Basic Report

LIMAC has been conducting feasibility studies on local fiscal investment projects, but has not yet considering balanced regional development in the feasibility study unlike the KDI and overseas related organizations. Therefore, this study aims to find ways to reflect such balanced regional development in evaluation. More specifically, this study suggests a differentiating method of a B/C standard by region in consideration of the degree of development of each region.
   This study comprises three parts.. First, we compare the decision-making system used for the national fiscal investment project and the ones for the local fiscal investment project. We suggest that in order to assess and consider the regional balanced development in the feasibility analysis, it is necessary to develop a methodology differentiated from the one used to evaluate the national-level project. Case analysis results suggest that there are regional differences in the B/C outcomes as well as in determining whether to promote investment projects. Thus, the need and justification for consideration are sufficient.
   Second, we propose an analysis system and its methodology, which enable to reflect the level of balanced regional development in the feasibility study of LIMAC. It is necessary to identify regional development levels and regional disparities in considering the value of such regional balanced development levels in the feasibility test and developing an evaluation system that reflects such regional disparities. Thus, this study develops an evaluation index that enables to measure the level of regional development. Upon determining the weights of such selected indicators based on their importance, the regional balanced development index is calculated, and such analysis confirms the regional disparities in the level of development.
   Third, in order to effectively reflect the regional development level in the feasibility study of LIMAC, we present the evaluation model that applies different B/C standard values by regions with consideration of its impacts on the regional development index on the B/C ratio. It is found that in the case of the Seoul metropolitan area and Sejong City, downgrading the B/C standard value of 1.0 is not needed, whereas, in the case of the Chungcheongnam areas, values of 0.85-0.90 apply. In other metropolitan cities, the gaps are large, ranging from 0.80 to 0.95. In Gangwon, Gyeongsang, and Jeolla, which are traditionally known as underdeveloped regions, the values range from 0.70 to 0.75, indicating that adjustment of the B/C standard is necessary.
   In addition, similar domestic and foreign cases were reviewed to examine the adequacy of the degree of differentiation of B/C standards by region. Considering the cases of the KDI and Japan, it is reasonable to adjust the B/C standard of the underdeveloped regions (Gangwon, Jeonbuk, Jeonnam, Gyeongbuk) to 0.70~0.75. Finally, this study reviews the applicability of the proposed regional B/C differentiation to the actual feasibility study of LIMAC. It turns out that 12 projects previously evaluated to have no economic feasibility are found to be economically feasible when considering the degree of regional development.
   This study is significant as it suggests ways to consider and reflect the level of regional development when evaluating the feasibility of local projects and conducting local financial investment reviews. In particular, this study suggests ways to adjust the standard value of B/C for the local project in a less developed region, which has less economic feasibility for projects. Nevertheless, there are some limitations in the proposed B/C differentiation method for which the theoretical basis is weak. Also, there are some limitations in the process of analyzing and deriving the degree of differences between the proposed B/C standard. Therefore, follow-up studies need to be conducted to find ways to reflect the characteristics of the proposed projects as well as the regional characteristics. This study is featured as an early-stage exploratory study that aims to reflect the value of balanced development in the feasibility study of LIMAC. It requires an expert consultation and an in-depth review to examine the appropriateness of the proposed methods and enhance its applicability in practice.