Strong Economic Impact Expected from Government's Approval of Capital Region Factory Expansions for LG Electronics and Others

The government's decision on the 7th to approve factory expansion in the capital region for four major corporations—LG Electronics (Osan), Pantech (Gimpo), Hanmi Pharmaceuticals (Hwaseong), and Ildong Pharmaceutical (Anseong)—is expected to generate substantial economic benefits.

According to Gyeonggi Province on the 7th, when these four companies invest 350 billion won by the end of next year to expand their factories, the expansion is expected to create 1,650 jobs and generate 770 million dollars in exports and 1.85 trillion won in production-induced effects.

LG Electronics is expected to significantly expand its production capacity for high-value-added printed circuit boards (PCBs) for semiconductors and next-generation terminal PCBs through this approval decision (33,000 square meters).

The province noted that in the second quarter of last year, LG Electronics' market share in the global market stood at 1.7% and 1.9% respectively, but it projected the company could rise to 3.6% by 2012 and emerge as a top-10 global company in these sectors.

Additionally, Pantech, a mobile phone manufacturer based in Gimpo, received approval to expand by 8,000 square meters, and it is projected that the company will increase its capacity to develop approximately 5 new models per month to around 15 models per month, and expand its finished product production capacity from approximately 400,000 units per month to 1 million units per month by 2010.

Furthermore, Hanmi Pharmaceuticals (9,000 square meters) and Ildong Pharmaceutical (5,000 square meters) will now be equipped with manufacturing facilities compliant with GMP (Good Manufacturing Practice) standards of advanced nations by separating production processes for cephalosporin antibiotics and anticancer drugs from general pharmaceuticals.

As a result, these companies will now be able to enter advanced overseas markets that were previously blocked due to manufacturing facility integration issues, and they will be able to respond in a timely manner to the enhanced domestic GMP standards scheduled to take effect from 2009.

Meanwhile, the province noted that the investment scale of these four companies (350 billion won) accounts for only 6 percent of the 56 trillion won awaiting investment from 37 companies in Gyeonggi Province, and predicted that if capital region regulations are eased, it would lead to a 2.7% increase in domestic GDP and create employment for 200,000 people.

In particular, the province predicted that 35 percent of the indirect production-induced effects generated from new capital region investments would occur in non-capital regions.

A provincial official stated, "A forward-looking policy shift in capital region policies is required so that the current system of selectively and limitedly permitting factory expansions can move toward institutionalization from the perspective of fostering national strategic industries."