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  • P-ISSN 2586-2995
  • E-ISSN 2586-4130

KDI Journal of Economic Policy. Vol. 39, No. 1, March 2017, pp. 41-82

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The Public-Private Partnerships and the Fiscal Soundness of Local Governments in Korea

Ho jun Lee

Author & Article History

Manuscript received 28 March 2016; revision received 29 March 2016; accepted 10 August 2016.


This paper studies the risks associated with local finance in Korea by identifying the financial status of each local government, including the financial burdens of PPP projects, and examined governmental future burdens related to PPP projects. We reviewed all fiscal burdens associated with projects, such as, for BTL (Build-Transfer-Lease) types of projects, facility lease and operating expenses, and, for the BTO (Build-Transfer-Operate) types of projects, construction subsidies that are paid at the construction stage, MRG (Minimum Revenue Guarantee) payments and the government’s share of payment. Furthermore, we compared the annual expenditures of local governments on PPP projects against their annual budgets and checked if the 2% ceiling rule could be applied.


Public Private Partnership (PPP), Fiscal Burden, 2% Ceiling Rule, Fiscal Soundness, Local Government

JEL Code

H54, H63, H72

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