Local Governments Fixed Accounts

Numerous projects initiated by local governments across the country have incurred significant amounts of debt and yet localities lied about them, a team of reporters has discovered.

JoongAng Ilbo recently asked that 16 cities and provinces and 232 counties and districts submit balance sheets for business projects they initiated. The projects came outside public spending and were intended to yield profits. All of the documents indicated that the projects were in excellent shape. Documents submitted to the Ministry of Government Administration and Home Affairs suggested similar results: Local governments invested 201.3 billion won ($182 million) and made 611.8 billion won, reaping a total profit of 410.4 billion won.

Further investigation reveals a different picture. South Cholla Province, which initiated 192 projects last year - the most in the country - said none failed. However, Damyang County in the province has invested 2.2 billion won over the past four years in a housing project, and yet only six houses have been sold, leaving a deficit of 1.1 billion won. The city of Chongju in North Chungchong Province claimed that it reaped profits of 248 million won from a cemetery project. That figure appears to have been conjured from the air: The figures reveal that expenses (723 million won) significantly outweighed revenue (482 million won).

There are also cases in which bad projects were simply omitted. The Dobong district of Seoul invested 559 million won in a cattle rearing project last year. It has made no profit and the district cut it from accounts.

Many of these localities ignore personnel expenses and the initial investment when they calculate profit. Balance sheets are withheld from local legislatures - and the public. "I can't get basic information on the progress of projects, so it's extremely difficult to supervise them," complained a legislator in the Inchon Metropolitan Council. Professor Namkung Keun of Kyongsang University said: "There are way too many projects initiated by local governments to allow proper inspections, in contrast to the United States and Europe where spending by local autonomies is highly regulated. We need to institute a system whereby the public can obtain information on how the projects are progressing and have a say in the inspection process."

Keum Hong-seob of a Taejon-based civic group, said: "A huge tranche of public funds has gone into these failed projects. Localities must be obliged by law to disclose information on the status of their projects."

by Lee Deok-nyung