How Will the Government Finance Its Town Construction Projects?

Since its inception, the incumbent administration has pursued special town construction projects that include innovation towns, industrial towns, administrative towns, and new residential towns. The total area set aside for these projects is now about 108.509 million pyeong (1 pyeong = 3.3 square meters), 42 times larger than Yeoido, Seoul (2.57 million pyeong).

However, the grand scale of the projects raises concerns that this might place a burden on the next administration and generation because most of the towns are scheduled to start at the end of the next year, and private companies, which were expected to make investment, are still reluctant.

According to a government-announced materials from the Ministry of Construction and Transportation, and the Presidential Committee on Balanced National Development, the total area designated for town construction projects is about 108.509 million pyeong: 15.559 million pyeong in 10 innovation towns, 32.81 million pyeong in six industrial towns, 22.05 million pyeong in one administrative town, and 38.09 million pyeong in 10 new residential towns around Seoul.

Besides, considering other similar projects for local areas, such as the construction of international free towns, specialized local developmental zones, and innovative clusters, the size of the projects will become much bigger than estimated above.

In fact, it is difficult to estimate the exact budget that is necessary for the town projects because there are many places that haven’t announced required budget. Meanwhile, the government has spent three trillion won on compensation for landowners who suffered losses due to the construction of administrative towns since its inauguration, and it plans to spend an additional 4.4 trillion won starting this year as compensation for residents in government-planned innovation towns.

Since many of these projects are scheduled to start next year when the current government comes to end, the expense is expected to increase further.

As for the innovation town project that will relocate 125 public institutions currently located in Seoul to six outlying local cities, the government plans to hold a groundbreaking ceremony in September this year, and complete construction of the town project in 2012.

The government’s town construction projects have been criticized for stimulating land speculation across the nation. Apart from compensation, the projects have contributed to a rise in land prices and have spurred speculation in designated areas.

Besides, it is still up in the air whether the government has succeeded in encouraging private companies to make investments in its town projects, despite promises made at the early stage of organizing them.

Regarding this, people worry that if private investment fails to meet expectations, the shortfall will have to be covered by more taxes.

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