Transcript PowerPoint 프레젠테이션

Linking Policy, Planning and Budgeting :
Korean Experience and Challenges
February 7, 2007
Kang Ho Lee ([email protected])
Director, Growth Strategy Division
Ministry of Planning and Budget
Republic of Korea
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1. Background of Fiscal
Reforms in Korea

Forecasting on additional spending in the future
– Need extra resources, 1,100 trillion won for vision 2030

Reallocation of expenditure between economic and
social welfare resulted in aging and polarization
problems
– social welfare as % of total expenditure :
9.9% (1980) → 25.2% (2005)  40.0% (2030)
– % of the population over 65: 7.2% (2000)  14.4%(2019)  24.1%(2030)

Increasing national debts after 1997’s Korean financial
crisis
– % of GDP : 12.3(1997)  23.0(2003)  33.4(2006)

Need to enhance the efficiency in public spending
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2. Framework of Major Fiscal
Reforms
System
Top-down
Budgeting
Program Budget
Performance
Management
National
Fiscal Management
Plan
Increased
efficiency
Operation
Enhanced
linkage
Building an advanced
Public Expenditure Management System
Legal
Framework
National
Fiscal
Act
in 2006
2
Overall Scheme of Vision 2030
Overall Scheme
Vision
Korea: New Stride of Hope for New Opportunities
Goals
Innovative, vibrant
Economy
Safe, equitable
Society
Strategy
Maintaining
Growth
Momentum
Advanced
Social Welfare
System
Vehicles
Institutional
Reforms
Upgrading
Human
Resources
Vision
Action Plan
Stable, posed
Nation
New
Social
Capital
All-out
Globalization
Proactive
Investment
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The Change of Resource Allocation
in Vision 2030
• Increase of social welfare expenditure in the budget
: 9.9% (1980)  25.2% (2005)  40.0% (2030)
• Decrease of economic spending in the budget
: 26.0% (1980)  19.9% (2005)  10.0% (2030)
ratio of budget
50.0
welfare
40.0
30.0
20.0
10.0
Economy
0.0
1980
1990
2000
2005
2010
2020
2030
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3. Linking Budget to Plans
3-1. NFMP(MTEP)
 Discordance of 2007 budget between ’06~’10 NFMP
and’04~’08 NFMP
– Difference of total expenditures : 1.8%
– Difference of Revenue : 4.4%
(unit : trillion won)
2007 Budget in NFMPs
’04~’08(2004)
’05~’09(2005)
’06~’10(2006)
Expenditure
234.2
234.8
238.5
Revenue
263.0
253.6
251.8
Managed fiscal balance
(Ratio of GDP, %)
0.3
1.1
1.5
National Debt
(Ratio of GDP, %)
28.8
31.7
33.4
GDP growth rate
5%
4.9%
4.6%
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3-2. Performance Management System
 Establishment of an ex-post control system that
reflects the performance in budgeting
– 1/3 of budgetary programs are evaluated and reflected
(unit : trillion won)
’06 (555 projects)
’07 (577 projects)
budget
Change to the
previous year
budget
Change to the
previous year
Total
34.2
-1.0
33.5
-1.7
Effective
2.0
0.5
0.93
0.04
Mod effective
9.3
1.3
3.5
0.2
Adequate
20.3
-1.3
28.6
-1.3
Ineffective
2.6
-1.5
0.5
-0.6
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3-3. Program Budgeting
 Program budget is a critical “building block” to link NFMP,
Top-down budgeting, and PMS in a whole Process
– For NFMP: provide program initiatives to
represent medium-term national priorities
NFMP
(MTEF)
– For Top-down Budgeting: provide the
consultative bases to decide expenditure
ceilings between line ministries and MPB
Program
Budget
Top-Down
Budget
PMS
– For Performance Management System:
provide the units to link resources and results
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3-4. Top-down Budgeting(1)
• Bottom-up : expenditure of program A goes to ￣
T,
and spending of program B goes to TR
• Top-down : expenditures of program A and B go to 2 times ß
Budget Range
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<Attach1> Theoretical background of
Top-down budgeting(1)

Basic Hypothesis
– Cost function
C (  , e)    g (e)    e
– Utility function of line ministry
– Scale of budget
– Net value
U  t   (e)
T t C
V  S  (1  )(t    e)
– Total Value W  V  U  S  (1  )(t    e)  t   (e)
 S  (1  ){  e   (e)} U
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<Attach2> Theoretical background of
Top-down budgeting(2)

Incentive compatibility(IC) and Individual rationality(IR)

Maximized condition

Optimized budget
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3-4. Top-down Budgeting(2)
• Enhancing accountability of line ministries
Actual case of Bottom-up → Top-down :
Ministry of Maritime Affairs and Fishery
(100M
300
Won)
250
200
253
254
188
154
150
132
100
60
50
0
2004 budget
Line bureau
2005 budget
Line Ministry
2006 budget
MPB draft budget
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4. Challenges to Performance
Management System(1)

Low incentives from performance evaluation

Too focused on the adequate category (85% of 2007 budget)

Difference between evaluating year and reflecting year

Difficulties in building effective evaluation index
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4. Challenges to Program Budget (2)

Align the annual budget classification with the
classification in the NFMP

Keep programs within the organizational structure

Combine all activities according to program objectives
regardless of revenue sources

Simplify the grouping of object levels
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4. Challenges to MTEF and
Top-down Budget (3)

Time constraint on the MTEF

How to meet expenditure ceilings

Mainly focused on the next year budget

Unit in setting expenditure ceilings :
program or subsection

How to harmonize the top-down budget and
deliberation process
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Ex) Behavior Changes in Requesting
Budget from Line Ministries
Program A(100M Won
250
200
150
Top-down
140
131
206
115
102
85
112
120
105
80
80
60
100
50
100
45
45
41
53
40
0
2004
Line M Bgt of A
2005
MPB Bgt of A
2006
Line Bgt of B
40
20
Program B(100M Won)
Bottom-up
0
2007
MPB Bgt of B
15
Thank You
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