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Feasibility exemptions raise doubts

The pushing through of big projects is seen as political by some

Jan 29,2019
The government will announce infrastructure projects today that are exempt from preliminary feasibility studies, and controversy is already brewing.

While the government claims the exemptions are aimed at speeding up the process and contributing to the development of rural areas, and the balance development of the country, critics contend that the exemptions are political and designed to win over voters.

President Moon Jae-in stressed the importance of the exemptions during his New Year’s press conference held at the Blue House on Jan. 10 and during his visit to Daejeon last week.

In a preliminary feasibility study, the government determines whether a project makes economic sense, forecasts its efficiency and impact, and evaluates the prospects for investment funding.

The Presidential Committee for Balanced National Development is looking at 33 projects in 17 localities. Expressways, high-speed rails and a public hospital are on the list.

According to civic group Citizens’ Coalition for Economic Justice (CCEJ), projects up for possible exemption are 13 times the cost of the 4.73 trillion won of infrastructure projects that were exempted over the five years between 2014 and 2018.

It is also believed many of the projects being considered are not inherently feasible and raise the possibility of wasting tax money.

A commercial rail in Daegu, which failed to pass preliminary studies in June 2016, and a highway connecting Jecheon and Yeongwol are up for review.

The biggest flops in the past, where the government went ahead without a preliminary feasibility study, include the Four Major Rivers Restoration Project in 2009 and the Formula 1 race track in Yeongam, South Jeolla, during the Lee Myung-bak administration.

Despite the massive investments that went into these projects, they generated huge deficits.

The Uijeongbu rail, which was opened in 2012, has accumulated a loss of 360 billion won, and in 2017 filed for bankruptcy. It is currently under the management of the Incheon Transit Corporation.

On Sunday, CCEJ released a statement opposing the exemptions, insisting the current administration has already passed studies on projects worth 29 trillion won.

The civic group added that allowing additional exemptions will result in commitments four times those made in Four Major Rivers Restoration Project, where the Lee administration invested 60 trillion won.

The opposition Liberty Korea Party (LKP) leader Na Kyoung-won called the exemptions political and targeted at winning votes for the general election, which is to take place in April next year, and also to win the public confidence ahead of Lunar New Year.

During the presidential race, the future Moon government promised it would not promote major infrastructure construction projects that were sought by predecessors Lee Myung-bak and Park Geun-hye. It said the projects were undertaken to improve economic figures and were a waste of taxpayer funds.

The recent change in stance is seen as an attempt to boost local economies as the current administration faces slowing growth while the job market continues to struggle. If half the projects are given the green light, roughly 20 to 30 trillion won will pour into the regional economies. That could shift sentiment.

As such, local expectations are running high.

“Infrastructure projects have a greater impact than the government’s short-term job measures,” said Kim Tae-ki, economics professor at Dankook University. “They are more effective in putting out the immediate fire at a time like this when the job market is sluggish and the economy is struggling.”

The question is largely one of cost versus benefit.

“Under current feasibility studies, areas like Seoul, where there’s a huge population, the benefits to cost are high, while in other regions where the population is small, the studies will come to the conclusion that the economic benefit is low,” said Ha Yeon-seob, Yonsei University public administration professor.

The Korea Development Institute is solely in charge of preliminary studies, and it takes more than one year to complete the work. This delays project start dates.

The current proposals have met with particularly heavy criticism, as each local government is proposing a project to the president. If these projects kick off simultaneously, they could negatively affect the nation’s fiscal soundness. Political backlash is also a possibility, as local governments whose projects are denied will cry foul.

On Monday, Gyeonggi Governor Lee Jae-myung said the central government should not discriminate against the greater Seoul area as it decides which projects get exemptions from preliminary studies.

“Just because Gyeonggi is part of the greater Seoul area, it shouldn’t be discriminated against,” Lee said.

But there are those who argue speeding up infrastructure projects in boosting balanced development is necessary.

“The preliminary feasibility studies have been a subject of fear for local government and politicians who have been trying to push ahead public projects while they try to stop the wasting of taxes,” said Kim Duol, Myongji University economics professor. “The studies not only evaluate the feasibility of the projects but also the social utility they contribute,”

“It’s worrying that political comments that ignore all of this would be made,” Kim added.


BY KIM KI-HWAN, LEE HO-JEONG [lee.hojeong@joongang.co.kr]


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