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At an intersection in front of Gyeongchung-daero in Bubal-eup, Icheon, Gyeonggi Province, a road sign reading "SK Hynix-ro" has stood since this past April. Three nearby roads have received the same honorary road name. It is the first such occurrence since SK Hynix opened its business site in Icheon. An honorary road name is an additional name appended alongside the legal road name used as an actual address, honoring a person's achievements or a company's symbolic significance.
Icheon residents welcome it, saying, "We've become wealthy thanks to SK Hynix." There is good reason for this: buoyed by growth in corporate local income tax revenue from SK Hynix, Icheon's fiscal independence ratio has surpassed 50% for the first time ever. Of this year's main budget of 1.2036 trillion won, 663.5 billion won is covered by its own revenue, bringing the fiscal independence ratio to 55.1%. That is higher than Seoul's Gangnam District (53.6%) and Seocho District (53.0%), and ahead of Hwaseong (51.6%), home to Samsung Electronics, and Seongnam (53.0%), where the Pangyo Techno Valley is located. This is thanks to SK Hynix accounting for about 60% of Icheon's corporate local income tax. Icheon reportedly plans not to spend the increased revenue immediately, but to set it aside in a fiscal stabilization fund. The city has not forgotten that in 2024, when SK Hynix's poor performance reduced related tax revenue effectively to "zero," its fiscal independence ratio fell to 34.6%.
An old saying goes, "Fill the rice jar in a year of plenty to endure the year of famine." But local finances do not always work that way. Local governments with lower fiscal independence ratios often have larger budgets per resident. Even when their own revenue is insufficient, local subsidy grants and national treasury subsidies fill the gap. Spending can also rise even when the coffers are empty. Ahead of the local elections, spending increased in Gyeonggi Province and Incheon, with their budget execution rates reaching 49% and 47%, respectively, as of the end of May.
Once the local elections are over, new local government heads will deliberate on how to spend their budgets to fulfill campaign pledges. But capital expenditure that raises growth potential matters more than current expenditure that simply pumps out money. Though the semiconductor boom has filled its coffers, Icheon chose to save first. A household that empties its rice jar just because the harvest was good will not last long. The same goes for local governments.
