[Heavy Industry ON] How Did the "1 Trillion Won Compensation" Arise... Poongsan Compensation Draws Attention as Centum 2 District Accelerates

Busan Plant Draws Renewed Attention as Centum 2 Project Gains Momentum

From State Land Purchase in 1981

to the Deletion of the "Buyback Clause"

The Poongsan Busan plant, a defense contractor located in Banyeo-dong, Haeundae-gu, Busan, is once again drawing attention. As the project to develop the Centum 2 District as a high-tech urban industrial complex accelerates, there is growing speculation that the land compensation Poongsan may receive could reach up to 1 trillion won.

A panoramic view of the site planned for Centum 2 District, which Busan City is promoting as an advanced industrial complex. Photo by Yonhap News

However, the current controversy is not solely due to the size of the compensation. The site was originally state-owned land sold in 1981 to foster the defense industry. The process by which a special provision—allowing the contract to be terminated if the land ceased to be used for military purposes—was later deleted, and the alignment of this with the Centum 2 District development, has reignited interest in the contract made over 40 years ago.

Centum 2 District is a high-tech urban industrial complex that Busan is developing across approximately 1.91 million square meters spanning Banyeo, Bansong, and Seokdae in Haeundae-gu. It is being promoted as the so-called "Busan-style Pangyo Techno Valley," aiming to attract smart shipbuilding, robotics, intelligent machinery, and information technology companies.

The project completed its feasibility study in 2015, and the plan for industrial complex designation was announced in 2016, but it has faced nearly a decade of delays. The main reason was the issue of relocating the Poongsan Busan plant. The plant covers about 1.02 million square meters, accounting for more than half of the total Centum 2 District project site. The relocation of the plant is necessary to commence the second phase of the project, so Busan City has been in discussions with Poongsan for several years.

Recently, with Poongsan submitting a letter of intent to relocate to Jangan-eup, Gijang-gun, and Busan City also advancing the process of designating the project operator, the project has begun to pick up speed again. However, as the relocation process enters full swing, attention is increasingly focused on the scale of land compensation.

Busan Urban Corporation had previously allocated about 830 billion won of the total 2.0411 trillion won project cost for the relocation and compensation of the Poongsan plant. However, this figure was calculated on the assumption that the project would be completed by 2027. With subsequent project delays and rising real estate prices, some now predict that the compensation could approach 1 trillion won.

Poongsan's financial situation is another factor attracting market interest. As of the first quarter of 2026, Poongsan’s consolidated total liabilities stood at 2.3993 trillion won, an increase from the end of last year. Of this, current liabilities amount to 1.8094 trillion won, making up about 75% of total debt. Short-term borrowings totaled 589.4 billion won, and long-term liabilities due within a year amount to 115.7 billion won. Recent losses from derivatives, caused by fluctuations in raw material prices and exchange rates, have also heightened market attention toward the possibility of significant cash inflows. However, these financial burdens do not directly correlate with the Centum 2 District compensation; the actual compensation amount will be determined through appraisal and administrative procedures.

The Poongsan Busan plant site is approximately 889,000 square meters of state-owned land purchased from the government in 1981. The original sales contract between the Ministry of National Defense and Poongsan included a special clause stating that the contract could be canceled if the land was not used for defense industry purposes.

However, this special clause was deleted from the land registry in 1999. This fact came to light in 2018 when then-Assemblyman Kim Jonghoon’s office released the contract and registry documents obtained from the Ministry of National Defense. At the time, civic groups and some politicians raised suspicions of preferential treatment regarding the deletion of the clause and called for an explanation and reinvestigation by the Ministry of National Defense. Poongsan, on the other hand, has cautioned against overinterpretation, emphasizing that land compensation will proceed according to legal procedures.

Poongsan is maintaining a cautious stance regarding the speculation of a "1 trillion won compensation." In a phone call with The Asia Business Daily, a Poongsan official said, "The project is currently being led by Busan City, and the company is waiting for a policy decision. Since the appraisal has not even begun, the 1 trillion won figure being mentioned is not one calculated by the company."

The official added, "The company is in a position where its land will be expropriated. Given the significant costs involved in developing a new site, relocating facilities, and investing in new equipment, it is difficult to say that the company will benefit greatly from the compensation alone."

In fact, Poongsan emphasizes that, as part of the plant relocation process, the development of a new site, transfer of production facilities, and new investments must all take place simultaneously. The company maintains that the specific compensation amount can only be determined after the appraisal and administrative procedures are completed.

Ultimately, for Busan City, the relocation of Poongsan is a key task in the development of Centum 2 District, and for Poongsan, it is a project that requires bearing massive relocation costs. Moreover, as the controversies over the past sale of state-owned land and the deletion of the special clause are revisited, the "1 trillion won compensation" issue has evolved beyond simple compensation, sparking a broader debate over public interest, development gains, and the appropriateness of national asset management.

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