The government has allocated about 1 trillion won for artificial intelligence (AI) projects in next year's budget bill even though the vetting process has not been completed. When a project is exempted from the preliminary feasibility study (pre-feasibility study), it must undergo a review of the appropriateness of the project plan, but even on a fast track that procedure would not be finished until the first half of next year. Some projects were excluded from the pre-feasibility study altogether, skipping the vetting process itself. With the budget allocated before the feasibility of the project size and the detailed plans are fleshed out, concerns are being raised that this could lead to inefficiencies such as delays in execution or the emergence of disallowed budget items later on.
According to the government on the 7th, the budget bill for next year reflects AI-related projects that were granted exemptions from the pre-feasibility study at the Aug. 18 Cabinet meeting.
Specifically, these include ▲ the Ministry of Trade and Industry (MOTI)'s "K-On-device AI semiconductor technology development project (185.06 billion won)" ▲ the Ministry of Climate, Energy and Environment's "AI-based distributed power grid industry promotion project (119.6 billion won)" and "AI-based distributed energy specialized zone creation project (10 billion won)" ▲ the Ministry of Trade and Industry (MOTI), the Ministry of Agriculture, Food and Rural Affairs, the Ministry of Health and Welfare, and the Ministry of Climate, Energy and Environment's "AI application product rapid commercialization support project (325 billion won)."
Under the National Finance Act, new projects with a total project cost of at least 50 billion won and state financial support of at least 30 billion won must undergo a pre-feasibility study. Only projects deemed "necessary to be pursued as a national policy to respond to urgent economic and social situations," among others, are exempted.
Even if a project is exempted from the pre-feasibility study, the National Finance Act requires that the appropriateness of the project be reviewed and the results be reflected in the budget formulation. Accordingly, the government began the appropriateness review of the relevant projects in September.
The problem is that the review process typically takes at least six to eight months. In practical terms, it is difficult to reflect the review results in the budget bill by the National Assembly's deadline of Dec. 2.
This also contradicts the position the government announced just over two months ago when it granted the exemptions. At the time, the government said, "Even for projects exempted from the pre-feasibility study, we will conduct a future review of the appropriateness of the project plan to examine the appropriate project scale and alternatives, and eliminate waste factors to proceed efficiently."
The National Assembly Budget Office said, "Until the review results are produced, it will be difficult to push the projects forward in substance, and depending on the results, the targets and scope of support and unit support amounts may change," adding, "This could lead to inefficiencies such as delays in budget execution or the occurrence of disallowed budget items depending on the results."
Moreover, there is a "blind spot" in the AI application product rapid commercialization support project, which spans all ministries, where no vetting is conducted at all. Projects worth about 321 billion won handled by the Ministry of Land, Infrastructure and Transport, the Ministry of Science and ICT, the Ministry of Oceans and Fisheries, the Ministry of SMEs and Startups, the Ministry of National Defense, and the Ministry of Food and Drug Safety fall into the defense, telecommunications, and transportation and logistics sectors and therefore are not subject to the pre-feasibility study. Since they were not exempted from the pre-feasibility study, the logic goes, there is also no obligation to conduct an appropriateness review.
The National Assembly Budget Office said, "Despite being large-scale projects that require a pre-feasibility study, verification of project feasibility is insufficient, and it is difficult to specifically identify the basis for calculating project costs and the year-by-year project plans," adding, "For multi-ministry projects, the system should be improved so that the same review procedures are carried out for projects with similar objectives, structures, and content."
In response to these criticisms, the government says the decision was unavoidable to respond to rapidly changing technology trends. A government official said, "If we cannot allocate the budget because of the appropriateness review, a year could be wasted," adding, "We set the budget first to proceed efficiently."