Lee Jae-myung, "Paper companies are hotbeds of corruption," "National Pension Service should have embezzled moderately"
[Asia Economy Reporter Ra Young-cheol] As the preferential treatment allegations surrounding the Seongnam Pangyo Daejang-dong development project, which Lee Jae-myung, the Democratic Party presidential candidate and former governor of Gyeonggi Province, promoted during his tenure as mayor of Seongnam, have become a heated issue, Lee Jae-myung's past remarks about eradicating 'construction industry paper companies' are also being reexamined.
In March, Lee Jae-myung stated on social media (SNS), "Paper companies that are established only on paper to win construction contracts and then handle work through unfair subcontracting can become hotbeds of poor-quality construction, disruption of transaction order, and corruption," adding, "As expectations for fairness rise, I will do my best to prepare and implement systematic policies and systems."
In particular, in December last year, Lee said on SNS, "Profits unfairly gained by someone take away the results of others' efforts," and added, "Abolishing the nationwide mandatory standard market price and eradicating paper companies is the way to prevent waste of precious taxpayers' money and block irregularities in public construction."
In May this year, Gyeonggi Province promoted through a press release that "the 'Public Construction Bidding Paper Company Pre-Inspection System,' which blocks fake construction companies (paper companies) from the bidding stage, was first implemented nationwide by the 7th Gyeonggi Province administration."
They boasted, "So far, 569 construction companies that applied for 344 construction bids have been pre-inspected, 167 companies were caught, and administrative actions such as business suspension were taken against 148 of them."
However, ironically, 'Seongnam-ui Tteul,' the special purpose company (SPC) established to implement the 'Daejang-dong development project' as a public development after halting private development during Lee Jae-myung's tenure as mayor of Seongnam, was revealed to be a 'paper company.'
A key issue surrounding the Daejang-dong development project is that the profits private companies took were much greater than the dividends earned by Seongnam Urban Development Corporation, the largest shareholder of 'Seongnam-ui Tteul.'
'Seongnam-ui Tteul' sold five land parcels through private contracts to the asset management company shareholder 'Hwacheon Daeyu.' Hwacheon Daeyu, which sold apartments and luxury villas, earned over 230 billion KRW in sales revenue.
This is separate from the 404 billion KRW dividends taken by individual investors through Hwacheon Daeyu and SK Securities Trust.
According to the construction industry and the implementing company, the Daejang-dong development project is divided into land development and apartment sales stages.
Among the total 12 districts (A1~A12) in Daejang-dong, six districts (A3~A8) were selected through competitive bidding. The competition rate was fierce, exceeding 100 to 1 at the time.
However, among the remaining six districts, four districts (A1, A2, A11, A12) were awarded to 'Hwacheon Daeyu' through private contracts without bidding.
As a result, predictions suggest that Hwacheon Daeyu's expected profits from participating not only in apartment sales but also in the land development stage will be astronomical.
Especially, the preferential treatment allegations have intensified as a former Seongnam city official testified that "there were repeated concerns about problems from the project operator selection stage, and a staff member who raised issues on the internal network was ignored."
Despite this, Lee claims that the "Daejang-dong development" is a model public interest project that prevented private development preferential treatment and recovered 550.3 billion KRW for citizen benefits.
Lee Sang-soo, president of the Korea Public Trust Research Institute, said in an interview with this paper, "Considering the statements Lee Jae-myung has consistently made, this can be seen as a self-contradictory act," and added, "He should take responsibility for these facts, and whether this will end with an apology or require legal accountability will be revealed through judicial procedures later."
Additionally, Lee's remarks regarding the public disposition of the privately funded Ilsan Bridge project have also come under criticism.
The National Pension Service agreed to donate the Ilsan Bridge to Gyeonggi Province, and Ilsan Bridge Co., Ltd. signed an agreement to operate the bridge as a toll road for 30 years until 2038.
This is a 'private investment project' where private funds are mobilized to construct roads when the government lacks funds or the project is unprofitable, allowing the private party to earn revenue for a specific period.
However, Lee expressed his opinion on Twitter, saying, "The National Pension Service is making exorbitant profits," and added with strong language, "If you're going to exploit, you should do it moderately. 20% interest rate? Are you a loan shark?"
Regarding the Daejang-dong development preferential treatment allegations, Lee emphasized at the Gyeonggi Provincial Council plenary session on the 15th, "The contract terms are clear. Whether they incur losses or profits, I do not interfere. It is not necessary nor appropriate to be involved in how those who conduct all the projects and participate in private investment projects distribute profits or bear losses. Isn't that common sense?"
Even if the National Pension Service is charging excessively high tolls as Lee claims, critics argue that the contract, legally concluded overnight by the ruling party's top presidential candidate, should not be disregarded.
Lee, who vowed not to interfere in private projects, is taking contradictory positions regarding the Ilsan Bridge and Daejang-dong development projects.
Some voices acknowledge the purpose of improving transportation convenience for residents in Ilsan, Paju, and Gimpo but argue that the 'equivalence, validity, and fairness' of toll-free policies need to be examined.
Moreover, Lee's sudden public disposition has been criticized as potentially causing conflicts among residents ahead of the presidential election and being used for his popularity.
Regarding this, Lee Sang-soo said, "Basically, the government and local governments must have policy consistency and reliability as a premise," and criticized, "Changing contracts into scrap paper and shifting directions just because circumstances have changed goes against the basic principles of democracy and violates market economic order."
He added, "From the perspective of policy consistency and reliability of government and local governments, there is clearly room for criticism, and the 'toll-free' policy can be seen as populism ahead of the election."
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