Precious few indeed

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Precious few indeed

 
Kim Dong-ho

The author is an editorial writer of the JoongAng Ilbo.
 
 
Key investors in the Daejang-dong land development project in Seongnam City, Gyeonggi Province, earned 10.1 billion won ($8.6 million) by investing 8.7 million won. Asset management company Hwacheon Daeyu rounded up seven investors under Cheonhwa Dongin, a subsidiary of the developer, to fund the project. Cheonhwa Dongin No. 2 is owned by the wife of Kim Man-bae, the largest shareholder and founder of Hwacheon Daeyu, and No. 3 is owned by his sister. As they would be in their early 50s, 8.7 million won would not be big money to them. They could do with or without the money. But that money ballooned to a return of 10.1 billion won.
 
Individual investors who have been glued to stock markets at home and the United States with the dream of riches may be shocked by the easy money made in the development project. Many investors in Korean stocks suffered losses in recent stock market crashes except for the stock boom during the so-called three-lows — low oil prices, low interest rates and a low (weak) Korean won — between 1985 and 1989 and in 2003-2007, when prices were stable around the globe. Stock markets enjoyed their heydays, but bull runs were temporary or followed by bearish times.
 
Many advise long-term investment. But that is not very exciting. The 10-year stock yield averaged 5.1 percent in the 2000s and 2.7 percent in the 2010s without including dividends. Savings-type investments also are dull. A monthly deposit for stock investment for 30 years yielded only a 2.9 percent gain as of now. Making big money is difficult. Seoul is covered with apartments, but they are out of reach due to their sky-high prices. Apartment prices doubled under the Moon Jae-in administration.
 
 Appearing at a National Assembly’s audit Monday of Gyeonggi Province, Governor Lee Jae-myung, the presidential candidate for the ruling Democratic Party, answers questions from opposition lawmakers about the controversial land development project he pushed as mayor of Seongnam City. [LIM HYUN-DONG]

Appearing at a National Assembly’s audit Monday of Gyeonggi Province, Governor Lee Jae-myung, the presidential candidate for the ruling Democratic Party, answers questions from opposition lawmakers about the controversial land development project he pushed as mayor of Seongnam City. [LIM HYUN-DONG]

Then how did the owners of Cheonhwa Dongin make big money so easily? When he was mayor of Seongnam, Lee Jae-myung claimed he had “designed” the Daejang-dong project as a joint venture between the public and private sectors so that the profit did not entirely go the private investors. But the devil is in the details. Although public entity Seongnam Development Corp. was involved, the project was monopolized by a few individuals.
 
The development project began after buying land from residents of Daejang-dong at cheap prices through public authority. Residents surrendered their homes, believing it was a normal urban development project. They are outraged to learn that they were ripped off to fatten a select group. They also could afford to invest 8.7 million won even if they had to take out a loan. Anyone would do so if such huge returns were guaranteed.
 
The explanations from Kim Man-bae, a major stakeholder in Hwacheon Daeyu, and Gov. Lee, who approved the project, are bizarre. They claim the dazzling returns were possible because housing values shot up under the Moon administration and that the shareholders took a huge risk. But the state-run Korea Housing Finance Corporation found the project had little risk. It cannot be a coincidence that Kim’s family members and friends invested thousands of dollars to reap millions of dollars.
 
The lesson from the project is that a land redevelopment must not be monopolized. Land is a limited resource. In his book “Progress and Poverty” in 1879, George Henry argued that land is a common property. Homes can be increased through high-rise apartments, but land cannot be stretched. The scandal involving staffers of the Korea Land and Housing Corp. also took place as they bought many plots of land assigned for development. The fact that public revenues from land went to enrich a precious few is the essence of the problem. The profits must be seized and restored to the original landowners.
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