[Exclusive] Eight Public Institutions Mobilized for Regional New Deal Already Have Debt of 153 Trillion Won

Total Debt of 8 Public Institutions Involved in Regional New Deal Reaches 153.2672 Trillion KRW... Increased by 17 Trillion KRW Compared to 4 Years Ago
Experts Say "Increase in Public Institution Debt Inevitable... Conflicts with Government Fiscal Rules Policy"

[Asia Economy Reporters Jang Sehee and Moon Chaeseok] It has been revealed that the debts of public institutions participating in the recently announced 'Regional Balanced New Deal' project by the government amount to 153 trillion won. Among these institutions, some have already fallen into a state of capital erosion. There are concerns that the financial situation will worsen as public institutions, which already have serious debt problems, are forced to take on government projects recklessly. Considering that public institution debt is hidden government debt, this ultimately increases the burden on taxpayers.

According to an analysis by Rep. Chu Kyung-ho of the People Power Party and Asia Economy on the 22nd, the total debt of eight public institutions mobilized for the Regional New Deal reaches 153.2672 trillion won. This is an increase of 16.9887 trillion won compared to four years ago (136.2785 trillion won).

In fact, Korea National Oil Corporation, participating in the Regional New Deal project under the name 'Ulsan Eco-friendly Energy Convergence Cluster,' has fallen into a state of capital erosion this year due to reduced sales caused by the drop in oil prices amid the COVID-19 pandemic. A representative of the Oil Corporation stated, "Sales have drastically decreased this year due to the significant drop in oil prices," adding, "From this year, we have entered a state of capital erosion, and the debt is at a level where it cannot be properly calculated." The Oil Corporation's debt as of the end of June stands at 19.5293 trillion won.

The debt of Korea Electric Power Corporation (KEPCO), participating in the 'Naju Energy Valley' project, has increased by 10 trillion won over four years, surpassing 59.666 trillion won. The debt ratio recorded 116.1%. Korea Gas Corporation's debt as of the end of June this year is 29.5957 trillion won, with a debt ratio approaching 369.9%, yet it has decided to proceed with the 'Daegu Green Energy Campus Project.' The National Pension Service has also seen its debt increase every year over the past three years, reaching 494.6 billion won as of the end of September this year. The Pension Service plans to carry out the 'Jeonju Asset Management-Centered Financial City Project.' Additionally, the debt ratios of Jeju Free International City Development Center and Korea Expressway Corporation are expected to be 82.3% and 80.7%, respectively, this year.

Experts point out that as the financial structure of public institutions deteriorates further, the tax burden on the public will inevitably increase. Professor Kim Sangbong of Hansung University’s Department of Economics said, "This conflicts with the government's fiscal rules framework, which aims for efficient expenditure management," adding, "If public institution debt becomes excessively large, the government must bear the burden, and ultimately, an increase in the tax burden on the public is inevitable." Professor Cho Donggeun of Myongji University’s Department of Economics also emphasized, "Unlike private companies, public institutions are not production organizations that create added value," and "Public debt should be regarded as a type of national debt, so an increase in public institution debt means an increase in national debt."

Rep. Chu Kyung-ho stated, "Under the current administration, public institutions have been mobilized for policy projects such as nuclear phase-out and public jobs, triggering red flags on debt," adding, "Another mobilization order has been issued under the pretext of the Korean New Deal." He further pointed out, "Since public institution debt is hidden national debt, it is urgent to establish mechanisms for responsible management." In response, a government official explained, "Considering the nature of the projects and the sources of funding, these projects are not of a scale that would significantly affect public institution debt."

Meanwhile, there are also criticisms that the Regional New Deal projects involving public institutions are being pushed forward hastily. According to the government's Regional Balanced New Deal project plan, of the 160 trillion won invested in the Korean New Deal, 47%, or 75.3 trillion won, is invested in regions. Public institutions supporting the Regional New Deal include Jeju Free International City Development Center (Jeju), Korea Information and Communication Industry Promotion Agency (Chungbuk), National Health Insurance Service (Gangwon), Korea Electric Power Corporation (Naju), Korea National Oil Corporation (Ulsan), Korea Expressway Corporation (Gimcheon), Korea Gas Corporation (Daegu), and National Pension Service (Jeonju).

The government has only disclosed the names of these projects but has not yet revealed specific project details. They have been mobilized for the government’s Regional New Deal projects despite the business feasibility being unclear. A public institution, requesting anonymity, said, "We are still at the initial stage," adding, "Nothing has been decided yet regarding the division of roles between local governments and public institutions." Another public institution said, "Although the government has set the budget for next year, it is difficult to guarantee that project costs can be immediately calculated or that several companies can be attracted; more time is needed to prepare plans."