Unauthorized Occupation of Public Property 'Stubbornness' by Sky72... Could It Become the Worst Private Investment Project?

Contract Period Ended Under Public Law but Refusal to Transfer Rights Under Civil Law
All Other Private Facilities Returned, Raising 'Bad Case' Concerns
Fear of Public Enterprises Avoiding Private Investment Projects... Ministry of Land and Incheon City Must Intervene

Kim Kyung-wook, President of Incheon International Airport Corporation, filed a criminal complaint against Kim Young-jae, CEO of Sky72, on the 1st at the entrance to the Sea Course of Sky72 Golf Course in Yeongjongdo, Incheon, for obstruction of business, and announced a statement declaring the suspension of water supply to Sky72. / Yeongjongdo = Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Park Hyesook] Sky72 Golf Course is writing the worst-case scenario in the history of private investment projects in South Korea. Even though the 20-year contract period has passed, it refuses to transfer the facilities and is occupying national land without permission. This behavior of Sky72 Golf Course, which earns more than 200 million KRW in operating profit per day, is drawing increasing criticism as it could set a bad precedent for future private investment projects.

According to Incheon International Airport Corporation on the 2nd, the development of Sky72 Golf Course was promoted as a private investment project (BOT) in which a private business operator invested capital, built facilities on land owned by the corporation, operated them, and then transferred them free of charge after the contract period ended.

As an airport support facility under the Capital Region New Airport Construction Promotion Act, the development project implementation agreement was signed by Incheon Airport Corporation with the approval of the Ministry of Land, Infrastructure and Transport. In other words, the contract was made between the corporation and the private business operator under 'public law (公法)'.

◆ Unauthorized Occupation and Operation After 20-Year Contract Expiry, Shaking the Foundation of Private Investment Projects = However, Sky72 is stubbornly refusing to transfer the facilities. In this process, Sky72 claims rights under civil law, but Incheon Airport Corporation explains this as self-contradictory.

The airport corporation stated, "Sky72 completed the 'pre-registration of claim for transfer of ownership' in 2007 in preparation for the transfer of ownership of the golf course facilities, and the audit report clearly stated 'free transfer or demolition of facilities' while applying depreciation. Considering that such measures necessary for ownership transfer have been taken, the claim based on civil law rights is unreasonable."

As Sky72 continues to operate for more than three months without returning the land, Incheon Airport Corporation has filed an eviction lawsuit with the court. It has also taken a tough stance by stopping the supply of reclaimed water used for turf management and filing a complaint with the police against the golf course representative for obstruction of business. This appears to be influenced by negative public opinion that public property is being neglected.

Above all, the Sky72 dispute is drawing criticism because it could leave a bad precedent for private investment projects, raising concerns that the central government, local governments, and public enterprises may avoid private investment projects in the future.

Private investment projects have long been common to expand social overhead capital facilities and public convenience facilities. According to the '2019 Report on the Operation Status and Performance of Private Investment Projects' published by the Ministry of Strategy and Finance, a total of 753 private investment projects worth 132.4 trillion KRW were implemented under the Private Investment Act from 1994 to 2019.

Considering that the total fiscal investment in social overhead capital facilities in South Korea during this period is estimated at about 624 trillion KRW, the proportion of private investment in total social overhead capital investment is approximately 17.5%.

A view of the 18th hole on the Haneul Course at Sky72 Golf Club.

◆ Other Golf Courses, Roads, Terminals Returned to Government... Concerns Over National Economic Loss = Even looking only at Incheon Airport Corporation, about 64 facilities including air cargo warehouses, in-flight meal facilities, maintenance facilities scheduled for return this year and next, as well as hotels, complex resorts, and boat racing training centers, were all created through private investment projects. There are also private investment facilities that have already been returned to the government after their usage period ended, such as Korean Air’s aircraft refueling facilities, Asiana Airport Development’s hazardous materials terminal, and foreign airline terminals.

Various private investment projects of different scales in Incheon, such as Songdo Universe Golf Club?the largest indoor golf practice range in Incheon opened in 2014?Songdo Convensia Phase 2, Songdo Hanok Village, Incheon Airport Expressway, Yeongjong Bridge, and Incheon Bridge, have all been smoothly completed despite differences in development methods (BTL, BTO, BOT, etc.).

There has been no case like Sky72 Golf Course where a private operator refuses to transfer facilities after the operation period ends and continues to earn profits while demanding compensation.

An official from Incheon Airport Corporation said, "Sky72 received economic benefits such as low land usage fees (about 13% of cumulative sales) under the BOT method, recovered its investment cost of 200 billion KRW in 2014, and recorded a cumulative net profit of over 160 billion KRW. Nevertheless, it denies the implementation agreement under the private investment method and claims rights to existing facilities," criticizing the golf course.

An anonymous private investment expert warned, "Private investment projects are promoted due to national needs and involve multiple institutions. In the case of Sky72, Incheon City, which has supervisory authority over golf courses (sports facilities), and the Ministry of Land, Infrastructure and Transport, which has project approval authority, should actively intervene to resolve the issue. If the Sky72 incident is not resolved early, the losses and disadvantages will inevitably fall on the nation and its people."