Moon Administration's 'Blind Exemption from Preliminary Feasibility Studies' Approaches 100 Trillion Won... Institutional Paralysis Due to Political Logic

[Sejong=Asia Economy Reporter Son Seon-hee] Since the inauguration of the Moon Jae-in administration, the cumulative amount of large-scale national projects exempted from preliminary feasibility studies (PFS) is approaching 100 trillion won. If the special law for Gadeokdo New Airport passes the National Assembly plenary session this week, it will mark the first time in history that the 'PFS exemption surpasses 100 trillion won' under any government. The PFS system, introduced to oversee national projects funded by taxpayers' money, has been effectively nullified by political logic.

According to the Ministry of Economy and Finance on the 24th, since the launch of the Moon Jae-in administration, a total of 120 projects involving large-scale national finances have been confirmed for PFS exemption, amounting to 96.5 trillion won. Large-scale PFS exemptions were pushed for social overhead capital (SOC) construction projects including roads and railways, with the scale reaching 36 trillion won in 2019, followed by another 30 trillion won (31 projects) exempted last year. This marks two consecutive years of PFS exemptions exceeding 30 trillion won. In cumulative terms, this is the highest among all past administrations, including those of Lee Myung-bak and Park Geun-hye.

The special law for Gadeokdo New Airport, likely to pass the National Assembly plenary session on the 26th, also includes a PFS exemption clause. The budget for Gadeokdo New Airport is estimated to be at least 10 trillion won, possibly exceeding 20 trillion won. The controversy over Gadeokdo New Airport has continued for years, but before its economic feasibility was properly evaluated, it was rapidly pushed forward due to intertwined interests of ruling and opposition parties ahead of the by-election. Furthermore, if the budget for the fourth disaster relief fund, expected to be submitted to the National Assembly next month, is included, the amount of PFS-exempted projects is expected to increase by tens of trillions of won within just the first quarter of this year.

The PFS exemption was first implemented in 1999 during the Kim Dae-jung administration. It was intended to prevent financial waste and improve efficiency by requiring a PFS for new projects with a total project cost exceeding 50 billion won and national financial support exceeding 30 billion won. Simply put, it was designed to restrain arbitrary spending on 'populist SOC projects.'

However, since the introduction of an exception clause (Article 38, Paragraph 2 of the National Finance Act) in January 2014, cases of avoiding PFS for large-scale financial projects for various reasons have rapidly increased. The clause lists ten exceptions, including public office buildings, educational facilities, and cultural heritage restoration, but especially the item stating 'projects necessary for national policy promotion for regional balanced development or urgent economic and social situations' has effectively opened the door wide for PFS exemptions. Under the reason of 'national policy,' PFS exemption has become possible through arbitrary interpretation.

Of course, there are cases where urgent budget allocation is possible due to national crises such as the COVID-19 pandemic. For example, the budget related to the government's first payment of the 'COVID-19 Emergency Disaster Relief Fund' in April last year was confirmed to be exempted from PFS after review by the National Assembly and the Cabinet meeting.

The problem lies in the excessive use of PFS exemptions for election-driven, one-off populist SOC projects. A representative case is the currently advancing Gadeokdo New Airport. Ahead of the Busan mayoral by-election in April, the ruling party pushed the project rapidly, leveraging its overwhelming majority, while even the Ministry of Land, Infrastructure and Transport, the responsible department, expressed concerns about excessive financial input and economic effects of the new airport project. Although opinions to delete the PFS exemption clause emerged within the ruling party in the National Assembly Land, Infrastructure and Transport Committee, the Democratic Party leadership reportedly pushed through the PFS exemption.

Regarding this, Yoon Hee-sook, a member of the People Power Party, stated on her social media on the same day, "The determination to push forward the Gadeokdo New Airport and the PFS are separate matters," adding, "PFS cannot bind the outcome (whether the project proceeds). If the result is unfavorable but the project is to proceed, reasons must be given, and political responsibility must be borne." She further criticized, "The ruling party leadership's obsession with PFS exemption is to block analysis and information production on the Gadeokdo airport project itself, leaving no basis for historical evaluation later," and said, "Nullifying the PFS system, which is legally required, and even destroying original records to avoid political responsibility is cowardly beyond measure."