The government is expected to make a sweeping overhaul of regional spending and subsidies as it seeks to balance the budget through expenditure cuts.
It is looking to cut annual spending worth about 55 trillion won ($49 billion) for nearly 1,000 regional projects, including infrastructure development.
Economic-related ministries, including the Ministry of Strategy and Finance and the Ministry of Land, Infrastructure and Transport, reportedly proposed cuts in infrastructure spending of about 10-12 trillion won over the next four years in a meeting on state fiscal management presided over by President Park Geun-hye last week.
This comes as the incumbent administration plans to secure 135 trillion won over the next five years to finance the country’s welfare expansion, as pledged by Park during her election campaign. Of the 135 trillion won to finance welfare, 53 trillion won will come from government revenue sources, with the rest secured through budget restructuring, the government said.
Korea’s spending on regional projects increased by threefold in eight years up to the end of 2012, as the former administration of President Lee Myung-bak boosted infrastructure spending.
“There are a lot of overlapping and inefficient projects, which the government needs to re-evaluate (for an overhaul),” said Yoo Jeong-bok, minister of security and public administration in the meeting with the president.
Prime Minister Chung Hong-won also suggested forming a task force to find ways to downsize its regional projects and spending schemes for efficiency.
The incumbent administration will refrain from developing new infrastructure, and only focus on maintaining or pursuing its existing projects such as roads and railways that have already been built or launched. Spending cuts are also expected in some water projects.
These austerity measures are likely to slow the expansion of road projects such as Korea’s 88 Highway and the development of a high-speed train linking satellite cities in Gyeonggi Province and Seoul.
However, some of these infrastructure cuts will be refocused on urbanization projects for the public.
It will also decrease the number of regional tax benefits and exemptions in line with global standards in a bid to increase the central government’s tax revenue.
The government will urge its regional offices and units to cut their budgets for marketing and events, while seeking an efficient system of regional taxation.
Details of the government’s spending plans will be further mapped out by the end of this month.
Each ministry will need to submit their budget cut proposals for next year to the Ministry of Finance by June 20.
By Park Hyong-ki (
hkp@heraldcorp.com)
