By Kim Hyun-cheol
Staff Reporter

South Korea has decided to do away with a compensation policy for privately invested highways to guarantee a minimum level of profitability for their operators.

The Ministry of Land, Transport and Maritime Affairs confirmed Sunday the government had struck the minimum revenue guarantee (MRG) provision off the list earlier this month in its review on basic plans for privately invested public businesses.

Tolls on the roads will also be cut to the level of state-run highways, amid criticism that the cost of driving on them are nearly double that of those operated by Korea Expressway Corp.

Aimed at galvanizing investment from the private sector in public projects such as roads and railways construction, the government introduced the MRG in 1998, compensating up to 90 percent of the minimal profits over the next 20 to 30 years in case they don't attract as many passengers or traffic as previously forecast.

This means there will be no more state-backed loss compensation for private operators in such public businesses. The system was terminated in 2006 for projects first suggested by private companies.

The move follows recent opposition that a great amount of tax is spent making up for badly designed private projects, with such roads suffering from tremendous losses over the past few years.

Since the launch of the MRG system, six construction projects have been supported from state coffers, starting with the Incheon International Airport Highway. Over the last seven years, Korea has spent 914.5 billion won ($783 million) on them. The spending of several more trillion won appears inevitable over the coming years, according to data from the Ministry of Strategy and Finance.

Toll rearrangements will be first applied to three private roads between Incheon and Gimpo, Gyeonggi Province, another highway in the province linking Anyang and Seongnam and one in North Gyeongsang Province between Yeongcheon and Sangju. The construction of those roads will be completed between later this year and early next year.

``The government has decided to go for those reshuffles considering both the financial burden from the private highways and complaints from their users,'' a spokesman for the Ministry of Land, Transport and Maritime Affairs said.

hckim@koreatimes.co.kr