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[EDITORIALS]Save the construction industry

Published: 19 Oct. 2004, 21:46

The Federation of Korean Industries presented a proposal for reviving the construction industry because the sector has deteriorated so rapidly. The deputy prime minister of finance and economy, Lee Hun-jai, announced earlier that the government would promote a Korean-style “New Deal” policy next year to revive construction businesses.
Both the government and the private sector share the view that the construction industry is in a crisis.
But the government must clarify what its real intention is. It is difficult to grasp its real intention, because the government promotes various anti-market policies even though it proclaims that it will revive construction through such “New Deal” policies.
A crash-landing of the construction industry was anticipated when various government policies aimed at stabilizing soaring housing prices met a bad economy head on.
This doesn’t mean that soaring housing prices should have been left unchecked. But the government designated speculative investment areas, overheated areas or areas needing reports on real estate transactions. It has also raised the basis of property tax to housing units’ market prices.
The promotion of all these ambitious policies all at once caused bad side effects. Speculative investors were unable to sell or buy houses, but legitimate buyers were shut out as well. Not only were the prices of housing units frozen, so were those of construction-related industries, moving companies, interior decoration businesses and construction accessory businesses.
If property taxes were increased, taxes on transactions should have been lowered. But such follow-up measures were not implemented.
The bad effects even affected temporary workers who belonged to the lowest income group in our society. The director of a construction site said, “The wage level of temporary workers is even less than it was three years ago. But they think it fortunate just to get a job.”
Some experts expressed worries that housing prices would shoot up after three or four years if the supply keeps on falling.
The idea of reviving construction businesses through public investment projects is too naive. Though belated, the government must listen to the voices of the construction industry and find out what must be done to revive the construction business.