Olympic Bid Strains Gangwon’s Financial Health
By Jane Han
Staff Reporter
For the people of Gangwon Province, bidding to host the Winter Olympics was first an ambitious goal, then a heartbreaking defeat, and now a dangerous dream that could end up throwing their home province into bankruptcy.
After the first two costly attempts failed to bring the 2010 and 2014 Winter Games to PyeongChang, South Korea's eastern coastal city only intensified its spending to snatch the hosting rights for the sports event in 2018.
The ongoing infrastructure projects - namely the lucrative Alpensia Resort - were continuously upgraded with better and more expensive facilities to entice the International Olympic Committee (IOC), which will decide on the official candidates in July 2011.
But the problem is that the province's primary channel of capital inflow for the construction has for months been clogged up.
The 1.5-trillion-won ($1.19 billion) Alpensia Resort, also known as the Alps in Asia - housing a resort village, ski slopes and golf course - was designed to rival luxurious skiing villages of Europe.
Since breaking ground in September 2006, developers boasted of the unprecedented amenities at the ultra-luxurious resort. But with three years left till the slated completion date, the entire project has started to wobble as the number of buyers has fallen short - far below the bare minimum need to shoulder the initial construction costs.
Disappointing sales have started to strangle the province-run Gangwon Development Corporation, which is overseeing the Alpensia construction, because it planned to fund the massive undertaking with profits from selling the vacation homes.
Only 14 percent of the 268 units were sold as of early this year, according to the Board of Audit and Inspection, which in June urged the Gangwon Development Corporation to downsize the project because of severe financial constraints.
But the developer moved forward, landing Gangwon with a huge debt totaling 700 billion won, with another 800 billion won still needed to complete the groundwork.
"One day's worth of interest Gangwon is having to shell out amounts to 100 million won," said Yoo Sang-cheol, secretary general of the Chuncheon People's Solidarity, a civic group urging the authorities to pay attention to Alpensia's financial risks.
"In the end, it's the people of Gangwon who are going to be responsible for the debt," he said, stressing that the province's heavy investment on the Olympics bid ultimately takes away the spending needed on public welfare, cultural events and other community facilities.
Critics warned that even regional governments can go bankrupt, exemplified by Japan's Yubari City in Hokkaido, which filed for bankrupty in 2007.
The Gangwon People's Solidarity, an alliance of 39 local civic groups, recently held rallies, claiming that both Gangwon Province and Gangwon Development Corporation were "far too inexperienced in resort development" to undertake such a huge project.