1. MTEF Implementation in Korea Ministry of Planning and Budget
- Top-down Budgeting -
Soo Min Park
Ministry of Planning and Budget

2. 1. The Starting Point of Reform
2. The Vision of MPB
3. What Lies Ahead

3. 1. The Starting Point of Reform

4. Why did MPB look for a new resource allocation system?
Fiscal Crisis No
However “Earlier the better”
Potential issues to be addressed ( populating ageing, unification costs… )
Efficiency of Public Expenditure
Yes
Stiff portfolio in macro & micro levels
- economic sector : over 20% for 30 year
- large spending but unsatisfactory improvement in some sectors
Fiscal Transparency
Yes
22 special accounts and 59 public funds
“highly fragmented and compartmentalized” (OECD)

5. Weaknesses in the present fiscal system
Bottom-up Oriented Budgeting
Too much work load on MPB from reviewing
individual programs ( 6,000 or more )
Little time for macro analysis
Yearly Budget
Lacks long-term perspectives, Incremental budgeting
Little consideration on business cycle
Central Fiscal Authority-led
Insufficient role of line ministries, field expertise is not absorbed into the budgeting process
Asymmetry of information on cost between MPB and line ministries

6. 2. The Vision of MPB

7. Where do we want to go? Top-down Budgeting
( Strategic Resource Allocation based on Macro Analysis )
Bottom-up Oriented
Budgeting
Yearly Budget
Med-Term Expenditure Framework
Cooperation and Role Sharing
between MPB and Line Ministries
Central Fiscal
Authority-led

8. The Korean Model (still evolving…)
( Mar~May )
(Jun~Aug)
As is
Line Ministries
MPB
Budget Requests
( by programs )
Budget Formulation
( program-oriented )
Y+1
(Jan~Apr)
(Apr)
(Apr~Jun)
(Jun~Aug)
To be
MPB
Line Ministries
MPB
Cabinet
Meeting
Medium-
Term
Plan
 Total
Ceiling
 Sectoral
Ceilings
Budget
Formulation
Within Ceilings
Consultation
and Review
Y+1
Y+5

9. Stage 1 : Establishing Medium-Term Plan ( National Fiscal Management Plan )
“ Supporting Strategic National Management ”
Analyzes 5-year Fiscal Balance &
Total Expenditure Levels
- Gives way to Medium-term Budget Balance
Sets National Policy Goals & Priorities
for resource allocation
Proposes Sectoral and Ministerial Ceilings
& Major National Projects

10. Stage 2 : Cabinet Meeting
“ Melting pot of Policies Making and Resource Allocation ”
In-depth Discussions on Sectoral & Ministerial Ceilings
5-year fiscal targeting
Resource allocation by national priorities
Review Major Policies upon Future Resource Allocation Projection
Based on MPB Proposal

11. Stage 3 : Line Ministries’ Budget Formulation
“ Change of Role and Mindset ”
Autonomous Resource Allocation within Ceilings
Own priorities by sectors
Using field expertise in budgeting
Yearly  5 years
MPB’s Stand Alone Decision-making → All the Line Ministries’ Decision-making
Provides “ Budget Formulation Manual ”

12. Stage 4 : MPB’s Consultation & Review
“ Player  Coordinator ”
Reviews Spending Plans of Line Ministries
Decisions from the Cabinet Meeting
Conformity to the Formulation Manual
Reflects Changes after Cabinet Meeting
Macro Variables, unexpected issues …

13. 3. What Lies Ahead

14. What are we expecting? Long-term Perspective
( The Starting Point )
Fiscal Soundness
Long-term Perspective
Symphony of Sustainability & Economic Stabilizing
Efficiency of Public Expenditure
Macro Analysis → Strategic Resource Allocation
Role Sharing → Self Expenditure Restructuring
Cost Information Sharing → Extinction of Excessive Budget Request ( 20∼190% Increase )
Fiscal Transparency
A new Consolidated Structure over special accounts and public funds

15. The road ahead… Not enough long-term fiscal forecasting background
Early stage of Performance Management System
Potential difficulties in gaining consensus of the National Assembly

16. Our roadmap… Maintaining strong fiscal discipline
2003
2004
2008
Planning & Design
Introduction
Adjustment
Full
establishment
Gradual introduction
Maintaining strong fiscal discipline
Surpassing global standards

17. Thank you