SEOUL, South Korea - South Korea's Incheon city said Thursday a $290 billion plan to transform a fishing village into a rival to the Chinese gambling enclave of Macau has collapsed.
Incheon Free Economic Zone official Jung Mi-hyun said luxury hotel operator Kempinski AG, a key member of the development consortium, failed to raise a promised $40 million by the end of July. Kempinski's Korean unit KI Corp. is the largest shareholder in the consortium, Eightcity Co. Korean Air Lines Co. is the second-largest.
According to Incheon city, Kempinski agreed in May to the $40 million investment and to pay land owners of Yongyu-Muui district by the end of June, after the German group failed to attract investment several times. The two parties also agreed to call off the contract if Kempinski failed again to raise money. Incheon extended the deadline one last time by a month.
Incheon said the six-year-old contract with Eightcity is cancelled and it will seek a new developer. The city is considering using multiple developers and investors by splitting up the district.
Eightcity said it cannot accept the city's move and will seek to nullify the cancellation in court.
Park Seong-hyun, vice chairman of Eightcity, said the company is still trying to attract investment to the project and Incheon city is also responsible for the delay in raising the money on time.
"We are willing to continue to pursue the project," Park said. "The city cannot unilaterally call off the contract."
Incheon and Eightcity said last year that they would raise 300 trillion won by 2030 to remake the 30 square kilometre town near Incheon International Airport into a tourism, shopping and gambling centre to lure China's middle and upper classes.
The project has been dogged by doubts about its viability.
Kempinski's plan to operate a hotel in the North Korean capital of Pyongyang is also uncertain.