The Incheon city government’s 5-trillion won ($4.2 billion) project to build a smart city in Geomdan new town district has foundered due to disagreement over the project terms between the two municipalities of Incheon and Dubai.

Incheon mayor Yoo Jeong-bok said in a press conference on Thursday that the city had sent a letter to notify the official termination of the deal to United Arab Emirates state-owned SmartCity Dubai and Smart City Korea, a special purpose companies set up for the project. The project fell through 20 months after Incheon received the letter of intent from Dubai to invest in the initiative.

The Geomdan Smart City project was intended to establish a 4.7 million-square-meter city that has financial centers, residences, educational institutions, health care centers and entertainment streets in Geomdan new town district. Incheon Development & Transformation Corp. and Korea Land & Housing Corp. have a 50 percent stake each while Dubai Holding of UAE promised to inject 5 trillion won to the project.

The special purpose company and the land owners, Incheon city and Korea Land and Housing, have been in negotiations over the project terms, but they failed to reach an agreement on which party would play a major role in the project. Incheon city wanted SmartCity Dubai to sign the agreement as a project leader taking major responsibility in the project from raising fund to attracting global companies, but SmartCity Dubai insisted Smart City Korea lead the project.

The collapse of the deal is expected to cause tremendous damage to the city as it has already spent astronomical amount of money in the project. The city said it would work hard to minimize damage for the residents in the area by resuming land development businesses that had been put on hold since the start of the project.

But if it fails to complete the land development by 2023, possible losses would reach about 100 billion won.

By Ji Hong-goo

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