'Increasing Local Projects?'... Ruling and Opposition Parties Push for Eased Preliminary Feasibility Studies Ahead of Presidential Election

Discussion Limited to Entire Projects or SOC Sector
Concerns Over Proliferation of Economically Unviable Projects

[Asia Economy Reporter Jang Sehee] Ahead of next year's presidential election, the ruling and opposition parties are considering raising the threshold for preliminary feasibility study (PFS) project costs from a total project cost of 50 billion KRW to 100 billion KRW. There have been considerable calls within the National Assembly to relax the criteria for PFS projects, and it has been decided to discuss this in earnest during this year's regular session ahead of the election. The Ministry of Economy and Finance has also confirmed its agreement to raise the total project cost threshold for PFS projects to 100 billion KRW, limited to the social overhead capital (SOC) sector.

According to National Assembly officials on the 23rd, the National Assembly's Planning and Finance Committee will submit a bill to amend the National Finance Act during this regular session to initiate discussions on reforming the PFS system. A Democratic Party official stated, "Constituency lawmakers, regardless of party affiliation, have reached a consensus that the total project cost threshold for PFS projects should be raised," adding, "Raising it only for the SOC sector is also one option."

Ryu Seong-geol, the opposition party whip of the Planning and Finance Committee from the People Power Party, also said, "The 50 billion KRW threshold for PFS investigations should be somewhat relaxed," and added, "There are various opinions, and we plan to review all of them."

The PFS is mandatory for new projects with a total cost exceeding 50 billion KRW or with financial support exceeding 30 billion KRW. This system has remained unchanged for 22 years since its introduction in 1999. Inside and outside the political sphere, it is pointed out that the current PFS cost threshold does not reflect reality, citing that the gross domestic product (GDP) increased from 577 trillion KRW at that time to 1,933 trillion KRW last year, indicating growth in both the economy and fiscal scale.

However, the ruling and opposition parties' acceleration in relaxing the PFS criteria is largely influenced by the upcoming presidential election. They argue that relaxing the PFS criteria is essential to promote regional projects.

The Ministry of Economy and Finance agrees to raise the PFS threshold only for the SOC sector. Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, stated, "Considering the capacity to conduct PFS, we can consider adjusting the target amount."

However, raising the threshold to 100 billion KRW poses a hurdle as it may lead to a proliferation of economically unfeasible projects. According to the National Assembly Budget Office, the exemption rate from PFS investigations has exceeded 50% over the past three years, meaning more than half of all projects under review have been exempted from PFS.

A government official said, "SOC projects are difficult to split," adding, "If the total project cost threshold is raised to 100 billion KRW, it could undermine the very existence of the PFS."

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