Korea's foreign aid outlays plagued by poor planning, widespread underuse, audit reveals

Significant increases in Korea’s Official Development Assistance (ODA) funding have been undermined by poor planning and execution, including insufficient consideration of conditions in recipient countries, leading to widespread underuse of aid.

The Korea International Cooperation Agency (Koica) building in Seongnam, Gyeonggi [KOICA]

Significant increases in Korea’s Official Development Assistance (ODA) funding have been undermined by poor planning and execution, including insufficient consideration of conditions in recipient countries, leading to widespread underuse of aid, according to a state audit report released Tuesday.

The Board of Audit and Inspection’s report on the Korea International Cooperation Agency (Koica), the state ODA agency that reports to the Foreign Ministry, revealed that 17 out of 19 informatization projects completed from 2019 to last year experienced low usage due to inadequate functionalities.

A key example is Koica’s $8 million project to establish a national payment system in Cambodia from 2015 to 2021. Despite the system’s completion in 2020, its utilization rate was only 0.004 percent of the planned target by August 2023.

The audit found that Cambodians predominantly use “Bakong,” a mobile payment system developed by the local central bank, rendering Koica’s system largely redundant.

The audit suggests that the system’s reliance on bank accounts was mismatched with the local context, where most citizens have mobile phones but not bank accounts. The report also criticized Koica for moving forward with the project despite knowing the Cambodian Central Bank was developing a similar system.

The audit also revealed that Koica invested over $4 million in a system that could not be used without changes to local laws. From 2017 to 2019, the agency created an informatization system for Mongolia’s Constitutional Court that would have allowed for case filings and searches.

However, the system remains non-operational due to a local law mandating that court officials be physically present during the entire process.

Further issues included poorly set performance indicators and reporting exceeded targets without objective evidence.

The audit urged Koica to enhance its preliminary investigations by accounting for economic and environmental factors in recipient countries and thoroughly verify project overlap before development.

It also advised the Foreign Ministry and the Office for Government Policy Coordination to devise measures to enhance ODA project effectiveness.

The Yoon Suk Yeol administration doubled the its budget for ODA after taking office to expand Korea’s diplomacy as a responsible “global pivotal state.”

The 2023 budget was raised by 18 percent to 4.5 trillion won ($3.4 billion), and this year’s budget jumped by a record 39.5 percent to 6.3 trillion won. On Tuesday, the Cabinet approved a 5.4 percent increase for next year.

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]