Rampant Corruption in the Area of Construction
Korea has taken a number of measures to improve the transparency level of its construction industry since the mid-1990s. However, presently the domestic construction industry scores only 54.21 points out of 100 in terms of transparency, which makes it evident that the situation is still serious.
According to data released by the Supreme Public Prosecutor’s Office (SPO) and the Citizens’ Coalition for Economic Justice (CCEJ), a revered local civic group, the construction industry was related to 412 corruption cases out of a total of 765 cases, or 53.9%, covered by Korean media between March 1993 and July 2006. In terms of the percentage of corruption cases indicted by the SPO, corruption in the construction industry accounted for 40.4% in 2005 and 25.2% in 2006. .
Unpaid Wages for Construction Workers
Back pay owed in construction is significantly higher than that of other industries in Korea. According to a survey conducted by the Ministry of Labor, 18,000 construction workers reported that they didn’t received wages worth 86 billion won in 2011, almost double the amount over the second worst industry in Korea.
However, the reality including the reported cases is likely even worse. It is reported that 68.8% of construction workers have been owed back pay in one form or another. The situation stems from the pyramid structure of the local construction industry. Many construction workers get paid only when payment goes smoothly through a linear payment channel : subcontractors submit payment requests to prime contractors, who then request payment from clients, who make payments to prime contractors, who in turn finally pay subcontractors.
Vagueness in Subcontract Amounts and Non-payment
Contracts require prime contractors to pay their subcontractors within 15 days of the receipt of payments from clients. This system allows prime contractors to use the funds for other purposes during those 15 days, which causes several problems. For instance, when prime contractors go bankrupt before the 15th day, the payment deadline, subcontractors have nowhere to turn to and neither do their workers.
Problems with the Direct Payment Scheme
Theoretically, it is easy to require clients to directly pay subcontractors after deducting the portion of the payment due to prime contractors. If this system is implemented, however, prime contractors will lose their power over subcontractors. As a result, work quality by subcontractors might deteriorate and disputes may increase.
Unsystematic Project Management
For a long time, papers were prepared manually. Contractors’ various reports including daily, weekly, monthly and so on, were no exception. All of these had to be submitted to clients’ offices in person.
The regular reports included many details such as types of work, the progress rate, the amount of materials and the equipment used. However, as these details were difficult to verify,, inaccurate information in the reports was commonly accepted in many cases.
Unsystematic Project Management
Citizens living nearby construction projects are entitled to know when a project is going to be completed. A signboard is often installed at the entrance of a construction site at the beginning of a project, but updates are not posted. Typically, any information on delays cannot be found anywhere, and some projects are totally halted with no information given.