Government to Write Off 40 Percent of Local Subway Corporations’ Debts

Controversy has been stirred by the central government’s plan to write off five local governments’ two trillion won in debt due to the subway construction and operation.

Some criticize that it is unfair to write off the subway corporations’ debts with the money of the taxpayers who do not even use the subways. And some suspect this plan is being politicized since the election is set for April.

The “Metropolitan Subways Bailout Package” will be confirmed this month, according to the Ministry of Planning and Budget and the Ministry of Construction and Transportation. The package outlines paying off 30 to 40 percent of 4.95 trillion won in debts as of the end of 2002 that the five metropolitan cities – Busan, Daegu, Incheon, Gwangju, Daejeon - owe in subway construction and operation.

Busan has 2.65 trillion won, the largest in debt while Daegu has 1.3 trillion, Incheon 525 billion, Gwangju 240 billion, and Daejeon 203 billion won. Seoul’s subway related debt is excluded from the write-off due to its revenue surplus, despite the largest debt of 5.73 trillion won.

If the package is confirmed, the central government will demand tough restructuring plans for the local governments instead of paying off their subway related debts over 10 years from 2005.

“Of course, the central government cannot turn its back on heavily-indebted local governments. But the government must be politicizing the write-off plan with the general election approaching,” says Professor Yun Kun-Young of the Economics Department at Yonsei University.

“Local governments owe debt, but the central government had to share the burden because the heavy debt prevents local governments from doing other local businesses,” explained Director Koo Bon-Jin of Industrial Public Finance Division at the Ministry of Planning and Budget.

Kwang-Hyun Kim Jae-Seong Hwang kkh@donga.com jsonhng@donga.com