A matter of feasibility

The Public and Private Infrastructure Investment Management Center (PIMAC) of the Korea Development Institute, a state-run economic think tank, is responsible for conducting preliminary feasibility studies, particularly on large-scale public projects. The government takes pride in the center, whose studies help save 2 to 3 trillion won ($1.7 to 2.6 billion) annually.

But a critical problem with the current feasibility study system is that politically important projects can easily evade scrutiny by the center. As it turned out, both the four rivers restoration project - the Lee Myung-bak administration’s flagship infrastructure development project - and the Sejong City construction project were exempted from feasibility studies by the center.

To make matters worse, the future of the feasibility study system is virtually in limbo. According to documents submitted by the KDI to the National Assembly’s regular audit on government offices, four out of 10 national civil engineering projects were forcefully implemented, even after they received a negative evaluation from PIMAC.

In the feasibility studies that have been conducted by the KDI over the past 12 years, 249 national projects worth a total of 124 trillion won were assessed to have a benefit-cost ratio of less than 1.0. In general, if the ratio is below 1.0, the project is judged “infeasible.”

Yet 38 percent of the projects - or 94 cases worth a total of 51.3 trillion won - were executed as scheduled.

The government pressed ahead with these projects, including phase two of construction of Sadong Harbor on Ulleung Island, which was given a budget of 312.2 billion won despite the fact that the benefit-cost ratio was only 0.159. The Pohang-Samcheok highway construction project was no exception. The government poured a whopping 4 trillion won into the project even though the ratio was 0.210.

We understand that certain national construction projects must proceed when they are unavoidable for policy reasons. But no one can assure the health of our state coffers if the government ignores the objective results of preliminary studies on public projects. And the bigger the projects, the more important the feasibility studies become. As long as politicians indulge in pork-barrelling and soulless officials push ahead inefficient projects, the government cannot achieve sound fiscal health.

It is time to reinforce the feasibility study system so that politicians cannot make glitzy campaign promises or waste public money.