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| The stands are nearly empty during a beach volleyball match between Korea and Thailand during the Incheon Asian Games in Songdo, Incheon, on Sept. 24. / Korea Times photo by Shim Hyun-chul |
By Kim Rahn
Now that the extravagant spectacle of the Asian Games is over, the host city, Incheon, is facing increasingly serious financial difficulties because its debts are snowballing following heavy spending to finance the event.
There are also concerns that PyeongChang in Gangwon Province, which will host the Winter Olympics in 2018, could incur similar financial woes unless there is thorough preparation and financial management.
According to the Incheon Metropolitan Government, the city government and its affiliated public companies are currently 12.6 trillion won ($11.8 billion) in debt.
Of this total, 3 trillion won was added over the last three years.
"The debt was mainly a result of the construction of the Asiad stadiums and the Incheon subway line No. 2," said Park Sung-soon, an official at the city government.
Some 1.7 trillion won was spent on building 17 stadiums and other facilities for the sports event, and Incheon paid 1.2 trillion won of this amount, or 73 percent, with the rest paid for by the central government.
Without the money to fund such a hefty financial outlay, the city government issued municipal bonds. While it has paid between 15.3 to 45.5 billion won in interest every year since 2010, it will have to start paying the principal, the outstanding balance of the loan, from next year. This will amount to 67.3 billion won in 2015 and rise to 157.3 billion won in 2020. Between 2018 and 2024, the annual repayment will be, on average, 100 billion won.
Including debts for projects other than the Asiad, Incheon will have to pay more than 400 billion won in principal payments and interest for its bonds.
The debts are expected to rise further because the city did not gain the expected financial and other benefits from the Asian Games which failed to draw the degree of public attention that had been anticipated.
Moreover, maintenance of the stadiums will cost additional tens of billions of won every year.
These results differ vastly from an initial study by the Korea Institute for International Economic Policy, a government affiliated think tank, which forecast that the event would bring 18 trillion won in economic effects to Incheon and create 270,000 jobs.
But Park claimed that financial profits were not the goal of the event. "At international sports events, it is impossible to recover costs with the proceeds from the events. The goal of hosting such an event is to raise the brand value of the city. It is future-oriented," he said.
However, the brand value may mean nothing if the city fails to pay back its huge debts and goes bankrupt. It is also unclear how the city can repay these debts and regain its financial health.
The city is planning to house movie theaters, shopping malls, discount chain stores and restaurants in the main stadium, receiving rent from those facility operators. It also plans to transform the handball stadium into an ice rink.
However, there is no detailed scheme or budget allocated for this, which Incheon Mayor Yoo Jeong-bok admitted.
"Frankly speaking, we haven't come up with detailed plans for after-event use of the stadiums. We'll draw up proper measures by studying precedents," he said in a media briefing on Oct. 6.
With Incheon's hardship as an example, concerns rise over similar difficulties other global event hosting cities may have, especially PyeongChang.
Meanwhile, ruling Saenuri Party Chairman Kim Moo-sung recently pointed out there was no control tower for the PyeongChang Winter Olympics. "I was surprised that the design of the main stadium has not even started yet. They have not decided on the location for the opening and closing ceremonies, either," he said after visiting PyeongChang.
Besides construction of the facilities, the organizers have no idea about how to use them after the event.
It is forecast that more than 10 billion won will be needed for maintenance costs for the speed skating rink alone. Alpensia Resort, which Gangwon provincial government built for the games, has nearly 1 trillion won in accumulated deficit.
The Bank of Korea's Gangwon branch stated in a 2012 report, "Deficits are inevitable considering the costs for facility construction and the maintenance expenses after the event."
Hyundai Research Institute also said in February that the central and local governments should control spending strictly to prevent the preparation costs for the Winter Olympics from escalating.
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