Securing Financial Resources
for Expanding Infrastructure
By Rep. Joo Seung-yong

The Korean economy has achieved a steady growth, riding on the expansion of roads and ports, representatives of social overhead capital (SOC), and state outlays into the SOC sector have accounted for a considerable portion of state budgets.
The public concern over social welfare has been growing as the per capita national income has exceeded the $10,000 mark. People are increasingly demanding that Korea's social welfare outlays, considerably lagging behind those of advanced countries, be raised. But Korea's securing SOC is markedly insufficient compared to advanced countries. In reality, Korea's combined length of roads stands at one-fifth of Japan's, one-third of United Kingdom's. The nation ranks 28th place among the 30 OECD countries.
Despite the current situation, the government has reduced its budgetary outlays into the SOC sector. The Ministry of Construction and Transportation has demanded 16,161.4 billion won in its 2006 budgetary request, 1,013.7 billion won shy of 17,175.1 billion won earmarked for its 2005 budget. Out of the total, the budget for road construction declined to 6,873.3 billion won in 2006, a decrease of 611.2 billion won from 7,484.5 billion won. The decrease in the budget for road construction represents 60 percent or 611.2 billion won of the total budgetary cut for the MOCT, which is feared to cause a considerable setback in SOC expansion plans.
In particular, the special account on traffic facilities, raising 13 trillion won per annum, a considerable portion of the MOCT budget, is scheduled to expire next year, so there is a worry over a possible disruption of securing financial resources for expanding SOC. It is important for the government to raise its budgetary outlays into the social welfare sector, but it is also essential to secure financial resources for constructing basic infrastructure, reducing logistics costs and offering traffic services. The validity of the special account on traffic facilities should be extended to at least 2011 when major SOC projects, including the ones designed to develop Korea into the logistics hub of Northeast Asia, are to be finished. I understand it is desirable that transportation taxes on gasoline and diesel, accounting for 83 percent of the special account on traffic facilities, are levied on motorists under the " beneficiary pay principle."
Next comes attracting private-sector investments into SOC projects, an essential means of securing financial resources for expanding infrastructure. I suggest that steps should be taken to streamline ways of attracting private-sector investments into SOC projects following a thorough analysis of the side-effects stemming from the investments.
So far, the government has turned to private-sector investments into SOC projects to raise financial resources necessary for expanding infrastructure, but such efforts have paid off in terms of quantity to some extent.
But such woes and side-effects as government's excessive financial burden stemming from excessive traffic demand projections and guarantee of inflated minimum operation revenues, insufficient competition among investors from the private sector and improper selection of private-sector investment projects have sprung up.
The government's plan to channel more budget into the social welfare sector and expand the scope of private-sector investments should be implemented after sufficient steps designed to prevent such problems and side-effects stemming from private-sector investments are taken. More specifically, I recommend that private-sector investments into small-sized SOC projects should be carried out on an experimental basis before the government considers expanding the scope of private-sector investments to large-sized SOC projects. nw

The writer is a member of the National Assembly Construction and Transportation Committee