated public institution to build a global-level theme park. Therefore, local governments such as Gyeonggi Province and Hwaseong City have also rolled up their sleeves. But what if a project developed for public interest proceeds according to a business agreement favorable to a specific company?

Previously, the Board of Audit and Inspection pointed out in its audit report during the suspicion of the bargain purchase of project land: "If a business agreement can be concluded with terms different from the public offering guidelines, it could fundamentally deprive companies that did not apply in reliance on the public offering guidelines of the opportunity to participate in the project, and there is a risk of abuse by providing preferential treatment to specific companies." If the current trend continues, this could set a precedent for unfair preferential treatment not only in this project but also for all companies participating in future public offering projects. To create a fair market competition environment, we hope Shinsegae will disclose the business agreement.