Government land development is one of the key elements of the comprehensive land use planning system in Korea. The policy goal of the government land development is to prevent the capital gains on land development to be concentrated on a few land owners and to promote a systematic and prudent land development. This paper has explored the current institutional constraints of Korean government in achieving the policy goal of its land development, the institutions playing a crucial part in coordinating individual actions. First, the price at which the government supplies land should be linked to the socio-economic effects of its users. Second, central and local governments should be entitled to offer grants to the public institutions for the financial loss which they take on as the supply price is below the cost of development.