The preliminary feasibility study at a crossroads

The preliminary feasibility study system is close to crumbling.

Bae Guk-hwanThe author is a former vice finance minister. The three airports in Yangyang County, Muan County and Uljin County in Gangwon, South Jeolla and North Gyeongsang, respectively, were once ridiculed for being perfect places to dry chili peppers. The trio was built before a preliminary feasibility study to check the cost-benefit of such infrastructure was introduced. Due to a critical lack of economic feasibility, some airports suffered a chronic deficit after opening — or couldn’t open even after construction.

Some 26 years have passed since the International Monetary Fund enforced the preliminary feasibility study on Korea in 1998 following an international bailout for the country’s foreign currency crisis. The feasibility study system was designed to prevent the indiscriminate implementation of infrastructure projects by the government.

The National Fiscal Act stipulates that infrastructure programs whose overall costs exceed 50 billion won ($37.5 million) — and which require more than 30 billion won in government subsidies — must undergo a preliminary feasibility study. The government could save 170 trillion won — one fourth of the 657 trillion budget for 2024 — from the 436 trillion won budget for 961 infrastructure programs from 1999 through 2022, thanks to such scrutiny.

But the preliminary feasibility checking system faces a crisis after the number of infrastructure projects that are exempt from the obligatory scrutiny increased. Two such cases are the 2021 Special Act on New Gadeok Airport and the 2023 Special Act on New Integrated Airport in Daegu and North Gyeongsang. The two projects effectively neutralized the National Fiscal Act and set an extremely bad precedent. The preliminary feasibility study system is close to crumbling as a result.

With less than three months left before the April 10 parliamentary election, the governing People Power Party and the majority Democratic Party last week passed the Special Act on Constructing Railway between Daegu and Gwangju to exempt the massive project from the preliminary feasibility study. In a war of nerves with the fiscal authority, lawmakers from both sides of the aisle pushed an exemption citing the need for harmony between Jeolla and Gyeongsang and achieving balanced development of the regions. But their argument is abstract and political. Does it really make sense for the government to push a colossal infrastructure project requiring a budget as large as 12 trillion won even without checking its feasibility in advance? Will the residents of the two provinces really visit their counterparts more frequently after the railway is built? If the trains run back and forth without carrying passengers, the deficit will snowball. If that is not a farce, what is?

A total of 32 bills currently await exemptions from the preliminary feasibility study in the National Assembly. Legislators are arbitrarily expanding the scope of such exemptions or trying to spare a number of infrastructure projects in which they hold a vested interest, as they know those projects will never pass the required scrutiny.

The Japanese government has pushed for infrastructure development projects by drawing up countless supplementary budgets over the past thirty years. But the hefty fiscal input fell short of boosting the economy. Rather, it created empty roads and piles of debt as the fast aging of its society made passengers disappear and regional populations decline.

Similar things are happening in Korea. Its population is declining fast and its aging pace is faster than Japan’s. Some 52 percent of local governments may disappear from the map soon. Most of its infrastructure, which is now used by 52 million people, will not be used in the near future.

The government must review its long-term projects for national infrastructure construction and carry out the preliminary feasibility study whenever the need arises. That’s how the government can ensure the sustainability of this country.

Translation by the Korea JoongAng Daily staff.