Seoul shock for speculators

PUBLISHED : Tuesday, 26 October, 2004, 12:00am
UPDATED : Tuesday, 26 October, 2004, 12:00am
 

Billions will be lost over the failure to relocate capital


President Roh Moo-hyun has abandoned his ambitious plan to relocate South Korea's administrative base out of Seoul.


The Constitutional Court dealt a major blow to one of Mr Roh's flagship policies last week after it ruled that the government's capital-relocation scheme was unconstitutional.


And with their hopes of a property windfall dashed, residents from South Korea's central Chungcheong province have held angry protests, with some shaving their heads in a mark of frustration.


Some speculators will face financial ruin after borrowing an estimated 514.4 billion won (HK$3.53 billion), The Korea Herald reported.


'Many of the loans will turn into non-performing assets if the construction boom fizzles out,' warned the newspaper.


Property owners in Seoul and neighbouring districts including Inchon and Kyongi province - which together make up about half of South Korea's 44 million population - were celebrating the development, having averted a possible dramatic drop in the value of their holdings.


Yesterday, in a speech read by Prime Minister Lee Hae-chan to the parliament, Mr Roh accepted the top court's verdict. 'We are determined to proceed with a proper project which does not go against the Constitutional Court's ruling but keeps intact the government's aim of balanced regional development,' Mr Lee said.


Officials and lawmakers will be anxious to soften the blow to construction companies and individuals who had borrowed heavily in anticipation of a construction boom.


In light of the court's verdict, the ruling Uri Party has instead floated the idea of pursuing the policy of decentralisation, but on a smaller scale than previously envisaged.


'Due to the Constitutional Court's decision against our plan, we are prevented from moving Chong Wa Dae [the presidential office] and the National Assembly,' said Lee Jong-kul of the Uri Party. 'But we still can move ministries and other important public organisations to the area.


'What the court ruled unconstitutional was the capital-relocation law itself.


'Our long-term project for the balanced development of the country is still sound and valid.'


The court's decision is being viewed by analysts as a major setback for the president and his supporters.


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