The government has conducted a comprehensive evaluation of its 42.8 trillion won ($32 billion) subsidy projects, revealing that only 6.9% of the assessed projects received a rating of being on track. Out of 1,014 projects evaluated, 980 were found to require improvements, budget cuts, consolidations, or cancellations.
Instances were identified where funds were allocated but not utilized effectively, or where projects only met low performance targets. Some projects requested budget increases despite failing to address issues highlighted in previous evaluations, prompting calls for stronger connections between evaluations and budget planning.
According to the '2026 National Subsidy Project Extension Evaluation Report' submitted to the National Assembly by the Ministry of Strategy and Finance's evaluation team on September 20, only 34 projects, or 3.35% of the total, were deemed to be on track this year.
The majority of projects, 588 (57.99%), were classified as needing improvements, followed by 372 (36.69%) requiring budget cuts, 18 (1.78%) slated for consolidation, and 2 (0.20%) recommended for cancellation. This indicates that more than 90% of the projects evaluated need adjustments in their operational methods or funding levels.
This year, the government expanded the evaluation scope to include all subsidy projects as the three-year expiration period for many projects approached, rather than the previous practice of evaluating about one-third of the total. The evaluation assessed the necessity of projects, the appropriateness of plans, execution efficiency, and outcomes, although projects with inappropriate duration settings were excluded from the evaluation.
In terms of budget, the proportion of projects rated as on track was 6.85%, amounting to 2.93 trillion won ($2.2 billion) out of a total evaluated budget of 42.77 trillion won ($32.1 billion). Projects requiring improvements accounted for 28.31 trillion won ($21.1 billion), or 66.19%, while those requiring budget cuts totaled 11.06 trillion won ($8.3 billion), or 25.74%. The budgets for consolidation and cancellation were recorded at 514.4 billion won ($386 million) and 7.3 billion won ($5.5 million), respectively.
Budget cuts affected projects across 32 ministries, with the highest number of projects in the Ministry of Climate, Energy, and Environment (55), followed by the Ministry of Health and Welfare (46) and the Ministry of Culture, Sports, and Tourism (42). The largest budget for projects requiring cuts was in the Ministry of Health and Welfare, totaling 2.3 trillion won ($1.7 billion), followed by the Ministry of Climate, Energy, and Environment at 1.43 trillion won ($1.1 billion) and the Ministry of Agriculture, Food, and Rural Affairs at 1.32 trillion won ($1 billion).
However, the 11.06 trillion won ($8.3 billion) designated for budget cuts represents the total budget for those projects and does not indicate the actual amount to be cut. The classification of projects needing improvements acknowledges the necessity for financial support while recommending enhancements in execution methods and performance indicators. It is essential to examine recurring management failures on a project-by-project basis rather than interpreting all non-compliant budgets as wasteful.
A significant issue identified was the discrepancy between fund allocation and actual execution. When central ministries distribute subsidies to local governments or implementing agencies, the funds are recorded as executed, but delays in administrative procedures often prevent the money from being spent in the field.
For instance, while the subsidy project related to national geoparks had a disbursement execution rate of 99.9%, the weighted average actual execution rate over the past three years was only 85.3%. The West Coast Discovery Center faced delays in land acquisition and construction planning, resulting in an actual execution amount of zero for its 500 million won ($380,000) budget for 2024. The evaluation team recommended developing measures to manage the gap between disbursement and actual execution.
There were also cases where high achievement rates did not translate into clear policy effects. The rural waste treatment facility project met its target of reducing landfill rates for rural household waste by 100%, but it was criticized for lacking scientific basis and proactivity in its goal setting.
In the tourism industry loan support program, while the revenue growth rate for beneficiary companies significantly exceeded targets, there was a call for verification of the pure effects of government support. To distinguish the impact of support, comparisons should be made with similar companies that did not receive assistance regarding revenue growth rates, survival rates, and employment retention rates.
There were also instances where budget requests did not reflect the same criticisms raised in evaluations, indicating limitations in post-management. The evaluation team pointed out that simply expanding the participating sectors in the greenhouse gas reduction program was insufficient to justify the increase in budget size, and the rationale for changing the budget calculation method was not adequately presented. Despite these concerns, the responsible ministry requested a 94% increase in this year's budget.
* This article has been translated by AI.
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