Performance Evaluation of the Expressway Construction Investment

The Korean government and the Korea Expressway Corporation invested about 13,600 billion Won on construction of expressways in the past five years (2010-2014). As the size of expressway construction investments is increasing,... [ view full abstract ]

The Korean government and the Korea Expressway Corporation invested about 13,600 billion Won on construction of expressways in the past five years (2010-2014). As the size of expressway construction investments is increasing, more questions on effectiveness and efficiency of such investments are being raised these days, and some of questions are focused on whether the preliminary feasibility study to measure validity of the social overhead investment functions appropriately.

The traffic volume of some expressways in operation turned out to be below the estimated traffic volume of the preliminary feasibility study which played a critical role in deciding the construction investment. The less traffic volume leads to business loss of the operating company and may result in additional fiscal burden of the government. Despite the government effort to reduce the gap between the estimated traffic volume and real traffic volume by improving the demand measurement techniques the low accuracy problem still remains.

This study aims to analyze why the estimation error in demand forecast takes place incessantly in the public expressways construction, and suggest some policy recommendations to reduce such error. For this purpose this study looks see the current traffic volume of expressways which was constructed after the strict analysis of feasibility study, and then tries to find out the gap between the estimation and real traffic volume. This study will focus on how to improve the investment performance after examining why such gap takes place.