The government’s decision to cut its budget for infrastructure construction by 11.6 trillion won ($10.3 billion) for the next four years is prompting concerns that it would aggravate financial woes facing some builders and their creditor banks.
Under the plan, the budget for road construction projects will drop the most, with a 4.5 trillion won ($4.billion) reduction, followed by railroads with a 4 trillion won ($3.6 billion) cut.
The cuts for infrastructure make up about 13.8 percent of the overall planned budget cut of 84.1 trillion won ($74.7 billion), which will be implemented in the fiscal years of 2014 and 2017.
Some builders said the reduction of the budget to build infrastructure would lead to the cancellation of some public projects and would deal another blow to the construction industry, which has already been bruised by the sluggish real estate market.
In particular, small builders in the provinces, which have relied on local projects by the government such as building dams and roads, are feared to face bankruptcy, which would negatively affect local banks’ financial soundness, industry observers said.
The Ministry of Land, Infrastructure and Transport explained that the budget reduction is aimed at supporting the government’s implementation of welfare-related campaign pledges and restructuring overlappeing investments in infrastructure.
By Seo Jee-yeon (
jyseo@heraldcorp.com)
