Posted on 09/19/2008 8:00:07 PM PDT by Tolerance Sucks Rocks
There is rising criticism that the Machang Bridge, which opened in July at the cost of millions of won, is only enriching speculative capitalists with tax money. They say that throughout the country, roads built through private investment are becoming white elephants where investors eat tax money via rough traffic predictions and contracts with excessive profit guarantees.
The province of South Gyeongsang spent 380 billion won (US$337 million) in budget outlays and 190 million won in private capital to build the Machang Bridge linking Changwon and Masan. For the next 30 years, the earnings from the bridge tolls will be taken by Macquarie Korea Infrastructure Fund, which invested 120 billion won into the project. This is because the fund owns 100 percent of the equity of Machang Bridge Co., Ltd., which operates the bridge.
The province signed a deal with the fund guaranteeing profits equal to at least 80 percent of the predicted traffic. Yet two months after the bridge’s opening, it is currently getting only 36 percent of the traffic initially expected. If the contract is followed, the province will have to pay 9 billion won to MCB in this year alone. The provincial assembly and local civic groups estimate that the province will have to pay over 1 trillion won to Macquarie Korea Infrastructure Fund over the next 30 years. Because of the province’s sloppy traffic predictions, a situation has developed in which it will have to spend tons of tax money to guarantee the profits of private capitalists who invested 120 billion won, on top of the 380 million won the province initially spent on the project.
An alliance of local civic groups held a press conference at the South Gyeongsang Provincial Hall Press Center on Thursday to point out the problems of the Machang Bridge, including the excessive traffic estimates. Kim Hae-yeon, a South Gyeongsang Province lawmaker, said 570 billion won went into building the bridge, including government budget outlays and private capital. Even if the project had been pushed as a purely financial one, however, it should have been possible to built it for just 390 billion won, using the medium bid offer, she said. Kim said she would push for a special investigation of the project, which, by exaggerating predicted traffic, is now wasting the money of provincial tax payers.
Not only do the people of the province have to guarantee the investment earnings of Macquarie Korea Infrastructure Fund through tax money, but they must also turn over the expensive bridge tolls. The toll for small cars passing over the 1.7km bridge is 2,400 won. On the MCB homepage, many complain there is no advantage to using the bridge due to the high tolls. With the controversy growing, the province said the current amount of traffic was low because connecting roads have yet to be completed, but that it would increase over time. It also said, however, that after a year, if the traffic still failed to meet expectations by a wide margin, it would consider additional negotiations to lower the profit guarantee rate now set at 80 percent.
Besides the Machang Bridge, Macquarie Korea Infrastructure Fund has invested and owns management equity in eight road projects across the country, including the Incheon International Airport Highway, the Cheonan-Nonsan Highway and the Umyeonsan Tunnel. Due to mistaken traffic demand predictions, of the 247 billion won the fund has made from these facilities, too, 104 billion won came from the central and regional governments that guaranteed earnings. Macquarie Korea Infrastructure Fund has invested in another six projects currently under construction, including the Seoul--Suncheon Highway, which is expected to open in 2009.
Macquarie Shinhan Infrastructure Asset Management Company Limited, which established Macquarie Korea Infrastructure Fund in 2002, is earning large profits by investing in social infrastructure nationwide. Even when it was founded, it stressed that unlike other funds that invest in financial markets, it had stable profits guaranteed by the government, earning attention as a new form of fund investing in social infrastructure.
Fortunately, none of those types of financial shenanigans happen here.
PING!
ROFLOL
In S. Korea, such wasted public money is called "blind money."
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