Outstanding debt jumps 75%; per citizen debt 310,000 won
Mayor Oh Se-hoon
By Lee Hyo-sik
The financial soundness of the Seoul Metropolitan Government has been deteriorating over the past few years as it outspends its revenue, and borrows more money to finance a number of development schemes, including the “Design Seoul” and “Han River Renaissance” projects.
It has also been expanding a range of social welfare-related programs in a bid to boost popularity, mostly with senior citizens despite financial constraints.
Civic groups blame Mayor Oh Se-hoon for Seoul’s worsening fiscal state over the past few years, arguing that the lawyer-turned politician is obsessed with raising his standing with the public. They urge Oh to discontinue what they call an array of “pork barrel” projects, and slash labor and other operating expenses to bolster its financial health.
The city said Monday that its outstanding debt jumped 75 percent to 3.24 trillion won as of the end of 2009 from 1.85 trillion won a year earlier, with its per-capita liability jumping to 310,000 won from the previous 177,000 won.
In late 2006, six months after Oh was elected mayor, the city government’s debt stood at 1.15 trillion won. But in three and a half years, its liability surged by nearly three-fold.
A senior Seoul city official said the size of Seoul’s debt has increased at a faster pace over the past two years in the wake of the global economic slowdown in late 2008.
“We had to raise funds by issuing bonds to help companies and citizens cope with worsening business conditions. We had to create jobs in the public sector and provide public housing for low-income-families,” the official said. “But our tax revenues have fallen sharply because of the sluggish real estate market, forcing us to outspend earnings.”
The city issued municipal bonds worth 1.12 trillion won in 2009.
However, civic groups insist that Seoul’s declining financial health is not because of the expansion of social welfare programs, but because of Oh’s populism-oriented development projects, which have nothing to do with actually improving the livelihood of Seoul citizens.
“Since Oh became Seoul mayor, he has initiated a series of development projects in the name of improving the city’s business and residential infrastructure, such as the Han River Renaissance project and Design Seoul policies,” said Ko Kye-hyun, director of policy department at Citizens’ Coalition for Economic Justice. “Additionally, the city has been building new roads and expanding subway lines, spending trillions of won.”
Ko said Seoul has been unable to increase its earnings and meet its growing expenditures because of falling tax revenues and deteriorating business conditions amid the global economic crisis, adding the city resorted to issuing bonds in a reckless manner to raise funds, which has aggravated its financial health.
“Seoul’s financial standing was far better than many other municipal administrations, thanks to its broad tax base. Given this, there is no question that Mayor Oh is responsible for the depletion of municipal coffers,” he said. “Oh should immediately stop pursing unproductive pork barrel projects, as well as downsize the workforce and cut operating costs,” he added.