Private investment: Ambitious dream city rises from reclaimed mud
Confounding the sceptics, a $35bn city is finally rising from the mud on reclaimed land off the west coast of South Korea after years of being mocked as a fantastical pipe-dream.
But while Songdo city's developers claim it could become north-east Asia's trade hub when it is completed in 2014, they warn that much depends on how long the credit crunch lasts and on "Fortress Korea" cutting much of its notorious red tape.
The ambitious project 50km west of Seoul is being developed by Gale International, a US company that has a 70 per cent stake, and Korea's Posco Engineering & Construction, which holds the remaining 30 per cent.
The project envisages not only residential properties, offices and retail centres but an opera house, the tallest building in Korea, Venetian-style canals, a version of New York's Central Park and a golf course designed by Jack Nicklaus.
Its key asset is its proximity to Incheon international airport, to which it will this year be linked by a 12.3km bridge.
Chris Sausser, executive vice-president of Gale's investment department, says this will enable executives, both Korean and expatriate, to live in a green city with good international schooling while being only a short flight from the manufacturing centres of north-east China.
Mr Sausser says $9bn has been invested so far, out of the projected $35bn.
Between 6,000 and 10,000 people are employed on the building sites and more than 25 per cent of the total projects are under construction. The projected population will be 65,000, with 300,000 commuting in each day.
But he admits the challenges are as big as the vision. "We know there are going to be peaks and valleys," Mr Sausser says.
Much financing was secured before the economic crisis and the last tranche was a syndicated loan of $2.7bn led by Korea's Shinhan Bank in November 2007.
Since then, Mr Sausser says the business model has involved taking profits made from work such as the flats, which are highly oversubscribed, and pumping those earnings into new ventures such as the park.
But finding the right time for fresh loans is tough.
"We are talking to international financial institutions that still see a vibrant Korean economy and they want to be involved, but I don't know when," Mr Sausser says.
Another Gale executive admitted the tight financial climate had meant that the introduction of eco-friendly buses has had to be postponed.
This setback apart, Songdo is striving to become a benchmark for international green development, ensuring all its buildings meet the rigorous standards imposed by the US Green Building Council.
Lifts will be 75 per cent more efficient than normal ones and plumbing fixtures have been designed to reduce water consumption by 20 per cent.
The city will have 24km of cycle paths and storm water will be collected to help irrigate the golf course and park.
Korean red tape has also clipped earnings when some of the flats had to be sold at, in effect, 2005 rates because of a price-capping scheme intended to stop the housing market overheating.
In broader terms, Mr Sausser says the success of the project depends on the government properly defining what it meant by a free economic zone when opening Songdo up as a mini-Dubai to foreign investors, deciding whether it would offer tax breaks.
"Ultimately, local and central government need to offer incentives to do business here, and guarantees of transparency."
Red tape also proved a bone of contention when Gale rushed to finish work on the international school to open it to fee-paying students this autumn. However, a Korean rule on 70 per cent of students being foreign looked as if it would stop the school opening. But this rule was relaxed.
Taubman Asia is looking to develop a retail mall at Songdo and has entered into partnerships with Korean retailer Lotte, Megabox cinemas and Britain's Tesco.
"It's a very exciting opportunity - Korea is so far behind in retail development, having a quarter of the retail per capita of the US.
"There's a well-educated, well-travelled population with an affinity for US and European brands and they are just not getting that," says Morgan Parker, Taubman Asia's president.
But he says this novelty poses a significant challenge because Korean banks have not financed a shopping centre before and loans are proving elusive.
Mr Parker adds that Taubman's model will be wholly based on Koreans looking for variety in shopping. He is not relying on hopes that the city will become an international hub - with Chinese and Japanese day trippers.
"We don't share that optimism in Songdo becoming north-east Asia's trade hub," he says.