The Korea Herald


[Editorial] Misuse of subsidies

By Korea Herald

Published : July 13, 2015 - 20:57

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Out of the 11.8 trillion won ($10.4 billion) in the supplementary budget bill submitted by the government last week to parliament, 5.6 trillion won has been earmarked to make up for this year’s tax revenue shortfall. In recent years, tax revenues have consistently fallen short of government-set targets.

Under these tightened fiscal conditions, the importance of budgetary efficiency cannot be overemphasized.

A recent audit by a group of experts, including professors and researchers, into government-subsidized programs revealed the widespread practice of inefficient and irresponsible spending.

The state budget for 2015 has set aside 58.4 trillion won, or 15 percent of total expenditure, in subsidies to help fund 2,502 projects implemented by local administrations and private organizations. This year’s government subsidies have risen 11.2 percent from last year, nearly double the rate of increase in the overall budget. Lawmakers from the main political parties, who have clashed over almost all sensitive issues, were more than willing to agree to allot more subsidies needed to fund pork-barrel projects in their constituencies.

In its report submitted to the Finance Ministry on Friday, the group of experts said about 10 percent of the 1,422 projects under audit should be scrapped. It also advised that some 20 percent should be gradually downsized and another 14 percent should improve their ways of operating.

The report said that, if such recommendations were put into action, the central government could save about 1.8 trillion won in budget expenditure by 2017.

It is deplorable that nearly half of the projects run on taxpayers’ money were so inefficient and impractical that they should be discontinued or could not continue in the current way.

The Ministry of Trade, Industry and Energy and the Small and Medium Business Administration, an agency affiliated with the ministry, were found to be spending money separately on similar programs designed to help cover living expenses for foreign professionals employed by small companies in the country. A project funded by the Ministry of Culture, Sports and Tourism to promote Korean food as part of efforts to boost the tourism industry has made little progress.

A set of measures aimed at preventing state subsidies from being squandered were approved at a meeting of economic ministers late last year. Those found to have received subsidies in an illicit manner will be banned permanently from benefiting from government-subsidized programs and subject to fines five times larger than the sum granted to them.

The recent audit was conducted under a measure to let an independent committee review all subsidized projects on a regular basis to decide whether to continue them and how to improve their operations.

The Finance Ministry should pay heed to the recommendations made by the group of experts in the process of drawing up next year’s budget.

It is only reasonable for the public to raise the question of why the inefficiency and loopholes in implementing state subsidy programs have not been addressed in a more active and surgical manner. The government should strengthen monitoring and supervision and set up a system to link all information on subsidy spending by different government agencies.

What may also need to be done is to raise the level of municipal governments’ fiscal autonomy instead of handing out state subsidies to them. This would make them more responsible for using taxpayers’ money.