Promotion of Public-Private Partnerships in the Republic of Korea

The R.O.K. leadership's stand on supporting public-private partnership (PPP) is defined in such key legal arrangements as The Act on Private Participation in Infrastructure, the President-issued Enforcement Decree of The Act on Public-Private Partnerships in Infrastructure and PPP Basic Plan which chiefly lay the regulatory basis for the PPP practice. Some important aspects of granting preferences and incentives to private companies in PPP are determined by other laws, including The Act on the Acquisition of and Compensation for Land, etc. for Public Works, Restriction of Special Taxation Act, Local Tax Act and Restriction of Special Local Taxation Act. The R.O.K. government enhancement of PPP takes the form of cooperation in settling project-linked land matters, financial support and risk-sharing mechanisms. The land settlement support means that the concessionaire is granted land expropriation rights and may entrust the competent authority, such as the local government, with the execution of the land purchase, compensation for loss, and resettlement of residents, among others. The financial support is provided by means of construction subsidies and tax incentives to the private partner while the compensation of base cost, early termination payment and Infrastructure Credit Guarantee Fund are the risk-sharing mechanisms. According to the legislation, the central or local governments may grant construction subsidies to the concessionaires if it is required to maintain the user fee at an affordable level. The tax benefits comprise separate taxation on interest derived from social infrastructure bonds, application of zero rating to VAT and VAT exemption in case of certain facilities and services as well as Acquisition Tax exemption with respect to PPP. In the compensation of base cost structure, the government assumes a portion of investment risk that is limited to what the government's costs would have been in the case of a public-financed project. The mechanism of early termination payment enables the private side in the project to request the government to terminate the concession agreement for certain reasons. When such a situation occurs the government pays the early termination payment for the project, taking over the project facility involved. The R.O.K. PPP market has gained in stability to become profitable over the past 20 years. In December 2011, Korea had 600 contract-based PPP projects, valued at USD 79.6 billion, a 29-percent increase in comparison with the same period of 2009.

1. Act On Private Participation in Infrastructure. Last amended by Act No. 11060, September 16, 2011. [Electronic resource]. - Mode of access: http://pimac.kdi.re.kr/eng/mission/ppp_guide.jsp/, free (Accessed 11.04.2015).

2. Restriction of Special Taxation Act. Act No. 11614, Jan. 1, 2013. [Electronic resource]. - Mode of access: http://elaw.klri.re.kr/eng_service/lawView.do?hseq=27406&lang=ENG, free (Accessed 11.04.2015).

3. Local Tax Act. Act. No. 11873, Jun. 7. (2013). [Electronic resource]. - Mode of access: http://elaw.klri.re.kr/kor_service/lawView.do?hseq=28592&lang=ENG, free (Accessed 11.04.2015).

4. Basic Plan for Public-Private Partnership Projects. Republic of Korea: Ministry of Strategy and Finance (2011). [Electronic resource]. - Mode of access: http://pimac.kdi.re.kr/eng/mission/ppp_guide.jsp/, free (Accessed 07.03.2015).

5. Gyeong-gu Gang. Evolution of the Korean PPP Market. (2012)Presentation file. Seoul:. [Electronic resource]. - Mode of access: http://kzppp.kz/ru/library, free (Accessed 07.03.2015).

6. Kim Jay Hyung, Kim Jung Wook, Shin Sung Hwan, Lee Seung Yeon (2015) Public-Private Infrastructure Projects: Case Studies from the Republic of Korea. Volume 1: Institutional Arrangements and Performance. Executive Summary. Mandaluyong City, Philippines: Asian Development Bank, 2011. [Electronic resource]. - Mode of access: http://www.adb.org/publications/publicprivate-partnership-infrastructure-projects-case-studies-republic-korea/, free (Accessed 07.03.2015).

7. Semenin A.A. (2010) Centry razvitia gosudarstvenno-chastnogo partnerstva: sravnitelny analiz [Publicprivate partnership development centers: comparative analysis]. Moscow: Non-commercial Partnership Public-Private Partnership Development Center.

8. Osnovy economicheskoy politilogii [Basics of Economic Politology] (2015). Course book edited by E.B. Zavyalova, Department of Economic Politics and Public-Private Partnership, Moscow State

9. Institute of International Relations (University). Moscow: MGIMO-University, 2015. – 414 p. (the «MGIMO Course Books» series).