Bureau and Corporate Funded Body
Seoul Metropolitan Government announced the adoption of a reform model for Seoul-type, private capital-based projects concerning Subway Line 9, which became controversial with the abrupt announcement of a plan for a drastic raise in fare last year.
1. Macquarie and Hyundai were replaced with Kyobo Life Insurance, Hanwha Life Insurance, and Shinhan Bank as shareholders of Subway Line 9.
2. The right to decide on subway fare on Line 9 has been taken back by Seoul Metropolitan Government. It means that matters concerning Subway Line 9 fare will be fixed under the same system as those of the other subway lines in Seoul.
3. The basis for the minimization of financial burden of public fund has been laid by converting the existing Minimum Revenue Guarantee (MRG) method to the minimum cost compensation (MCC) method. Under the existing method, Seoul Metropolitan Government had to provide more than 40 billion won a year to the shareholders.
Under the newly adopted system, the financial burden imposed on Seoul Metropolitan Government will be minimized by eliminating irrational factors.
4. The rate of profit guaranteed for the shareholders has been lowered from 13.4% to 4.86%, thanks to the elimination of various risk factors by dint of operational experience accumulated over the past 4 years.
5. Up to 3.2 trillion won of public fund is expected to be saved through the newly adopted reform model concerning Subway Line 9.
6. We plan to raise 100 billion won worth of citizens’ fund, offering 4.3 % per annum in profit; this is a little higher than that offered by commercial banks.
The reform model newly adopted for Subway Line 9 will set an example for private capital-based projects implemented by Seoul Metropolitan Government, such as Umyeonsan (Mountain) and light rail transit.
We at Seoul Metropolitan Government are making efforts to set right those projects started on wrong grounds, including Floating Island and unsold apartments in Eunpyeong New Town. We will continue to solve one problem after another and push through with programs designed for the benefit of citizens.