The Public-Private Partnerships and the Fiscal Soundness of Local Governments in Korea

KDI Journal of Economic Policy 39(1): 41-82, 2017

43 Pages Posted: 4 Apr 2017 Last revised: 15 Jul 2017

See all articles by Hojun Lee

Hojun Lee

Korea Development Institute (KDI)

Date Written: February 1, 2017

Abstract

This paper studies the risks associated with local finance in Korea by identifying the financial status of each local government, including the financial burdens of PPP projects, and examined governmental future burdens related to PPP projects. We reviewed all fiscal burdens associated with projects, such as, for BTL (Build-Transfer-Lease) types of projects, facility lease and operating expenses, and, for the BTO (Build-Transfer-Operate) types of projects, construction subsidies that are paid at the construction stage, MRG (Minimum Revenue Guarantee) payments and the government’s share of payment. Furthermore, we compared the annual expenditures of local governments on PPP projects against their annual budgets and checked if the 2% ceiling rule could be applied.

Keywords: Public Private Partnership (PPP), Fiscal Burden, 2% Ceiling Rule, Fiscal Soundness, Local Government

JEL Classification: H54, H63, H72

Suggested Citation

Lee, Hojun, The Public-Private Partnerships and the Fiscal Soundness of Local Governments in Korea (February 1, 2017). KDI Journal of Economic Policy 39(1): 41-82, 2017. Available at SSRN: https://ssrn.com/abstract=2945811

Hojun Lee (Contact Author)

Korea Development Institute (KDI) ( email )

263 Namsejong-ro
Sejong-si 30149
Korea, Republic of (South Korea)

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