The government has confirmed that it significantly reduced the budget for certain social overhead capital (SOC) projects, including the metropolitan express railway (GTX) Line B, in the supplementary budget proposed by the new government. This move is interpreted as a restructuring of items that are difficult to execute within this year due to construction delays.
According to relevant authorities on the 20th, 1.222 billion won of the approximately 2.968 billion won allocated for this year's GTX-B Yongsan-Sangbong financial section has been cut from this supplementary budget.
Although the GTX-B groundbreaking ceremony was held last March, actual construction has been delayed. Resident complaints surrounding the Bucheon Lake Park substation and the ventilation shaft construction near Seoul Sangbong Station, as well as issues with the location of vertical shafts near apartments and the fluctuation of construction company equity, are cited as the reasons for the delay. Vertical shafts are structures that connect to the ground for the ventilation and emergency evacuation of underground railway sections.
As the GTX-B construction is delayed, there are also withdrawals occurring among the consortium for the private sector section. DL E&C returned 4.5% of its equity and withdrew, while Hyundai E&C has recovered more than half of its existing 20%. Macquarie Korea Infrastructure Investment Company (Macquarie), a key investor in Line B, has also decided to withdraw from the project.
Some construction is already underway, and since there is an existing budget, the government decided to cut the budget that would be difficult to execute this year and allocate it elsewhere. However, the government emphasized that the project itself is not halted and that it plans to manage the overall schedule to avoid disruptions.
The Pohang-Yeongdeok Expressway section was also included in the budget cuts. Of the total budget of 200 billion won, about 180 billion won was reduced in the supplementary budget. The main reason is the reassessment of the feasibility of the project plan for the Yeongil Bay marine section.
When this section was proposed in 2008, the total project cost was 1.2 trillion won, but it has now surged to around 3.2 trillion won, prompting the Korea Development Institute (KDI) to start a reassessment of its feasibility. The Ministry of Land, Infrastructure and Transport is seeking cost reduction measures, including route reductions, but the review is being prolonged due to the lack of realistic alternatives to replace the existing marine crossing.
The expansion project for the Dong-Gwangju-Gwangsan section of the Honam Expressway also saw a full cut of its total budget of 36 billion won. The main background is that Gwangju City has delayed the payment of its share. Initially, the project cost was 276.3 billion won, which has increased to 793.4 billion won due to the rework of soundproof tunnels, and as Gwangju's burden grows, the start of construction is expected to be delayed from the initial plans.
The Gadeokdo New Airport project was also reduced in this supplementary budget. The budget allocated for the construction of the Gadeokdo New Airport this year was 964 billion won, but the government cut more than half, 522.4 billion won, citing difficulties in beginning construction within the year due to the failure to select a contractor.
A decisive reason for the construction delays is the withdrawal of the Hyundai E&C consortium, which was supposed to undertake the project. The Ministry of Land, Infrastructure and Transport proposed a construction period of 84 months, but Hyundai E&C stated that at least 108 months would be necessary, and disagreements regarding the opening date could not be narrowed down. Ultimately, the withdrawal of Hyundai E&C effectively canceled the anticipated groundbreaking schedule for this year.
The government has presented a 'practical restructuring' centered on items that cannot be executed within the year as the background for the budget reductions in these SOC projects. Lim Ki-hoon, the Second Vice Minister of the Ministry of Economy and Finance, noted, 'SOC projects are also included in the target for expenditure restructuring, and we adjusted those projects that would be difficult to achieve 100% expenditure this year.' He explained, 'In the case of the Gadeokdo New Airport project, we reduced some of the budget because we deemed it difficult to proceed with the construction due to the termination of the contract, but essential processes such as access roads will be carried out as initially budgeted.'
Delays in reflecting the reality of construction costs are also cited as a reason for the budget cuts. Jeong Gyu-cheol, head of the economic forecasting department at the Korea Development Institute (KDI), stated, 'Since 2022, prices and construction costs have risen significantly, and it is necessary to realistically reflect these changes in the budgeting process.' He added, 'While the government may have certain standards, the regulations need to operate more flexibly.'