[2023 Budget Proposal] 10% Cut in SOC... Red Light for Some Regional Pledge Projects Including GTX

[Asia Economy, reporter Cha Wanyong] As the government decided to reduce the budget for social overhead capital (SOC) projects-including railways, roads, aviation, and logistics-by 10%, concerns are mounting that some regional pledge projects, including the Greater Seoul Metropolitan Express Train (GTX), may face setbacks.

According to the Ministry of Land, Infrastructure and Transport on August 30, the SOC budget for next year has been set at 19.7956 trillion won out of a total budget proposal of 55.8885 trillion won. This represents a reduction of 2.2046 trillion won compared to this year’s allocation of 22 trillion won.

Looking at the reduced SOC budget: roads (-549.4 billion won), railways (-821.2 billion won), aviation and airports (-83.9 billion won), logistics and others (-188.4 billion won), R&D (-17 billion won), regional and urban development (-419.5 billion won), and industrial complexes (-142.4 billion won) have all been cut across the board.

In particular, the much-anticipated budget for the GTX-B line has been drastically reduced to 6 billion won for next year. This appears to be due to the recent failure to select a business operator for the GTX-B line within this year. For this year, the GTX-B line had been allocated 80.3 billion won.

In the case of road projects, the budget for the ‘Sejong-Anseong Expressway Construction’ was reduced by 213 billion won, from 310.2 billion won this year to 97.2 billion won next year. This reduction is attributed to a decrease in annual payments due to an extension of the construction period for the Sejong-Yeongi section's lane expansion, as well as a reduction in compensation costs following the completion of major compensation payments.

Additionally, projects such as the ‘Gimcheon-Gumi National Road Construction’ (150 billion won allocated this year), ‘Sadeung-Jangpyeong National Road Construction’ (9.9 billion won), and ‘Cheonan Seonghwan-Pyeongtaek Sosa National Road Construction’ (4.5 billion won) have not been allocated any budget at all due to the need for feasibility re-examinations.

For railway projects, the budget for the ‘Indeokwon-Dongtan Double-Track Railway Project’ has been reduced from 165.8 billion won this year to 110.3 billion won next year. This is the result of only reflecting the construction costs for the second half of the year, following a re-examination of the project's feasibility. As a result, no construction will take place during the first half of next year.

In aviation projects, the budget for the ‘Ulleungdo Small Airport Construction Project’ has been reduced from 114 billion won this year to 88.5 billion won next year, while the ‘Jeju Second Airport Construction’ project has been cut from 42.5 billion won to 17.3 billion won. The government explained that these adjustments reflect the appropriate executable amounts based on annual investment allocation standards and the schedules for consultations with relevant agencies, such as the strategic environmental impact assessment.

The problem is that if the SOC budget is significantly reduced, existing projects will be delayed, and naturally, new projects will also be affected. In the case of road and railway projects, delays in budget allocation lead to extensions of construction periods, which in turn result in additional costs for financing, maintenance, and repairs, causing further losses and construction delays.

In addition, the housing and urban fund, which has been reduced by 2.3334 trillion won compared to last year, is also expected to become a source of controversy. The budgets for the National Rental Housing Fund (reduced by 451.6 billion won), Public Rental Housing (115.6 billion won), Jeonse Rental Housing (1.0208 trillion won), Multi-family Purchase Rental Housing (2.5723 trillion won), and Remodeling of Aging Public Rental Housing (276 billion won) have all been cut. All of these funds are used to support housing stability for low-income and working-class households.