'Investment and Development Challenges in "Noneun Gukyuji"... Deep Concerns at the Ministry of Economy and Finance'

A Total of 18 Large-Scale State-Owned Lands Managed by the Government
Including Songpa Central Radio Management Office and Seoul National University College of Agriculture Site
"Practical Benefits in Private Investment... Related Law Discussions Stalled"

The government is reportedly facing deep concerns as private sector interest in developing 18 state-owned lands earmarked for large-scale land development remains low. While the government believes that promoting private development can secure tax revenue and enhance the productivity of surrounding infrastructure development, the private sector is reluctant to actively participate due to stringent conditions. The State Property Development Act, which could resolve this situation, is being discussed in the National Assembly but has yet to make progress due to differing views on development.

According to the Ministry of Economy and Finance on the 31st, the government has been managing a total of 18 large-scale state-owned lands as candidates for revitalizing private investment since 2018. Representative sites include the Songpa Central Radio Management Office, Seoul National University Agricultural Campus site, Uijeongbu/Daegu/Gwangju prison sites, and the Busan Horticultural Experiment Station site. The development methods for these state-owned lands have not been finalized. However, the Ministry of Economy and Finance expects that entrusting a significant portion of these sites to private participation development will have considerable effects on regional economic revitalization and increased tax revenue. A senior official from the ministry stated, “With office buildings and commercial facilities being established, we expect the private economic revitalization effects in these areas to contribute to government tax revenue as well.”

However, the private sector’s willingness to invest is understood to be low, causing concern. A senior official from the Ministry of Economy and Finance explained, “We have gathered opinions from related industries and local governments to consider effective development directions. However, with the real estate market in recession and the economy contracting, the conditions for making profits are stringent, and almost no one has expressed active participation intentions.” According to the current State Property Act, the lease period for companies participating in development is limited to within 30 years, and only the PFV (Project Financing Vehicle, a nominal company established with investment funds for large-scale real estate development) form is allowed under the Corporate Tax Act. Considering that the initial 10 years are focused on investment for development, making it difficult to generate profits, the 20-year period is insufficient to recover investment returns. Additionally, the fact that the lease entity is limited to a temporary organization in the form of a project financing company is also an obstacle.

Therefore, the Ministry of Economy and Finance believes that relaxing these conditions is necessary for efficient development and is pushing for amendments to the State Property Act. The amendment includes expanding the types of state-owned properties eligible for private participation development and broadening the range of development entities. The lease period is also extended to 50 years to increase incentives for private investment. In addition to PFVs, the types of corporate establishments have been diversified to include REITs (Real Estate Investment Trusts) and SPCs (Special Purpose Companies). The amendment also includes easing public sector investment regulations to promote private participation. Under the current law, the government’s investment limit is only allowed up to 30%, but this will be raised to 50%.

The bill has stalled in the National Assembly without progress. At the Economic and Fiscal Subcommittee meetings held in April and May, the amendment was not even tabled. Concerns have arisen that amending the law to activate private investment in state-owned property could weaken the public nature of the land and lead to speculative issues. At a public hearing on the amendment to the State Property Act held in the National Assembly in March, the amendment was criticized as a “sale activation law.” Nam Gieop, director of the Land Freedom Research Institute, pointed out, “The amendment also opens the possibility of sales, which would reduce the proportion of state-owned land and increase the proportion of land affected by speculation.” A Ministry of Economy and Finance official said, “There are sharp conflicts over opinions regarding land development methods. It is not just a difference between ruling and opposition parties; even within the same party, various opinions coexist, so in-depth discussions are needed.”