[Exclusive] Local Public Enterprises' Debt Soars to 54 Trillion Last Year... 67% Attributed to Urban Development Corporations Increasing Public Rental Housing

Seoul Housing & Communities Corporation 17.53 trillion KRW
Gyeonggi Housing & Communities Corporation 5.2255 trillion KRW
Local Public Enterprises Operating Losses Exceed 3 Trillion KRW

Mid- to Long-Term Fiscal Management Delegated to Local Governments
Rep. Han: "Public Enterprise Debt Ultimately National Debt... Strict Management Needed"

[Asia Economy Reporter Jang Sehee] It has been revealed that the debt of local public enterprises, which is not counted as national debt, reached 54 trillion won last year. Of this, 67% was confirmed to be accounted for by urban development corporations responsible for public rental housing. As national debt surpassed 1,000 trillion won and fiscal soundness deteriorated, there are calls to manage this invisible national debt more strictly.

According to the "Status of Local Public Enterprise Debt and Operating Profit by Province" submitted by the Ministry of the Interior and Safety to Han Byung-do, a member of the National Assembly's Administrative Safety Committee from the Democratic Party of Korea, local public enterprise debt recorded 54.6171 trillion won last year. Of this, 67%, or 36.5797 trillion won, was the debt scale of 16 urban development corporations nationwide.

The fact that urban development corporation debt accounts for two-thirds of the total local public enterprise debt is largely due to the government's activation of public rental housing. Rental deposits are recorded as liabilities in accounting, and as rental housing increased, the debt scale also increased accordingly. A representative of an urban development corporation who requested anonymity explained, "Due to the supply of public rental housing, accounting liabilities have increased significantly," adding, "As rental housing increased, naturally the debt scale also grew."

Last year, Seoul Housing and Communities Corporation recorded the highest debt at 17.53 trillion won, followed by Gyeonggi Housing and Communities Corporation with 5.2255 trillion won. On the other hand, Jeju Special Self-Governing Province Development Corporation had the smallest debt at 134.713 billion won.

Local public enterprise debt slightly decreased from 52.5459 trillion won in 2018 to 52.4981 trillion won in 2019. However, due to COVID-19 response last year, debt increased by more than 2 trillion won. A Ministry of the Interior and Safety official explained, "The increase in borrowing scale was influenced by additional issuance of corporate bonds by entities such as the Korea Railroad Corporation."

The operating losses of all local public enterprises have also increased year by year. Last year, these public enterprises' operating losses reached 3.4979 trillion won. This rose from 1.8799 trillion won in 2018 to 2.6038 trillion won in 2019, and exceeded 3 trillion won last year.

Although the financial situation of local public enterprises is deteriorating, management and supervision are not being properly conducted. This is because management and supervision are divided between the Ministry of the Interior and Safety and local governments, making thorough oversight difficult. Since the Ministry of the Interior and Safety only handles management evaluations of local public enterprises, it is not easy to grasp the mid- to long-term financial operation plans overseen by each local government. According to Article 64-3 (Establishment of Mid- to Long-Term Financial Management Plans) of the Local Public Enterprises Act, these public enterprises must establish mid- to long-term financial management plans covering five or more fiscal years, considering asset and debt scales, and submit them to the heads of local governments and councils.

Because legal authority has been delegated to local governments, it is difficult for the Ministry of the Interior and Safety to manage and supervise. This differs from the central government, which has unified performance evaluations and mid- to long-term financial operation plans of public institutions and quasi-governmental agencies under the Ministry of Economy and Finance.

A Ministry of the Interior and Safety official stated, "According to the Local Public Enterprises Act, the relevant provinces and cities can manage independently," adding, "The Ministry of the Interior and Safety does not manage mid- to long-term financial matters of local public enterprises."

Representative Han said, "Although not included in national debt statistics, local public enterprise debt should ultimately be regarded as national debt," and pointed out, "There is a need to manage public enterprise debt more strictly through mid- to long-term financial management."

This content was produced with the assistance of AI translation services.