"LegoLand Incident, Putting the Cart Before the Horse"… "Criticizing the Firefighters Who Came to Extinguish the Fire While Overlooking the Cause Providers"

Gangwon Research Institute Hosts Forum on 'What Is the Essence of the Legoland Issue?'
Experts: "Time to Consider Gangwon Residents' Perspective... Situation Must Be Diagnosed from That Viewpoint"
Ruling Party: "Former Governor Choi Moon-soon's Administration Faults Wrongly Blamed on Governor Kim Jin-tae"

On the afternoon of the 14th, the Gangwon Research Institute and ruling party lawmakers held a forum at the National Assembly on the topic "What is the essence of the Legoland issue?" [Gangwon Research Institute]

[Asia Economy Reporter La Young-cheol] The Gangwon Research Institute held an expert forum to dispel controversies and misunderstandings surrounding Gangwon Province's plan to file for rehabilitation of Gangwon Jungdo Development Corporation (GJC), which is responsible for the infrastructure development of Legoland.

On the 15th, the Gangwon Research Institute announced, "The forum was planned to clearly explain the series of market trends before and after the announcement of GJC's rehabilitation filing plan, including the credit market tightening phase, the government's stabilization measures to resolve it, and Gangwon Province's debt repayment plan announcement, under the theme 'What is the essence of the Legoland issue?' at the National Assembly Members' Office Building on the 14th."

Gangwon Governor Kim Jin-tae reiterated, "We have never declared default," and ruling party lawmakers criticized, saying, "They are blaming Governor Kim for the mistakes of former Governor Choi Moon-soon’s administration."

■ Keynote Presentations

- The Pros and Cons of Attracting Legoland

Kim Byung-heon, President of the Korean Tourism Promotion Society (former professor at Korea Tourism University), pointed out, "Local governments, while promoting regional development projects like Legoland, tend to focus on achievements and overlook issues that need to be checked such as economic feasibility, using the project as a means to strengthen political positions, and may be tempted to rush the project within their term."

He added, "Issues like debt guarantees by local governments or national public institutions are directly linked to the credibility of the nation itself," emphasizing, "If local government heads make performance-oriented decisions, it will become a significant burden not only for the local governments and residents but also for the country."

He especially stressed the need for thorough analysis across various fields and appropriate coordination among stakeholders to promote projects like theme parks and tourism development such as Legoland.

He noted that important tasks include establishing and implementing tourism development plans covering tourism demand forecasting, demand and supply and marketability analysis, development entities, investment financing, financial feasibility analysis, and attracting finance and investment.

President Kim stated that the annual 2 million visitors to Legoland, the 590 billion KRW production inducement effect, and the expected annual local tax revenue of 4.4 billion KRW are overestimated compared to the two major domestic theme parks: Seoul Lotte World (58 million cubic meters, 5.96 million visitors in 2018) and Yongin Everland (149 million cubic meters, 5.85 million visitors in 2018).

- Is the Credit Market Tightening Due to Legoland’s Rehabilitation Filing?

Oh Jung-geun, President of the Korean Financial ICT Convergence Society (former professor at Korea University), regarding the recent credit market tightening and GJC’s rehabilitation filing plan, said, "Although it was reported that the tightening was triggered by Gangwon Province’s 205 billion KRW asset-backed commercial paper (ABCP) rehabilitation filing for GJC on September 28, market interest rates have shown stable movements after the announcement, but market rates have risen (bond prices have fallen) following the Bank of Korea’s rate hikes."

He added, "The government’s 50 trillion KRW scale credit market stabilization measures are aimed at stabilizing the credit market," and diagnosed, "While GJC’s rehabilitation filing may have been one factor exacerbating the credit market liquidity crunch, it is not the fundamental cause."

As evidence, he cited the Bank of Korea’s big-step rate hike (0.5 percentage points) on October 12 and the expected additional federal funds rate hikes by the U.S. Federal Reserve, which have led to further bond price declines and reduced bond demand.

President Oh emphasized, "Rather than the credit market tightening being caused by Legoland, it is important to properly analyze and respond to the background and causes of the financial market tightening phenomenon, which stem from high inflation, high interest rates, and high exchange rates leading to bond price declines and reduced bond demand."

■ Comprehensive Discussion

- Misplaced Accountability Due to Politicization of the Economy

Kim In-young, Professor and Vice President of the Department of Political Science and Public Administration at Hallym University, said, "Holding the current Gangwon Governor responsible for the current credit market tightening, extending even to the Yoon Suk-yeol administration, can only be seen as a political offensive," and pointed out, "The current Gangwon Governor is being scapegoated as the 'cause of the financial crisis' as part of a political attack against the Yoon Suk-yeol government and the ruling party."

Professor Kim also analyzed that the main causes are "the sharp increase in financial costs due to high inflation, high interest rates, and high exchange rates, and the expected further rate hikes leading to bond price declines and reduced bond demand."

He explained, "Although Governor Kim Jin-tae can be criticized for not predicting the unfolding credit market situation and for pushing forward hastily without consulting the Financial Supervisory Service, such criticism is only hindsight."

He further stated, "Despite repeated mentions of the promise to fulfill guarantee debts, ignoring those words and blaming the Governor as the main culprit of the credit market liquidity crunch and even as the cause of an IMF-level financial crisis is a political witch hunt aimed at diverting public attention from the political crisis triggered by the investigation of opposition party leader Lee Jae-myung."

Professor Kim pointed out, "Many criticisms come not from the perspective of Gangwon Province and its residents but from the perspectives of GJC or Merlin, blaming the Governor and the provincial government, so it is time to consider the situation from the viewpoint of Gangwon residents."

He added, "The accountability theory blaming Governor Kim Jin-tae for the credit market liquidity crunch related to Legoland deviates from the essence of the issue," emphasizing, "It is a misplaced accountability blaming the firefighter who came to put out the fire while ignoring the root cause of reckless guarantee obligations."

He also criticized, "The core of this issue is the mistaken diagnosis that 'non-performance' rather than 'debt' is the problem," and said, "It is a logical error of 'creating a scarecrow to criticize' to claim there was non-performance when no default has actually occurred."

Professor Kim advised, "Economic issues should be resolved with economic logic, but the politicization of the economy, which turns them into political battles, is undesirable both nationally and for Gangwon Province, and does not help restore trust in Legoland."

- The Legoland Issue from a Local Perspective

Yoo Seung-gak, Research Fellow at the Gangwon Research Institute, diagnosed, "Over 11 years, the tourism market has changed rapidly, and the domestic population structure has also undergone many changes. However, the demand for Legoland has remained at the initially proposed 2 million visitors. Despite accelerating factors such as declining birth rates and changes in family composition, the demand has remained unchanged."

He advised, "If demand decreases and costs increase, economic feasibility inevitably worsens. In this situation, it is necessary to examine whether it was appropriate for Gangwon Province to proceed with the project by taking on 205 billion KRW in guarantee debt with residents’ taxes."

Research Fellow Yoo noted, "As the business environment deteriorated, changes occurred in Merlin’s role, and contract modifications were conducted unfairly," and judged, "If a private operator prioritizing economic feasibility were involved, one would inevitably doubt whether the project could have continued."

He pointed out that as the project leadership shifted to Merlin, the Legoland MDA was concluded very favorably for Merlin, yet the exact contents of the MDA have been kept secret.

Research Fellow Yoo suggested as a normalization plan for the Jungdo development project, "If GJC lacks capability, a new operator should be attracted, and pursuing M&A by a specialized development company through rehabilitation filing should also be considered. This process could save residents’ taxes."

He added, "It is necessary to review the previous plan once again and develop a new plan that can secure competitiveness in the changing tourism market. Securing a capable developer to efficiently implement this is essential."

- The Truth of the Legoland Issue: The Arsonist Should Not Blame the Firefighter

Cho Dong-geun, Professor Emeritus of Economics at Myongji University, criticized opposition leader Lee Jae-myung for maliciously interpreting Governor Kim Jin-tae’s plan for GJC’s rehabilitation filing as a refusal to repay guarantee debts.

On the 14th, Lee Jae-myung claimed, "Governor Kim Jin-tae and the government must take clear responsibility for the great chaos caused in South Korea’s bond financial market due to the 'Kim Jin-tae incident.'"

Professor Cho pointed out, "Lee’s talk of investigating Governor Kim Jin-tae can be seen as an act to divert the 'prosecutor’s scrutiny and public suspicion' aimed at himself outward."

Previously, Lee declared a moratorium (debt repayment deferral) during his tenure as mayor of Seongnam, citing that his predecessor Lee Dae-yeop left debts amounting to hundreds of billions of won.

Professor Cho raised questions such as, "'Is the state a bottomless pit?', 'Was a feasibility study conducted for Legoland?', 'Should the state guarantee everything?', and 'Are Gangwon residents slaves?'" He criticized, "During Governor Choi Moon-soon’s administration, management of GJC was not conducted properly, and GJC’s moral hazard was not checked."

Meanwhile, Governor Kim Jin-tae said, "The previous administration left without repaying a single penny, and I have been trying to repay it somehow, but this happened," and added, "To reiterate, I announced a rehabilitation plan, but the market seems to have confused rehabilitation with default."

Governor Kim emphasized, "As the financial market is slowly stabilizing, it is not good for the political circles to keep stirring up the crisis," and said, "The bond market is psychological, so we must not provoke anxiety and face a so-called self-fulfilling crisis."

This content was produced with the assistance of AI translation services.