Posco’s plan to set up holding firm in Seoul faces political backlash

Posco Group has been left baffled over calls from political circles and local communities not to establish a new holding company in Seoul, and to stay in Pohang, North Gyeongsang Province, where the firm was initially founded as a state-run enterprise in 1968. 

All four leading presidential candidates have publicly urged Posco -- which will officially launch a new holding firm on March 2 -- to remain in its birthplace of Pohang for the sake of balanced regional development.

Posco has denied that the plan is meant to leave Pohang or to relocate its company headquarters to Seoul. But presidential contenders, obviously mindful of angry voters in Pohang and neighboring regions, have been urging the steelmaker to reconsider, saying that setting up a major office in the capital city will jeopardize the economy of the southeastern industrial city that has relied on the company for its growth for decades.

Ruling Democratic Party of Korea presidential candidate Lee Jae-myung wrote on social media that Posco’s relocation to Seoul is “against the late founder’s spirit and the group’s historical mission.”

Other candidates, including Yoon Suk-yeol, Ahn Cheol-soo and Sim Sang-jung, also echoed the same sentiments, raising concerns in a TV debate held ahead of the presidential election earlier this week. 

Twenty-two years after the company was privatized in 2000, the Korean steelmaker decided to split off Posco into two entities in January, so the establishment of a holding company will focus on corporate social responsibility and the creation of jobs in new business areas. 

According to Posco, the new holding firm’s location in Seoul is meant to take advantage of the proximity to research and development facilities in the capital region, so they can easily recruit talents here and from abroad.

“Posco Holding company’s settlement in Seoul will not lead to an outflow of the workforce nor a reduction in tax revenues, because the strategy and planning division in our Seoul office will transform into the holding company,” said Posco Vice Chairman Kim Hak-dong.

The firm says it will still prioritize Pohang and Gwangyang, South Jeolla Province, as the hub for its new rechargeable battery and hydrogen business.

Posco has long contributed to its hometown, not only in terms of investing in its steel mill facilities which produce 16 million metric tons of steel annually; but also building academic institutions such as Postech, tourism hotspots like Space Walk, as well as startup incubation center Changeup Ground in Pohang. This year alone, some 2.8 trillion won ($2.33 billion) will be put to streamlining cokes and organizing steelyard.

Concerns initially spread among those in local steel businesses that the establishment of holding company in Seoul may send the wrong signal that Posco would put its manufacturing base in Pohang on the back burner to focus on seeking future growth.

The regional protest has grown to target Posco executives. 

The Pohang City Government said it has formed a task force, led by Deputy Mayor Lee Jang-sik, that will hold a massive rally next Monday in front of Posco headquarters in Seoul, urging the Posco CEO to step down.

By Kim Da-sol (ddd@heraldcorp.com)