MCT Distorted Economic Efficiency Analysis of Gyeongin Canal

The Board of Audit and Inspection (BAI) has found that the Ministry of Construction and Transportation entrusted the evaluation of economical efficiency of the Gyeongin Canal to the Korea Development Institute (KDI), providing data that reduced the construction cost by 267.7 billion won in an attempt to draw the positive results.

In addition, the KDI was found to have overestimated the effect of the Gyeongin Canal development in accordance with the demands by the MCT.

“The MCT and the KDI swelled the economical efficiency index from 0.76-0.93 to 1.28, leading to the loss of confidence in the economical analysis,” the BAI said Wednesday in its report on the canal construction project. The economical efficiency index should be over the reading of 1 to be considered efficient.

As a result, the BAI called for the Minister of Construction and Transportation to discipline those responsible for the analysis while it called for the KDI head to be careful in reviewing the validity of a project and using other data.

The MCT provided the KDI with the data that decreased the total construction by 267.7 billion won from 2.24 trillion won estimated by a private construction company in order to reduce the cost needed for the canal construction project.

When the tentative result of the analysis turned out uneconomical, the MCT made 12 items and requested for re-examination in August last year. Moreover, it presented 8 alternatives to the KDI at the end of last year, asking for re-analysis of efficiency, according to the BAI.

“An working-level official corrected the cost that the construction company inflated because that`s what they always do,” said the MCT. “The government has no right to correct it when a private company carries out a project,” retorted the BAI.

“We were running out of time and the budget was barely enough. That`s why such a result came out,” said the KDI, according to the BAI.

Seung-Ryun Kim srkim@donga.com