The total debt of local governments and the public companies under their roofs is likely to exceed 100 trillion won ($890 billion) in 2012, according to officials of the Ministry of Security and Public Administration. Local autonomous governments include provinces, metropolitan cities, cities, counties and districts.

The ministry sources said the debt of local governments is forecast to reach 40 trillion won ($36 billion) last year, while that of local public companies is likely to near at 70 trillion won ($62 billion).

The estimate is based on a report on the fiscal health of local governments, that the ministry is working on to release in October this year for the first time.

The debt of local governments and local public companies has soared for years as they issued bonds to fund their various construction and development projects amid falling tax income, the Korea Institute of Public Finance said.

In a survey of the debt of local governments in 2012 by the ministry, Gyeonggi Province topped the list at 3.4 trillion won, followed by Seoul City and Busan Metropolitan governments with debts of 3 trillion won and 2.9 trillion won, respectively. Incheon Metropolitan Government was placed 4th with debts of 2.8 trillion won.

Taking soaring debts in the public sector, whether central or local, the Park Geun-hye administration has been developing measures to improve financial health of the public sector.

In a meeting with business and finance desks of local newspapers and broadcasting companies last Friday, Prime Minister and Strategy and Finance Minister Hyun Oh-seok said the administration will force the local governments and public companies to reveal their financial information in a transparent way and to conduct a feasibility study on new projects, while encouraging them to run a debt management system, when their debts go beyond the limit, set by the central government.

On top of improvements in the fiscal health of local governments, the Ministry of Security and Public Administration said it will seek disclosure of management information of local public companies such as profit sharing, sales performance and executive profile in a bid to raise the competitiveness of those firms.

In addition, local public firms also have to reveal information on each process of their projects from order planning to payments from next year, the ministry added.

By Seo Jee-yeon  (jyseo@heraldcorp.com)