The document outlines the recent reforms in Korea's performance budgeting (PB) system, emphasizing its role as an accountability tool amidst changing fiscal environments. Key challenges include the need for sustainable PB processes, integration of fragmented evaluations, and effective engagement with line ministries. Proposed reforms aim to enhance strategic savings, capacity building, and the overall credibility of the PB framework.

1. SPENDING REVIEWS:
RECENT PB REFORM AGENDA
IN KOREA
NOWOOK PARK
CENTER FOR PERFORMANCE EVALUATION &
MANAGEMENT (CPEM)
KOREA INSTITUTE OF PUBLIC FINANCE (KIPF)

2. CONTENTS
Overview of the Korean PB System
• Description of the current PB system
• Characteristics of the Korean PB system
Changing Policy Environments
• Need for making fiscal space
• Need for making the PB process sustainable
Recent Reform Initiatives
• Reforming the PB system with focus on strategic savings
• Integrating fragmented evaluation process
• Decentralization with capacity building efforts
Challenges
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3. PFM REFORM PROGRAMS
IN KOREA
MTEF
Top-down
budgeting
Performance
M&E
Program
budget
classification
IFMIS
Accrual
Accounting
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4. SEQUENCE OF PFM REFORMS
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PB
pilot
2000
2003
MTEF &
Top Down
pilot
Top
Down
2004
2005
MTEF
&
PB
Program
Budget
2006
2007
FMIS
Accrual
Accounting
2010

5. WAS NO FISCAL DEMAND FOR
PB REFORM
The Korean economy was quickly recovered after the Asian
financial crisis in the late 1990s
• Fiscal Balance was quickly recovered within 3 - 4 years
5
-50
-40
-30
-20
-10
0
10
20
30
40
50
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Consolidated Fiscal Balance
Consolidated Fiscal Balance - Surplus of social security funds +Repayment Obligation of emergency public funds

6. PB REFORM AS AN
ACCOUNTABILITY TOOL
PB reform was considered essential because it was viewed
as an accountability tool in the context of top down
budgeting
PB reform was sold to line ministries as an integral part of
top down budgeting
• “Accountability mechanism is necessary in return for
enhanced autonomy to line ministries”
Initially active involvement of the central budget office was
sought after, but eventually separate performance
management bureau was established.
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7. 3 LAYERS OF PB SYSTEM
In-depth Evaluation
Evaluating 10 cross-cutting
programs
Data-driven program evaluation
Periodic Review
Assessing 1/3 of spending
programs
Checklist-based review
Monitoring
Annual performance plan & report Performance indicators & targets
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8. CHARACTERISTICS OF
KOREAN PB 1
Equipped with a comprehensive set of M&E tools
• Monitoring – Periodic Review – In-depth Evaluation
Institutionalized and routinized PB system
• PB processes are legalized and repeated every year
Explicit link with budget cuts, but indirect link with
macro fiscal situation
• At least 10% budget cut rule to “ineffective” programs
• No explicit targets for fiscal consolidation based on PB
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9. CHARACTERISTICS OF
KOREAN PB 2
Centralized PB system
• Guidance was issued by the MOSF
• Quality of performance information is monitored by the MOSF
• Review and evaluation process is centralized
Separation between central budget office and PB Bureau
• There is cooperation between them, but it is not institutionalized.
Some fragmentation in M&E system
• Existence of multiple central agencies brought about some
fragementation
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10. CHANGING POLICY
ENVIRONMENTS
Rapidly
worsening
fiscal situation
Need for
making fiscal
space
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Increasing
burden of
running PB
process
Need for
sustainable PB
system

11. INCREASING FISCAL DEFICIT
0
0.5
1
1.5
2
2.5
2011 2012 2013 2014
Fiscal deficit to GDP ratio
(%, excluding social insurance)
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12. INCREASING SOCIAL
WELFARE SPENDING
0
5
10
15
20
25
2011 2050
Expected ratio of social welfare spending to
GDP (under current system, %)
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13. INCREASING BURDENS OF PB
Not much significant progress in improving quality of
performance information
• Lack of capacity and incentives limit further progress
Increasing strategic behavior of line ministries
• Limited ownership of line ministries promotes their strategic
response to the PB process
Process becomes compliance mechanism without active
engagement of high level decision makers
• PB process becomes routinized process run by the mid level
managers  its impact is limited
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14. RECENT REFORM AGENDA
Introducing strategic review process focusing on strategic
savings
• Introduce strategic review process focusing on sectoral issues
with a purpose of identifying strategic savings
Integrating the self-assessment process
• Enhance ownership of line ministries by giving more
autonomy in the assessment process
• Integrate fragmented self-assessment process
Strengthening capacity building program
• Centralize and reinforce training programs for PFM functions
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15. STRATEGIC REVIEW PROCESS
FOCUSING ON SECTORAL ISSUES
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Sector/field:
Strategic reviews
Cross cutting programs:
In-depth evaluation
Sub-programs: self-
assessment

16. ISSUES ON STRATEGIC
REVIEW PROCESS
How to make the process credible ?
• Capacity of the central budget authority
• Independence of the review process
How to work with line ministries?
• Incentives for line ministries
• Capacity of line ministries
How to communicate with politicians?
• How to handle political parties’ priorities
• How to or not to engage politicians
How to communicate with citizens?
• How to handle pressure from interest groups
• How to engage citizens
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17. CHALLENGES:
REMAINING ISSUES
Establishing government-wide evaluation policy
• Enhancing accountability of high level decision makers
• Professionalization of key PFM functions
Reforming HR management system suitable for modern PFM
system
Reforming budget approval process in the National
Assembly and, perhaps, election system itself
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18. THANK YOU.
npark@kipf.re.kr
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