Public Land to Be Sold to Raise Gov`t Revenue

The Strategy and Finance Ministry yesterday said it will sell about 61 square kilometers of public land next year, double what it sold this year, and expand consignment development projects for state land.

The ministry said it is considering designating state land in Seoul’s Gangnam and Jung districts as candidates for consignment development projects. The government will also sell part of its shares in Industrial Bank of Korea early next year after the sale was postponed due to the global financial crisis that started in September last year.

○ Using state property

Since the government decided to continue stimulus measures next year, state spending for next year will be larger than this year’s budget of 284.5 trillion won (233 billion U.S. dollars).

A high-ranking ministry official said, “Given that fiscal expansion will be inevitable next year, tax revenue itself is not enough to achieve fiscal soundness,” adding, “Accordingly, we will sell state property to raise additional revenues.”

First, about 120 square kilometers of public land will be sold next year. As preparation for the sale, the government is revising a law on the sale of public property to deregulate the size of land the government is allowed to sell.

Major cities can sell less than 300 square meters of land. The revision, however, will double the size to attract private developers.

Given that the government raised 783.6 billion won (641 million dollars) by selling public land last year, sale of twice the land volume is expected to generate more than one trillion won (818 million dollars).

Consignment development projects are also expected to boom next year. A ministry official said, “Until now, nine plots of government land have been consigned to private developers, creating a net market value of 70 billion won (57.2 million dollars).”

“Narakeyum Jeodong Building (the old Namdaemun Tax Office), the first consignment project, is now generating five billion won (4.1 million dollars) every year.”

○ Sale and use of government-owned stocks

Additional revenue will be garnered by lending stocks in state companies to institutional investors. After law revisions, the government is looking for investors to conduct stock lending transactions.

Stocks subjected to loan include 68.47 percent of shares the government holds in Industrial Bank of Korea, 21.1 percent in Korea Electric Power Corp. and 26.8 percent in Korea National Oil Corp.

Daeshin Securities research analyst Lee Seung-jae said, “Even if the government lends all of its stocks, it can receive transaction fees worth three or four percent of the value of the stocks while receiving dividends,” adding, “From the perspective of the government, the stock lending transaction is a safe and effective way to utilize stocks.”

On the sale of Industrial Bank of Korea stocks, the government will add 1.2 trillion won (981 million dollars) in proceeds from the sale of the stocks to next year’s budget to be submitted to the National Assembly next month.

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