[Exclusive] President Orders "Crack Down by Any Means Necessary," but MOLIT Has Only Five Inspectors

Illegal Subcontracting Crackdown at Construction Sites Is MOLIT’s Exclusive Responsibility
300 Sites Inspected Monthly, but Staffing Is Insufficient and the System Is Temporary
"If You Report, You Lose Future Contracts"... Subcontractors Remain

President Lee Jae Myung. Photo by Yonhap News

There are concerns that the effectiveness of inspections is being undermined, as only five dedicated personnel from the Ministry of Land, Infrastructure and Transport (MOLIT) are tasked with cracking down on illegal subcontracting at construction sites. Although President Lee Jaemyung has ordered a strong crackdown, stating, "Do whatever it takes to enforce the law," and the government has announced its commitment to eradicating such practices, the organization responsible for enforcement is, in reality, a temporary body whose continued existence is reviewed annually. Experts point out that, considering there are as many as 170,000 construction sites nationwide and the unique characteristics of the industry, a permanent organization needs to be established and expanded.

In a recent Cabinet meeting, President Lee stated, "By law, construction subcontracting is only allowed once, but in reality, isn't it done illegally three or four times?" He added, "Even though it is prohibited by law, it doesn't disappear, possibly due to weak enforcement." He went on to say, "It is a hallmark of an abnormal society when following the law results in losses, while breaking the law leads to gains," and ordered a strong crackdown.

Re-subcontracting Ban Specified in the Framework Act on the Construction Industry... Dedicated MOLIT Oversight

The crackdown on illegal subcontracting in the construction industry falls under the jurisdiction of MOLIT. While the Fair Trade Commission oversees violations of subcontracting transaction order, and the Ministry of Employment and Labor is responsible for wage arrears and industrial accidents at construction sites, MOLIT directly inspects whether re-subcontracting is taking place at construction sites.

Unlike in the manufacturing sector, re-subcontracting is fundamentally prohibited in construction. The Framework Act on the Construction Industry, which is under MOLIT's jurisdiction, restricts re-subcontracting, and violations can result in business suspension or even cancellation of registration.

Since May 2023, MOLIT has launched a full-scale crackdown on illegal subcontracting, centering on the Construction Site Compliance Monitoring Team. Initially, this organization was mainly responsible for overseeing fairness across the construction industry. However, following a "100-day intensive crackdown on illegal subcontracting," it effectively became a dedicated team for this purpose.

The team inspects 200 to 300 sites each month. In the first half of this year, it investigated 1,607 sites nationwide and uncovered 520 illegal acts at 167 locations.

Although the authority to impose administrative sanctions lies with local governments, the MOLIT monitoring team leads on-site inspections and determines violations. The team selects sites suspected of illegal subcontracting, inspects them, and if violations are confirmed, requests that the relevant local government impose business suspensions or fines. When necessary, the team also refers cases to the police for investigation.

Managers are inspecting the site at an apartment construction site in Gyeonggi. Photo by Kim Hyunmin

Inspecting up to 300 Sites a Month... But There Are 170,000 Sites Nationwide

The monitoring team is affiliated with the Construction Policy Bureau but is not a permanent administrative body; it is a temporary organization. It operates under a "total personnel cost system," requiring an annual review of its continued existence, and currently has an official staff of five. In practice, there are seven people working, but two of them are support staff who are not included in the official headcount.

There are no dedicated enforcement personnel at the Regional Land Management Offices under MOLIT. All 17 individuals working at the five regional offices in Seoul, Wonju, Daejeon, Iksan, and Busan are either reserve staff or temporarily assigned personnel. Some of them are also responsible for providing on-site training to small and medium-sized construction firms, but there is always a risk of reassignment to other departments if there is a change in leadership or an urgent issue arises.

The lack of personnel is cited as a factor that reduces the effectiveness of enforcement. MOLIT has requested an increase in the monitoring team's staff several times from the Ministry of Economy and Finance and the Ministry of the Interior and Safety, but these requests have not been granted due to procedural issues such as organizational structure and budget allocation.

Compared to other ministries, MOLIT's enforcement conditions are relatively poor. The Ministry of Employment and Labor has about 2,200 labor inspectors and 900 occupational safety inspectors nationwide. The Fair Trade Commission also operates an investigative department dedicated to unfair trade practices with about 220 personnel. Of course, it is difficult to make a direct comparison, as investigation and supervision are the primary functions of these ministries. However, since the crackdown on illegal subcontracting is a unique and specialized task for MOLIT, the need for reinforcement has been consistently raised.

Difficulties in Reporting as a Subcontractor... "Continuous Crackdowns Are the Only Solution"

A worker is wiping sweat at a construction site in Seoul. Photo by Asia Economy DB

Kim Juho, head of the Economic and Financial Center at People's Solidarity for Participatory Democracy, said, "Given the nature of the construction industry, it is difficult to expect victims to voluntarily raise issues. Therefore, a proactive inspection and investigation system is essential." He added, "While there are supplementary measures such as cooperation with local governments, it is difficult to secure expertise and continuity with a workforce based mainly on temporary staff. A permanent organization centered on regular personnel is necessary."

The construction industry points out that, due to the overwhelming influence of primary contractors, it is virtually impossible for subcontractors to report illegal acts or raise issues. Once a conflict arises, they may be excluded from future contracts or even lose their business base in the region.

Site managers unanimously state that "such crackdowns must be continuous to be effective." A site manager at a mid-sized construction company said, "For headquarters to change its approach, crackdowns must be ongoing. One-off inspections will not change entrenched practices."

The National Assembly is reviewing institutional improvements. Moon Jinseok, a Democratic Party lawmaker who previously served as the ruling party secretary of the Land, Infrastructure and Transport Committee and is now the chief deputy floor leader, said, "To prevent the outsourcing of death, it is crucial to conduct on-site inspections that can actually uncover illegal subcontracting at construction sites." He added, "We will consider ways to strengthen regular personnel at MOLIT and establish a systematic inspection system that includes the Regional Land Management Offices and local governments."