

By Ko Dong-hwan

The Seoul Metropolitan City has wasted hundreds of billions of won on unprofitable projects.

According to a report by the Finance Public & Private Infrastructure Investment Management Center (PIMAC), nine out of 15 city projects yield a cost-benefit (B/C) rate below "1," meaning "zero profitability."

The B/C analysis method compiles costs and benefits transpiring during a project's entire operation period and converts them into monetary values, thus verifying projects' actual profitability. When a project's B/C rate is less than 1, it means the project has lower profitability compared to investment costs.

Prior to the issuance of the report, the projects were self-assessed by bidding local districts and handling departments at the time of proposals.

An official from PIMAC said, "When projects are self-assessed by the bidding districts, they tend to be more optimistic than necessary."

An overall cost for the 15 projects was almost 400 billion won, among which 226 billion won was for the projects with B/C rate below 1. As these non-lucrative projects were estimated to yield a total profit of only 151 billion won, calculation concludes that they only sap 75 billion won out of city's pocket.

Most of the projects with zero-profitability are regional improvement projects managed and operated by local districts in Seoul.