This presentation was made by John KIM, Korea, at the 13th Annual Meeting of OECD-Asian Senior Budget Officials held in Bangkok, Thailand, on 14-15 December 2017

1. Performance Budgeting in Korea
John M. Kim (jhrv@kipf.re.kr)
Korea Institute of Public Finance
2017 OECD-Asian SBO
14‒15 December 2017

2. 2
Overview: Korea’s three-tiered system
Kim, John M. & Nowook Park (2007), “Performance Budgeting in Korea,” OECD
Journal on Budgeting v7n4
Park, Nowook & Joung-Jin Jang (2015), “Performance budgeting in Korea:
Overview and assessment,” OECD Journal on Budgeting v2014/3
절대적빈곤
Basic Framework
“Monitoring”
All ministries/agencies
must produce
annual performance
plans and reports,
including:
Goals
Indices & targets
etc.
for all budgetary
programs and projects
Utilization & Enforcement
“Review”
All ministries/agencies
must produce
“self-rated” reports
on CBA-provided
standardized checklist, for
1/3 (about 500) of all
budgetary programs and
projects (full assessment
every 3 years)
Bottom 10% penalized
Attention to smaller units
of spending
Customized, Special
Attention
“In-depth Eval.”
CBA commissions special,
customized reviews of
problematic programs,
usually involving
crosscutting issues (e.g.,
air quality vs. hybrid car
subsidies vs. carbon tax)
Usually 10 or less reviews
are done annually

3. 3
How was it built up?
Initially considered in the aftermath of the Asian Financial Crisis (1998),
Performance budgeting was subsequently subsumed into the Four Fiscal
Reforms (2005) as one of the key elements
절대적빈곤
Basic Framework
“Monitoring”
2000‒2002
CBA considers PB, but
questions usefulness (no
feedback loop to budgeting)
Pilot basis for a few
min./agencies, requiring
only plans be drawn up
stating strat. goals, perf.
objectives and indicators,
similar to US GPRA
2003
New reform-oriented
government pushes pilot
PB to full implementation.
Utilization & Enforcement
“Review”
2005
CBA adapts US PART to
encourage compliance with
PB planning and reporting
requirement
Every program to be rated by
a 3-category (plan, execution,
result) checklist for 5 grade
levels
Within a year, CBA announces
budget penalties for
programs that score in the
lowest level (lowest 10%)
Customized, Special
Attention
“In-depth Eval.”
2006
Recognizing K-PART’s
uniform checklist method
may not address issues
adequately for some
programs,
CBA introduces “In-depth
Evaluation” program,
modeled after similar US
programs (High-Risk
Program (GAO, OMB) and
OMB’s PMA and PART-
Crosscutting)

4. 4
Where are we going?
The Basic PB Framework (plans & reports) and the K-PART will be handed over to
ministries/agencies shortly. CBA is satisfied that after a decade, the
performance framework is now firmly in place
절대적빈곤
Basic Framework
“Monitoring”
National Fiscal Act (2007)
made annual performance
plans and reports by
ministries/agencies
mandatory, for all
budgetary programs or
projects
Utilization & Enforcement
“Review”
Besides 10% penalty, CBA has
tried different variations
regarding validation of self-
ratings and incentivizing
methods
Customized, Special
Attention
“In-depth Eval.”
Crosscutting and
inter-ministerial issues
To be managed by
ministries/agencies:
To be run by CBA:
“PB to Inform
Strategic Allocation
Decisions”
+

5. 5
Reflections from 2 decades of performance budgeting
PB in Korea is rated very highly in the OECD survey
(for details, cf. Park and Jang 2015),
And, yes, PB is important,
yet questions with no easy answers remain:
• PB tends to be idealistically conceptual, and still too
abstract for practical application
Outcomes/outputs of some types of programs
cannot be quantified in a sensible way
(e.g., ODA, foreign affairs, MOF-related work, etc.)
• Usefulness: What to do with the performance information?
Mandatory budget cuts effective only initially; ministries will sooner or later adapt
• Prone to being undermined by “gaming”?
Two can play at that game, up to a point. In any case, makes for inefficiency
• How much is enough? What is the performance of performance budgeting?
• Benefits are subject to diminishing returns, probably relatively early on
(saturation point?)
• Costly beyond a threshold; takes your best people away (PPBS in the 1960s?)
• Does a good performance score necessarily mean good performance?
• PB may need to be regulated with pragmatic common sense; legalistic cultures
may be prone to pushing it too hard

6. 6
Reflections from 5 decades of performance management
• Strong tradition of performance management since early 1960s
• Military government launched the “Development Era,” three decades of sustained
near-double-digit economic growth after 1961 coup, driven by plans with targets
• Strong focus on results meant:
• Program budgeting introduced in 1960s (making 2005 reform redundant)
• Periodic streamlining of government organizations and realignment of
functions/programs
• Medium-term budgeting introduced in late 1970s (up to mid 1990s)
• Focus of nation-building was on education (workforce building), large
infrastructure projects, heavy industries and exports, for which quantifiable
targets and progress measurements are more easily defined and verified
• Budgeting in the 21st century has to address more diverse demands, many of
which cannot be easily assessed, especially over the short-run. Hence need for
new PB system
• Overall assessment of recent PB drive
• Across-the-board uniform approach of K-PART strongly enforced by CBA
probably overshot the mark, but at the initial stage of PB was arguably
effective in getting program managers to think about performance and VFM
• Re-assessment and regrouping needed to move onto the next stage

7. Thank You!