A Study on Facilitating infrastructure financing in Korea

Abstract

The level of stock and quality of infrastructure facilities is a critical barometer of a nation's industrial competitiveness and living standard. Building and operating such facilities have historically been the government's responsibility largely due to the difficulty in commercialization and the unique characteristics of infrastructure facilities.

However, budget constraints and public resistance to tax increases have compelled most countries to turn to private sources for financing infrastructure facilities, especially during the 1990s. Korea has not been an exception. The Korean government has initiated a private infrastructure investment system for the first time in 1994 by enacting "The Promotion of Private Capital into Social Overhead Capital Investment Act".

Unfortunately, the performance of infrastructure investments by private entities, so far, has failed to live up to the original expectations. Only 7 out of the 51 projects announced by the government are currently under construction, and merely 3 projects have procured financings

Looking back at the cmTent situation, I found a few fundamental problems.