Skepticism high over finance minister's pledge to root out real estate speculation

Land Minister Byeon Chang-heum adjusts his glasses while apologizing at the Land, Infrastructure and Transport Committee at the National Assembly, March 9. Korea Times file

By Lee Kyung-min

Skepticism is running high over the finance minister's pledge to eradicate real estate speculation, an understandable public sentiment and an indication that the public has largely lost faith in the government, due to dozens of botched real estate policies resulting in a spike in housing prices over the past few years. All the while, public servants were using insider information for personal gain.

The shameless lack of moral and ethical standards found at the state-run Korea Land and Housing Corp. (LH) laid bare the complete failure of the government which sought to control housing prices through heavier taxation and tightening of lending rules, a fundamentally flawed approach that ignores the market principle that pricing should be determined by supply and demand.

More embarrassing is the apparent lack of internal control thus far and absence of any basic code of conduct that should govern the behavior of public servants whose jobs require them to walk a fine line every day while avoiding temptation to seek undue profit that must be declined if they able to discern right from wrong.

Prevention measures?

Deputy Prime Minister and Finance Minister Hong Nam-ki pledged Wednesday that the government will announce measures in detail to prevent the recurrence of real estate speculation committed by LH employees, as part of an overarching mission to root out the illicit practice long tolerated and overlooked in the public sector.

“We are preparing measures to prevent, identify and punish speculation as well as ways to have the illicit gains forfeited, with details to be outlined by the end of this month,” he said during a ministerial-level meeting at Gwanghwamun in central Seoul.

The strongest yet most reasonable measures will be in store to reform LH, he added, including ways to redefine the role and function of the land ministry-supervised firm with over 10,000 employees and 185 trillion won ($163 billion) in assets. Its corporate governance and overall management will be put under the microscope.

“The joint special investigation team is currently looking into spouses, children and grandchildren of LH employees. If suspicions of speculation or attempted speculation are substantiated, the government will punish them with the strongest measures and ensure that their illicit gains will be forfeited,” he said.

Yet the housing supply plan announced in February will be pushed ahead without any course correction, he said, seeking to dispel concerns that the plan could be revised or scrapped altogether due to ongoing investigations.

“We are aware of concerns that the government's real estate policies announced in August and November of last year and February this year might face setbacks. But the supply measures will proceed as planned to limit market confusion. We will supply 243,000 homes in the second half of this year and 32,000 next year.”

Members of the People's Solidarity for Participatory Democracy, a left-leaning civic group, hold a protest asking for legislation to prohibit public servants from taking advantage of inside information for the purpose of making personal gains, in front of the National Assembly on Yeouido in Seoul, March 17. Korea Times file

Corruption

According to audit reports uploaded on All Public Information in One (ALIO), a finance ministry-operated website providing management information on Korea's 350 state-run, quasi-governmental entities, employee misconduct at LH has been rife in recent years.

Many received money among other favors in return for exercising their influence in managing details in state-run construction projects as well as inking related deals.

Some of them made equity investments with builders in contract with LH and used builders' corporate credit cards. Others asked builders for a job after retirement, implying or stating outright that their knowledge, experience and network would “serve them well in a variety of ways needed.”

A manager-level LH worker whose identity was withheld, for example, arbitrarily granted a request from a construction firm, in an apparent attempt to inflate the construction cost the LH paid the firm by 120 million won. He pocketed some of the money. LH ordered the man to recover the 120 million won and cut his monthly salary for one month.

He was one of many LH employees caught in 1,024 cases of misconduct and irregularities last year. Thirty-three faced disciplinary actions and 474 received verbal warnings.