Major construction bodies in South Korea called on the government Tuesday to withdraw its scaled-back infrastructure budget for 2018, saying it may hurt not only the industry but also the national economy.
Announcing its budget request late last month, the government said that it will spend 17.7 trillion won ($15.7 billion) on infrastructure projects in the coming year, down a whopping 20 percent from this year.
"We express serious concern over the drastic cut in next year's infrastructure budget," said the Construction Association of Korea and four other trade associations in a joint statement. "It will pose a threat to the nation's economy, as well as the construction industry."
Yoo Joo-hyun (6th from left), chairman of the Construction Association of Korea, reads a statement during a press conference in Seoul on Sept. 12, 2017. (Yonhap)
The government should maintain its 2018 budget at a level similar to this year's spending in the 20 trillion-won range, said the organizations at a hurriedly called news conference in Seoul.
"An optimum level of infrastructure spending helps improve the public's welfare, create more jobs and animate regional economies," the bodies argued. "The construction industry is more effective in galvanizing the sluggish economy than any other sector."
The construction industry's call comes as concern is growing that their future performance may hinge largely on government spending on infrastructure projects amid signs of a cooling housing market.
The government's proposed infrastructure budget for 2018 marks the lowest amount in 13 years. Industry watchers voiced worries that the budget request, if approved by parliament, would shave up to 0.5 percentage point off the country's economic growth and cut 40,000 to 60,000 jobs.
"If finalized, the 2018 infrastructure budget will not only plunge the construction industry into a prolonged slump but also hamper government efforts to attain economic growth of 3 percent and create quality jobs," CAK Chairman Yoo Joo-hyun said.
"The construction industry plays a great role in the national economy as it contributed to more than half of the country's economic growth rate last year. It is hard to understand the government's cut in its infrastructure budget since the industry's stagnation will inevitably lead to lower economic growth."
Making the construction sector more worrisome, the government has also announced that it will decrease its infrastructure budget at an annualized rate of 7.5 percent over the next five years.
Early last month, the government unveiled a package of measures to rein in the overheated housing market, including the designation of areas under close state scrutiny, tougher mortgage rules and heavier capital gains taxes, in an effort to curb snowballing household debt.
The measures sent South Korean builders' business confidence to a 19-month low in August. The construction business survey index stood at 74.2 last month, down 11.2 points from the previous month and marking the lowest level since January 2016. A reading hovering below 100 means pessimists outnumber optimists. (Yonhap)