Budgets for State-Run Projects Cut

Some government ministries which carried out large-scale projects last year asked the government for a budget increase. However, the government turned down many of these projects, saying they are not feasible enough. The total budget cuts amount several trillion won.

The government has even ordered to discontinue some of those projects although quite considerable amounts of money have been poured.

The Ministry of Planning and Budget (MPB) announced Tuesday that it has cut a total budget of 3.039 trillion won, including proposed increment, for last year’s 19 state projects after reviewing their feasibility.

The sum of budget cuts was largest last year since the feasibility review system was introduced in 2003. Each year, the percentage of budget cuts compared to initial budgets has relentlessly soared from 10.5 percent in 2003 to 44.5 percent in 2006.

Feasibility reviews are carried out on projects that have received a large budget without undergoing a preparatory feasibility survey or that demands over 20 percent of budget increase.

According to the MPB, the Ministry of Construction and Transportation demanded to increase the budget for constructing a highway section between Ulsan and Pohang from 1.03 trillion won to 1.77 trillion won. However, the MPB has decided to postpone the project, saying its economic feasibility is low. The entire project budget has been slashed as well, except 30.9 billion won allocated for planning.

The MPB has even cancelled the expansion project for the National Highway 19 between Yeongdong and Yongsan in Yeongdong, North Chungcheong Province due to low economic feasibility. All the 104.9 billion won of its initially granted budget has been cancelled.

The Ministry of Commerce, Industry and Energy also demanded to increase the budget to 196 billion won for the construction the New and Renewable Energy Theme Park in Buan, North Jeolla Province. However, the MPB has decided rather to reduce its 120 billion won budget, from 120 billion won to 101 billion.

The Ministry of Health and Welfare also tried to increase the budget for relocating government-run institutions, including the Food & Drug Administration from 198 billion won to 515 billion won. However, it has been also curtained to 277.7 billion won. In addition, the total floor space of the new buildings was reduced from 51,546 pyeong to 37,136 pyeong.

“The percentage of budget cuts has increased due to stricter feasibility reviews,” said Jin Yeong-gon, a senior manager of the MPB. “We will conduct feasibility reviews on at least 17 government invested projects this year”

ddr@donga.com