'Financially Sound' Local Public Corporations Expand Investment Limit in Other Companies to 'Up to 50%'

From now on, local public enterprises with sound financial health will have an increased limit on investments in other corporations. It is expected that large-scale public-led private investment projects will become more active.

On the 12th, the Ministry of the Interior and Safety announced that the amendment to the "Local Public Enterprises Act Enforcement Decree," which expands the investment limit of local public enterprises in other corporations to up to 50% of their capital, will take effect from the 13th. This amendment is one of the follow-up measures to the "Local Public Enterprises Investment Activation Plan" announced by the Ministry in February.

Previously, the investment limit of local public enterprises in other corporations was uniformly restricted to 10% of the corporation's capital, making it difficult for even financially sound local public enterprises to promote large-scale investment projects led by the public sector.

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The amendment applies a differentiated investment limit of up to 50% of capital depending on the debt ratio, allowing local public enterprises with sound financial health to actively engage in investment projects. According to the debt ratio, the investment limits are set as follows: ▲ 0% to less than 100% - 50% of capital ▲ 100% to less than 200% - 25% of capital ▲ 200% or more - 10% of capital.

Accordingly, some local public enterprises that had little remaining investment capacity will now be able to invest in new projects, which is expected to enable them to play a role in regional projects. Based on the 2022 financial statements, Daegu Urban Development Corporation and Gyeongsangbuk-do Development Corporation saw their investment limits increase by 40.8 billion KRW and 113.4 billion KRW respectively, enabling investment in the public-led integrated Daegu-Gyeongbuk new airport construction. Jeonnam Development Corporation also expanded its investment limit from 39 billion KRW to 195.3 billion KRW based on the same criteria, and is expected to participate in an offshore wind power project worth approximately 9.2 trillion KRW by 2030.

The Ministry of the Interior and Safety plans to strengthen management of investment projects as investments by local public enterprises in other corporations are expected to expand due to the amendment. Local public enterprises must undergo feasibility reviews by specialized institutions before making investments, and from the 13th, the requirements for these specialized institutions will also be strengthened. Additionally, based on the results of the annual management evaluation, management diagnostics will be conducted on high-risk investment projects, and improvement orders such as recovery of investment funds will be implemented.

Han Sung-gi, Director of the Local Finance and Economy Office at the Ministry of the Interior and Safety, stated, "With the expansion of investment limits for local public enterprises in other corporations, investments in regions will increase, revitalizing the regional economy. We will continue to actively support local public enterprises, which know their regions best, to expand investments actively."

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