The latest impropriety to roil the Moon jae-in government pertains to irregularities by Korea Land & Housing Corp. (LH) employees regarding large urban development projects near Seoul.
State-owned LH was
established in 2009 as a comprehensive organization responsible for the
development, construction, renovation and management of land, housing
properties and cities in South Korea. Since then, it has developed residential
areas, new towns and industrial complexes, including the inter-Korean Kaesong
industrial park in North Korea.
Earlier this month, two
civic groups – People’s Solidarity for Participatory Democracy and Lawyers for
a Democratic Society -- alleged that LH employees bought land worth about 10
billion won ($8.88 million) in the cities of Gwangmyeong and Siheung in
Gyeonggi Province between April 2018 and June 2020, before plans for transformative
development projects -- aiming to decentralize Seoul by turning farmland into a
self-sufficient town powered by an industrial complex and full infrastructure
-- were announced.
Their role in using
insider information to snatch precious property before word got out brought
into sharp focus the conflict of interest in public sector and effective
measures to tackle the issue.
A conflict of interest here
involves the public duty and private interest of public officials, in which their
private-capacity interest could improperly influence the performance of their
official duties and responsibilities.
Since then, the police have
raided LH headquarters and other regional offices, but the ensuing commotion has
refused to subside. With public mistrust growing before crucial mayoral
by-elections in Seoul and Busan on April 7, undermining his continuing attempts
to cool the property market, President Moon was forced to issue a public statement.
He encouraged the ruling
party to pass a conflict of interest law, noting that “the people are
infuriated” and the “unacceptable act destroyed society’s fairness and trust.”
Moon said that although the
current anti-graft law, also known as the Kim Young-ran law, paved the way for
the country to clean up corruption, and the latest scandal “should serve as an
opportunity to create a strong conflict of interest prevention system.”
It took an unforeseen
public embarrassment just before crucial elections to come to this sudden
realization. Efforts to bring a stringent law to tackle conflict of interest in
the public sector have been put on the backburner for years now, mostly due to
reluctant lawmakers across the ideological spectrum.
In fact, there is already
a public service ethics law which seeks to establish the ethics of officials by
preventing conflict of interests through the prevention from acquiring unlawful
property and securing fairness in the execution of their official duties. It
prescribes matters necessary for the regulation of property acquisition by
public officials who take advantage of their office, a report on gifts and
blind trust of the stocks by officials, and restrictions, etc. on the
employment and acts of retired officials.
Article 2-2 of the law
states that the central and local governments shall strive to promote the
smooth progress in the performance of duties of public officials in relation
with their property interests, so as not to cause any difficult situation in
their fair performance of duties.
“Public officials shall
appropriately and faithfully perform their duties with a preference of public
interests, so as not to cause any difficult situation in the fair performance
of their duties in relation with their property interests,” it notes.
It further adds that no
public official shall pursue private interests or grant illegal preferential
benefits to any individual, institution or organization using his or her public
position, and unfairly use the information acquired during his or her
incumbency for private purposes or have another person use such information
unlawfully.
However, the law has not been very effective
in tackling conflict of interest and it is widely accepted that there is need
to further strengthen it.
It was in this context
that a clause to prevent conflict of interest among public officials in the
current anti-graft law was shelved when it was initially taken up for
discussion in the National Assembly five years ago. Subsequent efforts to
introduce it have since been ignored.
Therefore, it is unclear
whether a related law will be expedited, although Moon is right in noting that
it is indeed an opportunity to do so. While one can expect strict action to be taken
against the public officials involved in the LH scam, there is a possibility
that the issue will die down after elections.
The government has so far identified
20 public officials suspected of buying land for speculation in the Gwangmyeong-Siheung
area, and Prime Minister Chung Sye-kyun has pledged to declare a “war” against
real estate crimes.
A government task force has
confirmed 13 of the LH officials identified by the civic groups and found seven
more after looking into 14,000 employees of LH and the Ministry of Land, Infrastructure
and Transport.
The detailed findings will
be transferred to a special police investigative team, which will expand the
probe to include spouses and relatives of the officials in question.
The latest scandal comes
in the backdrop of soaring property prices in since May 2017 when Moon came
into office, despite repeated government interventions to cool down the market.
Housing affordability has become a headache, as his high levels of support have
started slipping due to scandals, high unemployment and slow economic growth.
Historically, real estate
has been the safest and most lucrative investment vehicle in Korea. Believing
that the rise in housing prices is triggered more by speculation than real
demand, the government has on various occasions stepped in to curb the price
rise and crack down on speculation.
Market watchers expect the
property market to continue to attract public attention and policy focus in
2021 as house prices will maintain their upward trend.
As noted by analysts, two
factors will drive the anticipated growth in housing prices. On the supply
side, the housing stock will sustain the persistent increase in prices for new
properties and also add upward price pressure in the second-hand property
market. On the demand side, property remains a favorite investment asset and
will continue to be so.
If the government is
really keen to curb housing prices and gain back public confidence, it must
ensure that its real estate policies are in tune with reality and not just stopgap
measures. More importantly in the context of the current scandal, it must beef
up its checks and balances on conflict of interest in the public sector.