Gyeonggi Gov. Lee Jae-myung said Friday that he had decided to revoke the National Pension Service’s right to operate the Ilsan Bridge so he could make it toll-free. The NPS wholly owns the right to operate the bridge, and revocation is an exceptional measure under the law.
Of course, frequent users of the bridge will welcome the decision, but there are several issues to consider. Is it fair for local government heads to abrogate the rights of privately owned businesses without warning? Is it fair to compensate the operator of a bridge with taxes paid not only by frequent users, but also by those who seldom use it?
Also, one must question whether Lee used his gubernatorial post to shore up his presidential campaign, giving himself an undue advantage over other contenders.
Lee said he had made the decision in the public interest for the sake of the residents.
Under the law, when a local government cancels its prior decision to give a private business the right to operate public facilities, justifying it on the grounds of the public interest, it must compensate that business accordingly.
Lee’s remarks to the effect that he was “giving the bridge back to the residents” makes a good political show. But it is dangerous thinking in that it damages the value of contracts, which are the basis of a free-market economy.
If the government breaks its contracts just because some residents want it to, who will be willing to participate in investment projects in the future? For good reason, no similar public interest measures have been undertaken so far.
The construction of the 1.8-kilometer, six-lane bridge over the Han River was completed in 2008 at a cost of 191 billion won ($164 million) from the private sector and 34 billion won from the provincial budget.
The following year the NPS acquired a company that had the right to operate the bridge for 30 years.
To raise the profitability of its pension fund, the service invested about 200 billion won, expecting operating margins of up to 700 billion won until 2038.
The provincial government, it is said, has estimated compensation near the level of NPS’ investment principal, meaning the service will have to forgo its expected earnings.
The Gyeonggi government plans to split the compensation equally with three of the province’s cities.
Where will that compensation come from? It will come from Gyeonggi residents, whether they use the bridge or not.
A more serious issue is that underestimating that compensation will incur great losses for the NPS, which manages people’s retirement funds. The provincial government’s estimate falls far short of NPS’ expected earnings.
From the standpoint of common sense, if the service wishes to protect public assets, it should strongly protest the decision or file a civil suit to obtain proper compensation. If it accepts the public interest measure obediently, not only will its investment returns deteriorate but its officials will open themselves up to accusations of breach of trust.
Still, the service has kept silent. One must wonder if it is trying to avoid getting on the nerves of the front-runner in the ruling Democratic Party of Korea’s race to elect its presidential candidate. The NPS’ chief executive, Kim Yong-jin, ran unsuccessfully on the ruling party ticket in the general elections last year for a seat representing Ichon, Gyeonggi Province.
Lee announced his decision on the Ilsan Bridge about six months ahead of the presidential election. This should make people ask, “Why now, after all this time?” It is hard for him to avoid criticism that he is using his job for political ends.
The national debt is feared to surpass 1,000 trillion won this year due to lax fiscal management and populist policies requiring massive taxation. Deficits have been mounting for public pension programs, including the NPS.
In this situation, a presidential candidate who heads a local government is trying to win the hearts of residents with taxpayer money, while a public entity managing the national pension fund is doing nothing about a huge expected loss. Both show moral laxity about people’s money.
The fund belongs to the people. Serving the public interest means increasing its investment returns. After all, a loss to the fund is a loss to the people.
By Korea Herald (firstname.lastname@example.org