- Topic
Economy/ Administrative·Financial Affairs
- AuthorDong-Guen Kim, Dong-Sung Kim, Young-Eun Choi, Hyung-Jun Shin, Tae-yup Sung, Seo-Young Lee, Yoon-Jung Oh
Since the 2020 amendment to Enforcement Decree of the Act on the Operation of Local Government-Invested or -Funded Institutions, municipal governments must undergo a feasibility review by their respective Regional Institute when establishing an invested or funded institution. Based on the Standards for the Establishment of Local Government-Funded Institutions, Regional Instiutes currently assess 11 items: ① public service relevance, ② ratio of core mission-related projects, ③ economic analysis, ④ appropriateness of implementing entity (including overlap with existing institutions), ⑤ organizational and staffing demands, ⑥ appropriateness of the investment or contribution plan, ⑦ consistency between the proposed budget and expected outcomes, ⑧ civil servant downsizing plan, ⑨ welfare effects for residents, ⑩ regional economic impacts, ⑪ fiscal impacts on local government.
However, these items differ in weight, contain overlaps, and lack clear functional differentiation, resulting in a weak logical structure of the evaluation framework. Therefore, before developing detailed guidelines, this study seeks to clarify the division of roles among the assessment items and to reconstruct them in a more rational and coherent manner.
A comparison between the components of the establishment plan specified in the Standards for the Establishment of Local Government-Funded Institutions and the evaluation indicators in the review checklist revealed weak correlations. Among the establishment plan elements, only “public service relevance” and “ratio of core mission-related projects” correspond to the component “scope of business (range and content of target projects),” which is insufficient to fully assess the business scope. Furthermore, two key evaluation indicators—“alignment with regional conditions and government policies” and “project sustainability”—are not covered by any current assessment item.
An analysis of five cases conducted by the Seoul Institute’s Seoul Public Investment Management Service since 2021 has provided further insights into restructuring the evaluation items. Among the first-tier categories, “appropriateness of investment and project” was conceptually ambiguous compared to other first-tier categories. In the second-tier items, “public service relevance” and “ratio of core mission-related projects” were found to be redundant and could be integrated into “appropriateness of proposed project.” Similarly, “economic analysis” and “appropriateness of implementing entity” both assess the optimal modality of establishment and should be combined. There is a partial overlap between “appropriateness of investment/contribution plan” and “fiscal impacts”, suggesting that their roles should be more clearly differentiated and systematically linked. The item “welfare effects for residents” should be renamed to reflect its actual focus on the preferences of residents and other stakeholders regarding the new institution’s establishment.
To draw implications for restructuring, similar feasibility assessment systems were analyzed, including those for local public enterprises, preliminary feasibility study under the National Finance Act and Public Project. The elements of “economic feasibility” and “policy feasibility” should be reorganized as first-tier categories by referencing these analogous frameworks. Moreover, given that the establishment feasibility assessments for institutions place greater weight on the appropriateness of the establishment plan itself, such emphasis should also be reflected.
Synthesizing these findings, the study proposes a restructured framework that reorganizes the first-tier items and refines or adds second-tier items. The first-tier categories are restructured into three logically sequential domains: “validity of the establishment plan,” “economic feasibility,” and “policy feasibility.” The first category, “validity of the establishment plan,” follows a logical sequence corresponding to the basic components of an establishment plan—problem/issue identification, goal setting, project composition, and organizational/staffing planning. The “economic feasibility” category is reorganized to assess the appropriateness of establishment and operational costs, the scale of contributions, and both direct and indirect benefits. The “Policy feasibility” category is designed to review policy considerations that are not covered by the “validity of the establishment plan” or the “economic feasibility”, but are nonetheless essential to take into account.
The validity of establishment plan consists of three subcategories: (1) appropriateness of problem/issues and objectives, (2) appropriateness of proposed projects, and (3) appropriateness of organizational and staffing plans. The first subcategory examines whether the problems justifying the need for establishment and the corresponding objectives are clearly and appropriately defined. The second assesses the adequacy of project components and reviews the possibility of overlapping or duplicative functions with existing public institutions. The third evaluates whether the organizational structure and staffing levels are appropriately designed for efficient operation.
The economic feasibility includes (1) reasonableness of estimated costs, (2) appropriateness of contribution scale, (3) economic analysis, and (4) regional economic impact. This section reviews whether establishment and operational costs are reasonably estimated, whether the proposed contribution is appropriate without imposing undue fiscal burdens, compares the economic efficiency of the establishment plan with alternatives, and estimates the induced effects on production, value-added, and employment.
The policy feasibility is composed of (1) alignment with higher-level policies, (2) stakeholder preferences, and (3) special evaluation items. It assesses consistency with central and local government policy directions, reviews stakeholder opinions such as those of local residents, and examines project-specific factors such as public staffing effects and potential legal or institutional risks.
To improve the guidelines for feasibility reviews, follow-up research is required to revise and complement the Standards for the Feasibility Review of Local Public Institution Establishment and the Manual for the Feasibility Review for the Establishment of Local Public Institutions. Detailed assessment methodologies for each evaluation item should be developed. In addition, training programs and workshops should be organized to promote information sharing and enhance the consistency and objectivity of feasibility reviews.