Populism and moral hazard

Gyeonggi Governor Lee Jae-myung is once again stirring controversy with his signature populist pledges. He has announced a plan to allow vehicles to cross the Ilsan Bridge connecting Goyang and Gimpo cities in the province without paying tolls from October. He plans to do that by ordering his province and its three cities of Goyang, Paju and Gimpo to jointly retrieve the rights to operate the bridge from the National Pension Service (NPS) which has a 100 percent stake in the bridge. Lee — a frontrunner among presidential candidates of the ruling Democratic Party (DP) for the election in March — says he made the decision to protect basic traffic rights of the residents. But critics attack him for using his governorship to win the election.

The controversy spiked Friday after Lee decided to purchase the rights to operate the bridge for “public interests.” Local governments are allowed by the law to retrieve operational rights on public facilities from private entities when the need arises. The 1.1-mile-long bridge was built with 178.4 billion won ($154.2 million) in private capital and opened in May 2008. A private company which had its operational rights until 2038 handed them over to the NPS entirely in 2009.

Gyeonggi residents who use the bridge for commuting have called for free crossing as it was the only bridge collecting tolls among scores of bridges on the Han River. The tolls for the bridge were also three to five times higher than the tolls for the expressway to the Incheon International Airport, for instance.

Gyeonggi province plans to cover 50 percent of the money needed for the retrieval and ask the three cities to cover the rest. But that calls for an enormous amount of tax money. It also could deal a critical blow to the NPS financially as the proposed 200 billion won in compensation money falls way short of its expected profits of 700 billion won until 2038.

If the NPS has any will to protect the money the people entrusted to it, it should take action, including filing a civil suit against the move by the province. But it keeps mum. The NPS is being led by its board chair Kim Yong-jin, a former official in the Moon Jae-in administration and a candidate who ran for a legislative seat representing a district in Gyeonggi in the last parliamentary elections. Political analysts link his silence to the need to not provoke a leading DP presidential candidate.

Our national debt is to exceed 1,000 trillion won pretty soon due to the government’s hefty spending, not to mention the snowballing deficit in the NPS and other three national pensions. The NPS’s silence under such circumstances signifies moral hazards. Voters must not be drawn to a sugarcoated promise from a presidential candidate.