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“Korea should expand SOC investment to lift up LPI”
Monday, September 18, 2017, 18:51:47 Paul Yoon ckyoon7@paran.com
SOC investment should be urgently expanded in Korea over time in order to upgrade its LPI (Logistics Performance Index) which is falling lower now, and to save its national logistics cost comparing with that of logistics power countries, it is argued.

Hyundai Research Institute (HRI) has stated the above in a latest report titled ‘The Key to SOC is to Expand Future Growth Potential’, indicating that there is a strategy required to expand SOC investment as well as level up its investment efficiency at the same time.

According to LPI rankings lately released from the World Bank surveying each country’s customs, infrastructure, arranging shipments, ease of arranging shipments, quality of logistics services, tracking and tracing, and timeliness, Korea’s LPI rose to 21st in 2012 from 24th in 2007, but fell to 24th in 2016.

Korea’s national logistics cost incurred in the course of logistics activities for people’s economies including cargo transport, cargo storing and loading-discharge stood at 16.3 trillion won accounting for 11% of its GDP in 2014, annually growing by 6.2% over the period of 2005~2014. This is compared lower with China’s 16.7% GDP, but still higher than that of Japan’s 9.2% and U.S.’s 8.1%.

This is chiefly attributed to Korea’s short and outdated SOC facilities, HRI considers. Of its SOC facilities, the speed of the roads being lengthened increasingly slows down whereas the railroads are steadily lengthened. But in the overall view, the density of Korea’s roads and railroads are not considered higher than that of those in western countries in the light of its land area and population. Korea’s road penetration rate in consideration of the nation’s total land area and population as per country coefficient records 30th, lowest among 34 OECD countries, short of road supply, and Korea’s railroad density stands below half of that of other countries with similar land area, also very short of the railroad supply, it emerged.

Also, Korea’s domestic SOC facilities built intensively on its peak economic growth period are rapidly getting into decrepitude. Notably, the bridges and tunnels show comparatively their lower deterioration rate whereas infrastructures such as ports-harbors and retaining walls have deeply deteriorated, HRI explains. Korea’s national competitive edge tends to increasingly worsen as Korea’s ranking 19th in 2011 in competitive index of basic infrastructure continued to decline to 26th in 2014. Korea’s 19~20th ranking in the early 2010 in transport competitive index slipped to 21st in 2015. The intensive control of aging infrastructure is needed as decrepitude in transport SOCs is expected to rapidly progress in future, HRI pointed out.

The much more SOC budgets should be invested this way due to short SOC facilities and decrepitude, but SOC investment rate against Korea’s GDP stood at 1.4% in 2016, and is estimated at 1.3% in 2017 and 1.0% in 2018 as its domestic SOC budgets are also sharply cut down. Thus SOC budgets tend to decrease. In particular, the transport SOC budget is expected to decrease by 23% from 19.1 trillion won in 2017 to 14.7t won in 2018, which is considered not sufficient in quality and in amount, HRI added.

In order to seek ways to elevate the domestic economy’s growth potentiality in the medium-and long-term and stabilize construction business still feared to make hard landing in short term, SOC facilities should be supplied to a certain level. It is also necessary to elevate the efficiency in SOC investment higher, seek ways to make balanced development of national land and recognize SOC investment to upgrade quality in people’s life and brace for future society, HRI said.
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