National Assembly Budget Committee: "Preliminary Feasibility Study Led by Ministry of Economy and Finance Must Change"

Report Content of the Ministry of Strategy and Finance Review on the 17th
Change of the Entity Conducting Preliminary Feasibility Study from Minister of Strategy and Finance to 'Head of Central Agency'

Yoon Hoo-duk, Chairman of the National Assembly's Planning and Finance Committee, is attending and presiding over the full committee meeting held at the National Assembly on the 21st. Photo by Yoon Dong-ju doso7@

[Asia Economy Reporter Jang Sehee] The National Assembly has advised that the entity responsible for conducting preliminary feasibility studies, currently approved by the Ministry of Economy and Finance, should be changed. This would allow for the incorporation of various special characteristics and expertise into the preliminary feasibility studies and could shorten the review period. Preliminary feasibility studies are a system designed to pre-verify and evaluate the policy and economic feasibility of projects involving large-scale government funding.

According to the 'Economic and Fiscal Review Report' from the National Assembly's Planning and Finance Committee obtained by Asia Economy on the 17th, the National Assembly expressed this opinion in relation to the partial amendment of the National Finance Act proposed by Kim Du-kwan, a member of the Democratic Party of Korea.

The amendment proposes changing the entity responsible for conducting preliminary feasibility studies from the current Minister of Economy and Finance to the head of the central government office, and for projects aimed at regional balanced development, the entity responsible should be changed to the National Balanced Development Committee. Under the current National Finance Act, the entity responsible for conducting preliminary feasibility studies is the Minister of Economy and Finance. However, in the case of preliminary feasibility studies for national research and development projects (R&D), the Minister of Economy and Finance may delegate this to the Minister of Science and ICT.

The bill points out that since the entity responsible for conducting preliminary feasibility studies is the Minister of Economy and Finance, decisions on whether to proceed are made based on quantitative figures (economic feasibility derived from benefit-cost analysis), making it difficult for regional projects to pass the preliminary feasibility study.

According to the Ministry of Economy and Finance, the regional pass rate for preliminary feasibility studies of road and railway infrastructure projects is 63.5% nationwide on average, whereas the Gangnam area has a pass rate of 90.5%. After the delegation of R&D preliminary feasibility studies from the Ministry of Economy and Finance to the Ministry of Science and ICT in April last year, the average duration of the preliminary feasibility study period, which previously took 13.5 months, was reduced to about 6 months.

Furthermore, the Planning and Finance Committee advised that it is necessary to refer to overseas cases where pre-evaluations are conducted.

In the United States, preliminary feasibility evaluations and budget incorporation are conducted by each department, not by the Office of Management and Budget (OMB). The OMB prepares guidelines and supervises each department to follow them. In the United Kingdom, a gate review system is operated to effectively implement all stages from feasibility evaluation, design, procurement, construction, completion, to transfer during the planning phase of investment projects. In Japan, based on laws related to policy evaluation conducted by administrative agencies, post-evaluations and re-evaluations including pre-evaluations to determine the adoption of new projects are conducted. Pre-evaluations are performed by each department.

Accordingly, the Planning and Finance Committee stated, "It is reasonable to reflect the diverse special characteristics and expertise of each department in the preliminary feasibility study and to consider regional balance and equity, which aligns with the legislative intent." However, they also added that more meticulous measures are needed to prevent fiscal waste and project failures.

This content was produced with the assistance of AI translation services.