Gov’t to reform 20-year-old preliminary feasibility study method

Apr 04, 2019, 09:16 am

By AsiaToday reporter Ahn Jong-ho

The government has decided to reform the preliminary feasibility study method for the first time in 20 years to promote balanced regional development. As a result, more regional and nonmetropolitan projects are likely to pass preliminary feasibility studies than before.

The government announced such plans on Wednesday at a policy meeting for economic revitalization led by Deputy Prime Minister and Finance Minister Hong Nam-ki.

Under the reform, the government will apply different evaluation rate for metropolitan and nonmetropolitan areas to evaluate their economic feasibility. The current comprehensive evaluation set the regional balance factor at 25 to 35 percent to all regions.

The government will expand the rate of the regional balance factor and cut down the economic feasibility factor by 5 percentage points respectively for nonmetropolitan projects. For metropolitan projects, the government will only evaluate the economic feasibility factor for 60 to 70 percent and the policy factor for 30 to 40 percent. However, border regions of the metropolitan areas as well as agricultural and fishing villages will be classified as nonmetropolitan areas to allow easier approval of preliminary feasibility studies.

Besides, the “policy effectiveness factor” will be newly created in the preliminary feasibility study. There were limitations in analyzing various policy effectiveness since the current method evaluated only the environmental risks and direct employment effects.

By newly adding the policy effectiveness factor, the government will evaluate four things – whether they can create quality jobs, improve people’s livelihoods, improve the environment, and strengthen the safety system.

While the current job creation factor evaluates only the effectiveness of direct employment, the effectiveness of indirect employment will be newly added to evaluate the new job creation factor. For the environmental factor, the positive environmental impact, such as improvement of water quality and air quality, will be newly added to the current negative environmental impact item. For the safety factor, new items such as disaster response, possibility of safety accidents and information security will be added.

The government plans to give separate consideration for projects that have a substantial amount of finances secured from causers, and projects that are difficult to procure operating expenses after completion.

The government will have more institutes than just the state-run Korea Development Institute (KDI) in carrying out preliminary feasibility studies. Under the reform, the KDI will be only responsible for economic evaluation. The overall evaluation will be undertaken by the Financial Project Evaluation Committee, which will be newly set up under the Ministry of Economy and Finance.

“The part we focused the most was that the reform should not break the foundation of the preliminary feasibility study method that plays the role of financial gatekeeper,” said Lee Seung-chul, director of the ministry’s fiscal management.

#reliminary feasibility study