Government to Restructure Spending on Private Subsidies and Public Contribution Projects Worth 34 Trillion Won (Comprehensive)

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[Sejong=Asia Economy Reporter Kim Hyunjung] The government is set to undertake a comprehensive expenditure restructuring of private subsidy projects and public institution contribution projects worth 34 trillion won.

On the 2nd, Ando-geol, Vice Minister of Strategy and Finance, chaired the 4th Fiscal Management Strategy Committee at the Seoul Regional Public Procurement Service, discussing and announcing these plans. The Ministry of Strategy and Finance, having received budget requests from each ministry by the end of last month, plans to officially begin next year’s budget formulation based on the results of this meeting.

◆ Restructuring of 1,545 private subsidy projects supported for over 3 years = The government will first carry out expenditure restructuring targeting 1,545 private subsidy projects worth 12.3 trillion won that have been supported for more than three years. Projects that have achieved their support objectives or where circumstances have changed, eliminating the need for support, will be abolished. Similar or overlapping projects will be consolidated or inter-ministerial roles readjusted. Projects with poor execution or unsatisfactory performance, or those involving fraudulent receipt of subsidies, will have their subsidies reduced by about 5?10% of this year’s project-specific budgets. During the budget formulation process, the subsidy rate system, previously set per project, will be reorganized by introducing a multi-stage standard subsidy rate method.

Contribution projects worth 21.5 trillion won across 579 public institutions will also be revised. Projects deemed ineligible after legality and appropriateness reviews will be abolished or converted into other projects that can be strictly managed, such as subsidy projects or private consignment projects.

For projects entrusted with and performing policy funds, the scale of operating expenses will be adjusted. For contribution institutions generating their own revenue, operating expenses will be set based on management improvement efforts, and incentives such as allowing some of the surplus revenue to be reserved for future resources will be considered.

The restructuring of private subsidy projects and public institution contribution projects will be led by ministries, with fiscal authorities providing guidelines and private experts offering consultation and verification.

The government has decided to unify the financial support channels for child abuse prevention projects, currently divided among five ministries and 12 projects, into the Ministry of Health and Welfare’s general account. Previously, related channels were split among the Ministry of Health and Welfare’s general account, the Ministry of Justice’s Crime Victim Protection Fund, and the Ministry of Strategy and Finance’s Lottery Fund. Alongside this, the investment priority of related budgets, which had focused on infrastructure construction and isolation/protection of abused children, will be adjusted to concentrate support on healing and recovery programs for the normal social reintegration of abused children.

◆ Experts suggest considering a 3-year sunset clause linked to contribution project performance = On the same day, the government reviewed the execution performance and outcomes of the 10 major Korean New Deal projects scheduled for completion in 2022, the global innovation venture and startup promotion project, and the all-industry data big bang project, while also gathering expert opinions on investment directions. Among the 10 major projects, smart flood management and water supply management are expected to be completed early this year, but smart roads and national sports centers showed poor actual execution. The results of this review will be reflected in next year’s budget proposal and the July first anniversary performance review of the Korean New Deal.

To spread the second venture boom and expand unicorn companies, the 'Five Core Tasks for Global Innovation Venture and Startup Promotion' will also be included in the budget. Funds will be concentrated on new industry sectors such as future cars, bio-health, system semiconductors?the 'Big 3'?artificial intelligence (AI), and non-face-to-face industries, and a new youth AI developer training program will be launched.

Five new startup-focused universities will be designated to support commercialization funds for technology startups in non-metropolitan areas linked to regional strategic industries. Customized package support including R&D, guarantees, and investment will be expanded by growth stage for baby unicorns (promising startups) and prospective unicorns (companies valued under 100 billion won). Budgets related to the data big bang project will also be reflected in next year’s budget proposal.

AI training data will complete the first phase of building 700 types by 2022, and support for high-performance computing will be expanded to promote the utilization and commercialization of the constructed data. The big data platform will broaden participation from primarily data-supplying companies to include analysis and processing companies. To foster the metaverse as a new industry, a comprehensive development ecosystem platform will be established, integrating extended reality (XR) technology, content, and device development in promising fields such as urban information.

Private committee members suggested that, regarding local government subsidy projects, there are limits to achieving expenditure efficiency through central government efforts within a structure where 40% of domestic taxes are transferred as local allocation tax. They emphasized that welfare, jobs, and disaster-related projects are areas of joint responsibility between the state and local governments, requiring appropriate investment sharing. They also proposed reviewing the validity of all contribution projects to public institutions from a zero-base perspective and considering the introduction of a 3-year sunset clause linked to performance.

They further stressed the need to nurture the private cloud market using public sector investment as a catalyst. Proposals included strengthening security functions of private cloud services, developing additional software-as-a-service (SaaS) available for public use, and enhancing information security regulations for government and public institutions.

This content was produced with the assistance of AI translation services.