2013 budget allocates more for welfare, small businesses

Government promises over 100,000 jobs for youth, greater budget to fight sex crimes and school violence


The government’s 2013 budget plan appears to focus on support for more welfare programs to stabilize the livelihood of ordinary people, while maintaining a budget balance.

The budget plan includes expanded support for small and mid-sized companies from 69.5 trillion won this year to 78 trillion won, and an additional 10 billion won for companies that open branches overseas. The government plans to create over 100,000 jobs for youth and 30,000 jobs for baby boomers.

To support childcare, the ministry vowed to include meningitis on the list of free vaccinations and open 5,000 more public day care centers. In addition, it revealed plans to provide cash support for families in the lowest 70 percent income bracket with children up to age 5. The plan will have the top 30 percent households pay for their childcare, but in different levels.

“The principle of framing the budget for childcare was that we should give parents the right to choose between sending their kids to nurseries or keeping them at home,” said Kim.

The government also announced plans to increase the budget to tackle sexual and school violence, from 263.1 billion won this year to 405.5 billion won next year and from 184.9 billion won to 295.7 billion won, respectively. The number of police officers will increase by about 1,260 and nearly 4,700 CCTVs will be installed throughout the nation.

The budget plan comes amid growing concerns that Korea’s exports-reliant economy could face a bumpy road ahead as uncertainty is growing amid the prolonged eurozone debt problems and lingering concerns over a global slowdown.

Another notable change in the budget proposal is the transfer of 3.5 trillion won ($3.12 billion) worth of government-run financial loans for companies and households to the private sector.

Private institutions will operate the loans plus an additional 3.2 trillion won worth of funds supplied by the government. The government will provide the difference between the private interest rate and policy rate to the private institutions.

The government expects that its actual spending in 2013 will increase by 7.3 percent instead of 5.3 percent by supporting the 6.7 trillion won through the new system.

“Two concerns may arise regarding the new system: one, that the government is simply passing on the burden to the private sector; and two, that some companies may be at a disadvantage when turning to private institutions. Private financing funds are known to be about 2 quadrillion won in the market. The 6.7 trillion won passed on from the government is a very small amount,” said Vice Finance Minister Kim Dong-yeon.

“And we are coming up with ways to prevent companies, who are likely the actual customers, to face disadvantages in the screening process when doing finance with private institutions.”

By Park Min-young (claire@heraldcorp.com)