[Viewpoint] Reviews required for good reasonThere are about 70 employees working at a division called the Public Investment Control Center within the state-run think tank the Korea Development Institute. They are responsible for conducting preliminary feasibility reviews on state projects costing over 50 billion won ($43 million). The Ministry of Strategy and Finance contends that the government saves 2 trillion won to 3 trillion won a year thanks to the reviews. Before the preliminary reviews were required by law in 1999, various institutions pursuing the projects studied their feasibility themselves.
Of 32 projects during the five years before 1999, only one was dropped. And that was the ludicrous idea of building an airport on Ulleung Island, a pile of rocks and cliffs in the East Sea.
Both the Incheon Airport Railway - built at a cost of 4 trillion won, while passengers still just hover at 7 percent of the estimated level - and the new city hall that recently made news for its extravagance were not subjected to the feasibility studies. The railway authorities accepted a preliminary bid to construct an express line between the city and Incheon Airport three months prior to the feasibility review law taking effect. When a local government builds a city hall using funding from its own coffers, it is not subject to examination by the central government. The Board of Audit and Inspection launched a probe into the possible squandering of taxpayer money only after the lavish city hall came under fire.
A preliminary feasibility review can help avoid wasteful spending. It is a system other countries envy. The review sifts out and detects projects that could have turned into white elephants. The Ministry of Finance and Strategy expanded the reviews beyond public facility projects to ventures in research and development, information technology, and the welfare and health care fields. The government has spent over 1 trillion won in the last four years to help local companies develop a free Linux operating system, but the effort has yet to reap benefits.
Despite its merits, the system has a serious loophole. It cannot net big fish. The multitrillion-won Sejong City project and four rivers project flew under the radar. The Roh Moo-hyun government made the proposed plan to build the administrative city with a special law that avoided a feasibility review.
One senior official at the budget bureau of the National Assembly testified that the Roh government had a knack at breaking up the spending to hover below the 50 billion won threshold and duck a review.
The Lee Myung-bak government was even bolder in sidestepping the reviews. In March of last year, it rewrote the enforcement ordinance on the law to make disaster-preventing projects an exception to the review process before announcing an extensive project to build reservoirs and redesign areas around the country’s four major rivers.
As a result, key safety-related engineering jobs like dredging, building dikes and eco-corridors were exempted from feasibility reviews. The administration assured us that it was not undertaking feasibility reviews as the project concerned only construction work on the streams and bike paths. It plans to include “strategically important state projects approved by the Finance Ministry” as exemptions. If this keeps up, there will be more items on the exemption list.
The ministry is considering revamping the law altogether as its pursuit of infrastructure projects continues to clash with the feasibility review requirement. It has already begun dismissing the law by appropriating budgets for projects that have not been through a review. Among them are large projects like the second expressway on the west coast and a new harbor at the Saemangeum seawall.
Following the central government, local governments are jumping into the fray to push for impractical infrastructure projects. Incheon is seeking to build a seven-kilometer bridge link between the airport and a district on the mainland, claiming apartment sales are low due to the absence of a bridge even as a nearby express highway linking the airport is losing 100 billion won a year due to a lack of traffic. There is also a large bridge not far away. Moreover, the rise in Incheon apartment property prices was the highest in the nation last year.
State finances will take a beating without a proper review process for large construction projects. The more ambitious the plan is, the more scrupulous the review must be.
Look at the Sejong City case. Six years ago, the government painted a rosy picture, promising that a new administrative city would generate benefits worth 178 trillion won. Last year, the government said the city at best will reap about 30 trillion won.
The government repeats the catchphrase that it has its eyes on the next century when pushing for a policy. But at the same time it is doing all it can to sidestep six-month feasibility reviews. A game without a referee is bound to be a mess.
*The author is an editorial writer of the JoongAng Ilbo.
by Lee Cheol-ho