[Editorial] Populist collusion ahead of the election

The government must be careful not to worsen its fiscal health.

After ferociously battling over nearly all bills related to people’s livelihoods, the People Power Party and the rivaling Democratic Party have joined hands when it comes to populist legislation. A subcommittee of the Strategy and Finance Committee in the National Assembly unanimously passed a revision to ease the standards for a preliminary feasibility study on projects requiring government budget. As a result, the upper limit of total project costs needed to build infrastructure or implement national-level R&D — both eligible to be exempted from the mandatory preliminary overhaul — will be upped to 100 billion won ($75.4 million) from the current 50 billion won, while the ceiling of government budgets needed for such projects will be raised to 50 billion won from 30 billion. Such lifting of the standards is the first of its kind since the system was adopted in 1999.

In fact, the move was not an abrupt consensus reached between the two parties. As the upper limits stayed put for decades, even though the size of national projects nearly doubled in the past 10 years, the finance ministry has been preparing to raise the standards. So, the lifted standards mostly reflected demands from the ministry. Instead, the ministry revised guidelines to reinforce post-construction management in return for the exemption of the preliminary study.

The problem is the Assembly’s failure to legislate the delayed fiscal guidelines aimed at bolstering the fiscal integrity of the country. The two parties had agreed to fix the fiscal guidelines as the eased standards for the exemption of the preliminary study for national projects can increase the fiscal burden for the government. For instance, the fiscal guidelines mandate the upper limit of fiscal deficit to not exceed 3 percent of the GDP and to be lower than 2 percent of GDP if national liabilities surpass 60 percent of GDP. But the fiscal guidelines could not be reached after the DP vehemently called for the passage of a bill aimed at forcing public entities to buy goods from social enterprises. The two parties’ rush to legislate eased requirements for the exemption of the preliminary study represents a populist move to win more votes in the next parliamentary elections.

The ministry plans to close possible loopholes by instructing other ministries to attach the results of their preliminary study when they demand a budget. But it is not easy to stop politicians from pork-barreling. Our national debts have reached over 100 trillion won. But the government’s tax revenue already decreased by a whopping 16 trillion won for the two months of January and February alone. The government must be careful not to worsen its fiscal health.