Issue Focus

Infrastructure management system is changing with substantial portion of domestic infrastructure aging rapidly. However there are still not a few loose ends in the system and no concrete strategies are established on how to finance related costs. This research is searching for ways to utilize regional development funds owned by 18 municipal governments as sources for financing costs for aging infrastructure. Regional development funds are funds that were established for the construction of water and sewage pipelines in local areas but are losing ground as the demand for new infrastructure investment are dwindling. For reference total funded money by municipal governments amounts to 15.7 trillion won as of 2017. In this research, diagnosis on current infrastructure management system was made first. Analysis of operation of the funds was conducted in detail and feasibility of their usage for intended purposes was examined. Current infrastructure management system is found to be mainly composed of activities such as safety examination and appraisal based upon the Act of Safety and Maintenance of Infrastructure and lack in funding mechanism for related costs. On the other hands, non negligible amount of regional development funds are just deposited in local banks because regional government are failing to find proper investment chances and exposed to the risk of adverse parity as the trend of low interest is becoming permanent. With all these research results, the following recommendation for the usage of the funds are suggested. First, the coverage of businesses and eligibility of support from the funds should be expanded and legal devices should be designed to influx money into the investment for aging infrastructure. Second, the terms of loan from the funds should become more flexible and more lenient conditions should be applied to businesses relevant to ageing infrastructure. Third, public infrastructure fund where regional development funds can contribute to should be established. Forth, new PPP model and investment platform for ageing infrastructure using regional development funds should be constructed. Fifth, management plans for small vulnerable facilities by local governments should be established and they should be connected closely with operation plans for regional development funds.