Public Contribution Funds Collected in Gangnam Will Also Be Used for Underdeveloped Development in Gangbuk

[Asia Economy Reporter Yoo In-ho] Public contribution funds collected as city donations during large-scale development projects in the Gangnam area of Seoul will be allowed to be shared for supporting underdeveloped areas in Gangbuk.

Accordingly, a significant portion of the 1.7491 trillion KRW in public contribution funds generated during the construction of the Global Business Center (GBC), Hyundai Motor's new headquarters in Samseong-dong, is expected to be used for development in Gangbuk.

On the 10th, according to the Ministry of Land, Infrastructure and Transport (MOLIT) and the Seoul Metropolitan Government, MOLIT is reportedly discussing amendments to the "National Land Planning and Utilization Act (Land Planning Act)" at the request of Seoul City to allow this.

Public contribution funds are cash donations received by local governments as part of development profits in exchange for permitting relaxed floor area ratios or land use changes during development projects. Under the current Land Planning Act, these funds can only be used by the basic local government where the district unit plan area for the development project is located.

However, going forward, the law will be amended to allow metropolitan governments to use a certain proportion of public contribution funds. Recently, MOLIT and Seoul City have agreed on the policy to amend the law and are discussing the usage ratio of public contribution funds between metropolitan and basic local governments.

MOLIT is reportedly referring to the recently amended "Act on the Recovery of Excessive Profits from Reconstruction." Previously, the National Assembly changed the usage ratio of reconstruction burden funds from 50% national, 20% metropolitan, and 30% basic to 50% national, 30% metropolitan, and 20% basic.

This plan to allow metropolitan governments to use public contribution funds has been advocated for years by the late former Seoul Mayor Park Won-soon. On the 5th of last month, former Mayor Park urged MOLIT to amend related laws via Facebook, stating, "The enormous development profits of Gangnam should not be monopolized only in Gangnam but should be used for balanced development of the neglected areas in Gangbuk."

According to former Mayor Park, public contribution funds from the three Gangnam districts?Gangnam, Seocho, and Songpa?amounted to 2.4 trillion KRW in 2020?2021, accounting for 81% of Seoul's total public contribution funds of 2.9558 trillion KRW.

MOLIT plans to propose the amendment bill through a member's bill as early as this month. Separately from MOLIT's policy, Assemblyman Cheon Jun-ho of the Democratic Party is also preparing an amendment to the Land Planning Act including this content. If the amendment passes, a significant portion of the 2.4 trillion KRW collected in Gangnam is expected to be used in other areas such as Gangbuk.