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Government Reform: Lesson’s from Korean Experience


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Public Officials Capacity Building Training Program for Government Innovation; Seoul, December 7, 2007

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Government Reform: Lesson’s from Korean Experience

  1. 1. Government Reform: Lesson’s from Korean Experience Public Officials Capacity Building Training Program for Government Innovation Seoul , December 7, 2007 Jin PARK, Ph.D. KDI School of Public Policy and Management
  2. 2. KDI School of Public Policy and Management Seoul, December 7, 2007 D adang Solihin Delegation Head Public Officials Capacity Building Training Program for Government Innovation
  3. 3. Introduction of KDI and KDIS <ul><li>Gvt-funded (50%) research inst. in economic policy (1971~) </li></ul><ul><li>Mission: Economic Policy advice (economic planning in the past) </li></ul><ul><li>Covers all areas of economy with around 60 Ph.D.s and 80 Masters </li></ul>KDI <ul><li>Graduate School (’98~) for Master degree in Public Policy and MBA </li></ul><ul><li>Teaches in English and 100% scholarship for international students </li></ul><ul><li>3. Annually admits 300 people with diverse composition </li></ul><ul><li>- international (25%), Korean civil serants(25%), Corporation(35%), </li></ul><ul><li>General students(15%) ( </li></ul>KDI School
  4. 4. PARK, Jin 1991 : Ph.D. in economics, Univ. of Pennsylvania 1992~1998 : Research fellow, KDI 1998~2001 : Director, Administrative Reform Team, Ministry of Planning and Budget 2001~2004 : Associate Professor, Director for Knowledge Cooperation, KDI School Currently Professor, KDI School Presenter
  5. 5. <ul><li>The Role of the Government Reform in the Economic Development </li></ul><ul><li>II. Government Reform after the economic Crisis </li></ul><ul><li>How to Reform the Government? </li></ul>
  6. 6. Four success factors behind Korea’s Economic Development ‘ I can do (or my kids can do) sprit’ : education, hardworking … Competition and incentive : export, Saemaul Movement … The role of the government Abundant labor with (potentially) good skill
  7. 7. Capability for Development What is the role of the Government Reform in Korea’s early economic development? <ul><li>Political leaders </li></ul><ul><li>Endowed resources </li></ul><ul><li>Means to organize the resources </li></ul>- Willingness to response to social needs - Capacity to set the right visions and strategies - Ability to build bureaucracy to implement the strategies - Ability to mobilize the resources - Capacity to generate and implement right policies to achieve the visions set by the political leaders
  8. 8. 1. Political leadership <ul><li>* Monthly Economic Report Meeting (1963~) by President </li></ul><ul><li>- Format: EPB reports to the President </li></ul><ul><li>- Participants: President, EPB and other relevant Ministers, Bank of Korea, Major Banks, Private Firms, Economists </li></ul><ul><li>- Role: Discuss current economic issues </li></ul><ul><li>* Monthly Trade and Export Promotion Meeting (1965~) by President </li></ul><ul><li>- Format: Ministry of Commerce and Industry reports to the President </li></ul><ul><li>- Participants: President, MOCI and other relevant Ministries Private Firms and Major Banks </li></ul><ul><li>- Role: Check the export performance and discuss export promotion </li></ul><ul><li>* Export Day (Nov. 30 th ): 0.1 billion $ of export in 1964 (284 b$, ’05) </li></ul>
  9. 9. 2. Concentration of information <ul><li>Presidential Office </li></ul><ul><li>- President PARK had three senior economic advisers - 1 (General economic issues), 2 (Heavy and Chemical Industry), 3 (Tourism promotion, temporarily since 1972) </li></ul><ul><li>Economic Planning Board (EPB, 1961~1994) </li></ul><ul><li>- Planning Bureau from Ministry of Reconstruction </li></ul><ul><li>- Budget Bureau from Ministry of Finance </li></ul><ul><li>- Statistics Bureau from Ministry of Interior </li></ul><ul><li>- Foreign Capital Bureau (new establishment in 1961) </li></ul>
  10. 10. 3. R&D <ul><li>Korea Institute for Science and Technology (KIST, 1963~) Korea Development Institute (KDI, 1971~) </li></ul><ul><li>- Start of government-funded research institutes </li></ul><ul><li>- Attracted many scientists in the advanced countries with higher salary and other benefits (minimize brain-drain) </li></ul><ul><li>* KDI research fellow in the early 1970s was offered: an apartment, a car with a chauffeur, an office, two RAs and one secretary. </li></ul><ul><li>- Government played an important role in making a network between the industry and the government-funded research institutes </li></ul>
  11. 11. 4. Anti-Corruption <ul><li>Corruption has been an important issue in Korea, but not that serious enough to endanger the development potential. </li></ul><ul><li>Incentives for civil servants </li></ul><ul><li>- Technocrats had many opportunity to serve in the related areas after their retirement. So it is to their benefits to stay clean. </li></ul><ul><li>* During mid 1980s, 150 out of 470 EPB retirees are working for private firms and 196 out of 311 are working for banking sectors. </li></ul><ul><li>* Of course, this created ‘ conflict of interest ’ issue, and it is now regulated by the government. </li></ul><ul><li>Monitoring </li></ul><ul><li>- Mutual check and balance among intelligence agencies </li></ul><ul><li>- Although not as strong as it is now, a monitoring scheme by news media and the scholars was working. </li></ul><ul><li>President PARK Chung-Hee himself was very clean. </li></ul>
  12. 12. 5. Utilize Civil Servants <ul><li>Recruiting System </li></ul><ul><li>- Since 1963, the entrance exam for civil servants became an appointment exam, which was just a qualifying test before. * Different entrance exam for 5 th degree, 7 th degree, 9 th degree </li></ul><ul><li>- Top graduates from best universities joined government such as EPB and Bank of Korea. ( No nepotism ) </li></ul><ul><li>Technocrats were respected. </li></ul><ul><li>- Up to the Assistant Minister level, career civil servants completely filled the positions. In fact, most of vice-Ministers and many of Ministers were from career civil servants. </li></ul><ul><li>* Since 1999, an open system was introduced so that 20% of director-generals should be appointed by open competition. </li></ul><ul><li>- Ratio of Ministers with career military background (’62~’79): 38.3% in the non-economic Ministries 14.9% in economy-related Ministries (0% in Ministry of Finance) </li></ul>
  13. 13. <ul><li>The Role of the Government Reform in the Economic Development </li></ul><ul><li>II. Government Reform after the economic Crisis </li></ul><ul><li>How to Reform the Government? </li></ul>
  14. 14. Korean Government’s Transition 1960s 1980s Since 1997 Rapid Economic Growth through Government Intervention Frequent Intervention and Over-regulation of the Private Sector Open Economic System Government as a Fair Coordinator
  15. 15. Korea’s Economic Development Model <ul><ul><li>Government-led growth </li></ul></ul><ul><ul><li>High savings rate, active investment </li></ul></ul><ul><ul><li>Export-orientation </li></ul></ul><ul><ul><li>low wage, work ethic </li></ul></ul><ul><ul><li>Market friendly strategy (WB, 1993) </li></ul></ul><ul><ul><li>Economic development before democracy </li></ul></ul>Is this a right model in Korea in 1990s?
  16. 16. Growth Decomposition of S. Korea Real growth rate Irregular factors Pot. growth rate(A+B ) Factor inputs(A) Labor Capital TF Productivity(B) Economies of Scale Resource allocation Technological prog. 1971~1980 1981~1990 1991~ 2000 7.4 -1.0 8.4 5.6 3.2 2.4 2.8 1.4 0.8 0.6 (%) 6.1 -0.7 6.8 3.4 1.5 1.9 3.4 1.5 0.7 1.2 8.6 1.0 7.6 4.6 2.5 2.1 3.0 1.4 0.7 0.9 Is Government intervention effective for tech. progress?
  17. 17. Changes in the growth environments <ul><ul><li>Resource mobilization is no more critical. : planning is less important. </li></ul></ul><ul><ul><li>Technology and innovation drives a growth. : the role of market and private sector grows </li></ul></ul><ul><ul><li>Good business environment is very important for economic growth. : the gov is the most important environment. </li></ul></ul>
  18. 18. Consequences of Government’s Intervention <ul><li>Government intervention is at first effective, but as private sector grows, it is not effective and even hampers economic growth. </li></ul>Development of a market economy was seriously hindered. The government became increasingly bloated and unresponsive to demands for reform. The economy was hampered by collusive ties between government and businesses, arbitrary regulations and corruption.
  19. 19. Background of economic crisis <ul><ul><li>During 80s ~ 1997 (economic crisis) </li></ul></ul><ul><ul><li>The gov. stopped 1) planning and resource mobilizing but continued the insurer’s roles . </li></ul></ul><ul><ul><li>>>> Firms underestimated their risks. </li></ul></ul><ul><ul><li>The roles of Korean gov in the 60s ~ 70s </li></ul></ul><ul><ul><li>1) planner and a resource mobilizer </li></ul></ul><ul><ul><li>2) Insurer : lowers the risks of firms and banks </li></ul></ul><ul><ul><li>3) Producer </li></ul></ul><ul><ul><li>4) Regulator, facilitator </li></ul></ul>
  20. 20. Crisis and Reforms <ul><li>Korea suffered the economic crisis in 1997 because it did not transform the government and its role when it had to. </li></ul>the need to establish a firm foundation upon which to rebuild the economy - To start a new as a government that sets an example for other sectors of the society to follow. - To start a government that truly serves the public >>> The government reform had to be implemented with utmost priority.
  21. 21. Efforts for Government Reform after the Crisis Efforts of previous Administrations Efforts after the crisis Past attempts were partial in nature, whether they focused on government reorganization, privatization, or deregulation. The reform drive was almost unprecedented in its comprehensiveness, proceeding simultaneously on all fronts, Including both central and local governments, public enterprises, and quasi-government organizations. The only exceptions were the political and judiciary divisions.
  22. 22. New Role of the Korean government <ul><li>The role of the Korean government has changed from an active leader and planner of economic activities to a fair coordinator and regulator of the economy, permitting greater reliance on private initiative. </li></ul><ul><li>From rowing to steering. (David Osborne) </li></ul>To maximize private sector autonomy and initiative, government intervention and regulation has been sharply reduced, superfluous government functions has been abolished, reduced, or transferred to the private sector. The government’s role in protecting the weak, establishing a social safety net, market supervision and environmental protection, among others, has been substantially strengthened.
  23. 23. <ul><li>The Role of the Government Reform in the Economic Development </li></ul><ul><li>Government Reform after the economic Crisis </li></ul><ul><li>How to Reform the Government? </li></ul>
  24. 24. What is Public Sector? Central Administration + Branch agencies Local Administration Government Affiliated Org. Local GAO State owned-enterprises State Invested Enterprise Government funded org. Government-commissioned org. Government-subsidized org. Education Agency National University What is the most progressed and the most retarded sector in terms of the public reform in your country?
  25. 25. Two types of reform Which is more appropriate in your country? Passive Reform Spontaneous Reform Strength Overcome of internal resistance Outsider participation Broader scope Radical Reform Top leader ’ s reform agenda High feasibility Utilize insider knowledge Broad participation Persistence Weak -ness Low feasibility Knowledge of external force Subject to political change Intra-institutional problem Hard to overcome inertia Possibility of manipulation
  26. 26. Comparison of Two government reforms Kim Administration <ul><li>Hard ware Restructuring </li></ul><ul><li>Top -down </li></ul><ul><li>Government ’ s Initiative </li></ul>Roh Administration <ul><li>Soft ware Restructuring </li></ul><ul><li>Bottom -up </li></ul><ul><li>Citizen ’ s Participation </li></ul>
  27. 27. Evaluation Recognition Implement The four steps of reform Plan Achievement Index Institutionalization Goals Constraints Strategy Adaptive implement Overcome of resistance Objective of evaluation Feed back of evaluation Which step is least effective in your country?
  28. 28. The obstacle of reform(1): No trigger Quality Control Branding Strategic Partnerships Outsourcing What is the case in your country? - Incognizant of problem High concentration, bureaucratic org. - Implement: High classification The characteristic of Organization <ul><li>Complicated, unclearly expected result </li></ul><ul><li>High risk and uncertainty </li></ul><ul><li>Conflict with incumbent rules </li></ul><ul><li>- Inappropriate timing of the reform </li></ul>The feature of Reform plan <ul><li>Support of people </li></ul><ul><li>Political, Administrative Leadership </li></ul><ul><li>Legal support </li></ul><ul><li>Human, material, technical aid </li></ul>Condition of Support
  29. 29. The obstacle of reform (2): Captured reformer Quality Control Branding Strategic Partnerships Outsourcing What is the case in your country? - Assimilation - Corruption - Weak intellectual capacity of reformers Attitude and Ability of Reformers <ul><li>- Overwhelming difference of Power </li></ul><ul><li>Budget and personnel dependence </li></ul><ul><li>No channel for information gathering </li></ul><ul><li>No agenda-setting jurisdiction </li></ul>Weak Institutional arrangement
  30. 30. The obstacle of reform (3): Resistance Quality Control Branding Strategic Partnerships Outsourcing What is the case in your country? - Political Instability, Social conflict - Low credibility to reformer - Unclear goal and contents of reform - Inappropriate reform process - No conflict resolution process Situational Condition <ul><li>Disbelief for the outcome of reform </li></ul><ul><li>No understanding of reform contents </li></ul><ul><li>Infringed interest </li></ul><ul><li>Burden of re-adaptation </li></ul><ul><li>Hurt pride </li></ul>Psychological Factor
  31. 31. The solution for Resistance Quality Control Branding Strategic Partnerships Outsourcing What should be emphasized more in your country? <ul><li>Enhance charisma and leadership </li></ul><ul><li>Promotion of participation </li></ul><ul><li>- Moral obligation </li></ul><ul><li>Education for the need of the reform </li></ul><ul><li>Help adapt to the change </li></ul><ul><li>* Necessary for spontaneous reform </li></ul>Normative Way: Persuade <ul><li>Order, Sanction </li></ul><ul><li>Making Tension </li></ul><ul><li>Reorganizing governance structure </li></ul>Compulsory Way <ul><li>Prevent, Indemnity for loss </li></ul><ul><li>Publicity about benefit of reform </li></ul><ul><li>Slow down reform process </li></ul>Technical Way: Negotiate and Compromise
  32. 32. <ul><li>conditions for the success of the reform </li></ul><ul><li>Based on Korea ’ s experience </li></ul><ul><li>① Presidential Leadership </li></ul><ul><li>② Institutional arrangement </li></ul><ul><li>③ Plan with vision and strategies </li></ul><ul><li>④ Implementation </li></ul>
  33. 33. <ul><li>① Presidential Leadership for Reform </li></ul><ul><li>i) president ’ s strong will to reform </li></ul><ul><li>-Kim: strong will after economic crisis, but changed after 2001 </li></ul><ul><li>-Roh: show strong will through establishing institutions and workshops </li></ul><ul><li>ii) appointment of innovative figures as heads of public organizations </li></ul><ul><li>-Kim: didn ’ t seriously concerned reform-mindedness </li></ul><ul><li>-Roh: reflected the reform accomplishment </li></ul><ul><li>iii) shape favorable political conditions </li></ul><ul><li>-Both Kim and Roh failed </li></ul>
  34. 34. <ul><li>② Institutional arrangement </li></ul><ul><li>: 6 conditions for a good reform leading organization </li></ul>Comparison of reform-leading organizations Under President Kim Under President Roh PBC MPB MOGAHA PCGID Under the president O X X O Full-time and permanent O O O X Focus on Reform O X X O Organizational Flexibility O X X ∆ Mix with Private and Public O ∆ X O Working relation with the other organizations - - X X
  35. 35. <ul><li>③ Reform Plan: vision and Strategies </li></ul><ul><li>i) A clear objective </li></ul><ul><li>-Kim: overcome financial crisis </li></ul><ul><li>-Roh: better performance > input reduction </li></ul><ul><li>but give up ‘ small government ’ easily </li></ul><ul><li>ii) Have a widely shared blueprint </li></ul><ul><li>-Kim: Top 100 National Agenda but no priority or strategy </li></ul><ul><li>-Roh: “ Government Innovation Roadmap ” </li></ul>
  36. 36. <ul><li>④ Implementation of Reform </li></ul><ul><li>i) Periodical examination and evaluation </li></ul><ul><li>-Kim: did examination not evaluation </li></ul><ul><li>-Roh: emphasis on evaluation </li></ul><ul><li>ii) Legal background </li></ul><ul><li>-Kim: didn ’ t care </li></ul><ul><li>-Roh: know the importance of legal support </li></ul><ul><li>iii) Education and Training </li></ul><ul><li>-Kim: didn ’ t care much </li></ul><ul><li>-Roh: valued the role of training </li></ul>
  37. 37. Evaluation Criteria by outcome <ul><li>① Efficiency </li></ul><ul><li>② Decentralization </li></ul><ul><li>③ Transparency </li></ul><ul><li>④ Quality of policy and service </li></ul><ul><li>⑤ Public participation </li></ul><ul><li>Roh generally shows a better outcome but, overall competitiveness slightly decline </li></ul>
  38. 38.
  39. 39. “ The innovator makes enemies of all those who prospered under the old order, and only lukewarm support is forthcoming from those who would prosper under the new.” --- Machiavelli Thank you
  40. 40. Dadang Solihin currently is Director for System and Reporting of Development Performance Evaluation -Bappenas. He holds MA degree (Economics), University of Colorado, USA. His previous post is Head, Center for Research Data and Information at DPD Secretariat General as well as Deputy Director for Information of Spatial Planning and Land Use Management at Indonesian National Development Planning Agency (Bappenas). <ul><li>Beside working as Assistant Professor at Graduate School of Asia-Pacific Studies, Waseda University, Tokyo, Japan, he also active as Associate Professor at University of Darma Persada, Jakarta, Indonesia. </li></ul><ul><li>He got various training around the globe, included Public Officials Capacity Building Training Program for Government Innovation, Seoul –Korea (2007), Advanced International Training Programme of Information Technology Management, at Karlstad City, Sweden (2005); the Training Seminar on Land Use and Management, Taiwan (2004); Developing Multimedia Applications for Managers, Kuala Lumpur, Malaysia (2003); Applied Policy Development Training, Vancouver, Canada (2002); Local Government Administration Training Course, Hiroshima, Japan (2001); and Regional Development and Planning Training Course, Sapporo, Japan (1999). He published more than five books regarding local autonomous. </li></ul><ul><li>You can reach Dadang Solihin by email at or by his mobile at +62812 932 2202 </li></ul>Dadang Solihin’s Profile