"Boosting Local Construction Economy"… Regional Public Enterprises to Invest 94 Trillion Won in Housing and Land over 4 Years

Improving Shrinking Regional Investment with 20 Trillion Won Investment This Year
Streamlining Investment Procedures Including Exemption from Feasibility Review
Raising Investment Limit in Other Corporations from 10% to 50%
Increasing Bond Issuance Limit for Industrial Complex Participation

Local public enterprises will invest a total of 20 trillion won this year in housing supply, land development, and water and sewage systems. The total investment over the next four years amounts to 94 trillion won, a measure aimed at revitalizing regional economies by boosting local investments that have been subdued due to high inflation and high interest rates. The government also plans to expand the investment limits for other corporations and raise the bond issuance limits to enable these enterprises to carry out their investment activities smoothly.

The Ministry of the Interior and Safety announced on the 7th that the Local Public Enterprise Policy Committee, held on the 5th, approved the "Local Public Enterprise Investment Activation Plan" based on these points. This measure focuses on expanding investment projects over 1 billion won to provide work opportunities to local small and medium-sized construction companies, which handle most of the construction projects carried out by local public enterprises. The logic is that securing work for small and medium-sized construction companies will also create jobs in the region.

[Photo by Ministry of the Interior and Safety]

As of 2022, the debt ratio of local public enterprises (101.0%) was relatively lower than that of national public enterprises (250.4%) and private companies (122.3%), which also influenced investment decisions. The government added that financial soundness has been strengthened through structural reforms of local public enterprises in line with the "New Government Local Public Institution Innovation Direction" promoted since July 2022.

This year, local public enterprises plan to invest a total of 20.2511 trillion won. This is an increase of 3.1 trillion won (18.2%) compared to last year's budget of 17.1 trillion won, resulting from continued consultations to expand investments by local public enterprises. Specifically, 11.0931 trillion won will be invested in housing supply and land development, 5.9892 trillion won in water and sewage systems, 1.1828 trillion won in environment and safety, and 783.9 billion won in industrial complexes. The investment plan for the next three years (2025?2027) after 2025 amounts to 73.4756 trillion won, totaling about 94 trillion won by 2027.

The government will also provide various supports. First, it plans to encourage local governments to invest in local public enterprises and increase the bond issuance and investment limits of local public enterprises, which are set proportionally to the capital size, to facilitate financing. The Ministry of the Interior and Safety expects that by promoting various investment methods to local governments and including conditions such as local government investment when approving bond issuance projects in advance, local governments will voluntarily increase capital investments.

If local public enterprises meet requirements such as debt ratios, the investment limit in other corporations will be expanded from the current 10% of capital to up to 50%, enabling large-scale investment projects. Additionally, when local public enterprises participate in industrial complex development projects, the bond issuance limit will be raised to the same level as public housing projects, and when reviewing bond issuance subject to debt ratio constraints, grants received in advance from local governments for agency projects will be excluded from debt.

Projects such as renewable energy businesses, which lack short-term profitability but have mid- to long-term profitability, or essential regional services like offshore passenger transport, will be added to the mandatory application projects (essential projects with high public interest that can be promoted if only scale requirements are met). For example, in cases where there is inter-local government consultation, such as the Samcheok "Gold City" jointly promoted by Seoul, Gangwon Province, and Samcheok City, a legal basis will be established to allow local public enterprises to operate outside their jurisdiction.

A new regulation will also be established in the law to exempt feasibility reviews when local public enterprises invest in other corporations. The criteria for re-examining new investment projects, which must be undertaken due to increased project costs or delays, will be relaxed to a similar level as related systems. This is intended to create a prompt investment environment to prevent further project delays.

The Ministry of the Interior and Safety has set the first half execution target for local public enterprises' 2024 investment plan at 57%, the highest level in the past five years, to ensure rapid execution. To achieve the raised target, monthly rapid execution goals will be set and managed, and institutions with poor execution rates will receive focused consulting to fully support achieving the goals. Minister Lee Sang-min of the Ministry of the Interior and Safety stated, "As regional economic downturns and investment contractions continue, we will support local public enterprises to make bold and leading investments to revitalize regional investments."

[Photo by Ministry of the Interior and Safety]

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