Authors: Hyeon Park; Sooyoung Choi
The Republic of Korea experienced rapid motorization during the 1980s. The country’s transportation network was unable to accommodate the increase in the number of cars, which led to serious traffic congestion and a significant, and costly, infrastructure gap. Increased investment in transportation infrastructure would be critical to fill this gap, but the budget of the Korean government was limited. For this reason, the Presidential Office of Korea organized a task force, the SOC (Social Overhead Capital) Planning Commission, to formulate policies for infrastructure financing. Two acts were developed as a result: the Transportation Tax Act of 1993, subsequently renamed the Act on Transportation, Energy, and Environment Tax of 2007, and the PPP Act, or the Act on Promotion of Private Capital into Social Overhead Capital Investment of 1994. Although the legislation of the PPP Act declared that the government was ready to welcome private companies to participate in public-private partnerships (PPPs), the promotion of PPPs slumped as the Asian financial crisis hit Korea in late 1997. In response, the Korean government made a wide range of systemic improvements in PPP projects to overcome the crisis and stimulate the economy and foreign direct investment.
This case study, as well as a delivery note adapted by Sooyoung Choi from the original case study, examines how PPP policy adapted and PPP programs were implemented.