Since 2011, participatory budgeting has been used in every local government of South Korea. The Ministry of Economy and Finance, of the Korean Central Government, implemented Participatory Budgeting nationally for the 2018 fiscal year budget (MOEF, 2018), and every year since.
Problems and Purpose
PB was introduced in South Korea to ensure that the residents directly participate in the budget planning process and that budget-allocation decisions operate transparently and fairly. PB is one of the most active forms of governance and a direct democratic system in that residents directly participate in the government's official resource allocation process (Gilman, 2016). Residents' participation is grounded in the premise that the government shares the authority of budget planning with residents, and the preferences and demands of residents (consumers) for public goods are reflected in the policy-making process through participation of residents (decision makers) in the budget planning process. It is followed by opinions and evaluations of residents on the overall government activities. In this way, PB can be said to be a system that actively realizes the ideology of resident autonomy in the budget process in that residents, who are taxpayers, exercise the authority to decide where and what tax is used (Ganuza, 2012).
In Korea, unlike other countries, not only the local governments but also the central government implemented PB (MOEF, 2018). The difference between the two is the object and scope of participation. The resident PB system, which was previously operated by local governments, is limited to projects conducted at the sub-national levels and affects the budget planning process of each local government (Kim, 2016). On the other hand, the National PB influences the budget planning process through proposals, discussions, and participation group activities for various financial projects conducted by the central government without regional restrictions (MOEF, 2018).
The National PB, which was included in the Moon Jae-in government's national affairs tasks and started in 2018 as a pilot operation, is a process in which citizens participate in the process of reviewing and prioritizing projects, through which the citizens directly formulate the central government budget and make the corresponding policy (MOEF, 2019). If the local government's resident PB is for projects of the sub-national level, the National PB can also be proposed to the public for projects financed by the central government, achieving a wider range (Kwon et al., 2017). With the introduction of the National PB, the scope of people's participation in the budget process has become much wider than in the past when only the resident PB or the government proposal system was implemented (Sim, 2019). In the past, although a proposal system in which the general public came up with ideas for government affairs or suggested improvement measures was used, it was concluded in a way that relevant Ministries responded to the proposals made by the people. On the other hand, through the National PB, the participation of the people from the proposals of the public to the process of reviewing and prioritizing projects has been made possible, based on the related laws, Article 16 of the National Finance Act and the Enforcement Decree of the National Finance Act (MOEF, 2017).
“National Finance Act Article 16 (Budgeting Principles): The Government shall comply with the following principles in formulating and executing its budget: 4. The Government shall strive to enhance transparency and citizens' participation in the budgetary process.
Enforcement Decree of the National Finance Act Article 7-2 (Citizen Participation in the Budget Process): (1) The Government shall implement measures necessary for enhancing transparency and citizens’ participation in the budget process as prescribed in subparagraph 4 of Article 16 of the Act.”
In 2021, the plan for running the National PB will promote innovation in three directions: expanding participation, activating communication, and operating a field-oriented system (MOEF, 2020).
Background History and Context
After the first participatory budgeting (hereinafter referred to as PB) system was implemented in the Northern District, Gwang-ju Metropolitan city in 2003, the process spread to all of the 243 local governments nationwide when the implementation of PB became compulsory through the revision of the Local Finance Act in 2011 (MOIS, 2011). The Ministry of the Interior and Safety, which is responsible for local development projects including PB, continues to develop and improve the design of PB (Lee and Kim, 2016). The provisions of the amended Local Finance Act for the spread of PB are as follows.
“Local Finance Act Article 39 (Residents’ Participation in Budget Compilation Process of Local Governments): (1) The heads of local governments shall prepare and implement procedures for residents to participate in the budget compilation process, as prescribed by Presidential Decree (Amendment from discretionary clause to mandatory clause, MOIS, 8 MAR 2011).”
Seoul, the largest local government as well as the capital city of Korea, introduced PB in 2012, which is an example of citizen participation in budget planning in a city with a population of 10 million or more (Seoul, 2018). In large cities, wide-area services and narrow-area specific services are supplied at the same time, and the decision-making process is not as simple as small-scale municipalities because it involves many administrative districts and various preferences. Therefore, Seoul's resident PB experience was expected to provide lessons and implications for the direct application of democratic principles in the National PB process (Son and Kim, 2017).
Prior to the full-fledged implementation of National PB in 2018, the Korean government implemented a demonstration project from 2017, established a dedicated organization, clarified legal grounds, prepared operational plans and detailed guidelines, and constructed an online platform through the preliminary preparation steps for this (MOEF, 2018). To carry out the pilot project of the National PB, a contest was held for about 6 weeks from mid-April 2017 to receive suggestions for ideas. The 368 cases of the national project ideas gathered were reviewed by the relevant Ministries, and 10 candidate projects were selected as proposals that could be commercialized. In addition, through an online preference survey targeting 1,000 general citizens, projects with high necessity and urgent priority were chosen. As a result, 6 participating budget pilot projects worth KRW 42.2 billion (GBP 26.3 million) were decided, and the total amount was reflected in the 2018 fiscal year budget.
In September 2017, the National PB Division was newly built within the Ministry of Economy and Finance, and an additional budget of KRW 1.9 billion (GBP 1.2 million) was created for the operation of the National PB Group and for surveys and publicity on national proposal projects. Moreover, prior to the earnest proceeding of the system, in order to clarify the legal basis, the revision of the Enforcement Decree of the National Finance Act was promoted, and it was promulgated on December 29, 2017 after the Cabinet meeting (MOEF, 2017).
In the process of designing the National PB, the government discussed the operation plan through a meeting consisting of experts such as local governments, academia, and civic groups that are operating the local resident PB exemplary. After meetings with private experts and people in charge of resident PB, and discussions with related government Ministries, the system operation plan was prepared in January 2018. The basic directions are as follows. First, it operates within the framework of the government's right to organize the budget and the right to deliberate and vote on the budget of the National Assembly. Second, it collects various opinions from experts, local governments, and related Ministries, but considers the specificity of the central government. Third, it promotes communication and participation centred on digital platforms (MOEF, 2018).
Organizing, Supporting, and Funding Entities
The submission of proposals for the 2021 National PB project has been held for one month from March 15, 2020. The application was conducted online and offline at the same time, through the National PB website, e-mail, and “visiting budget briefing sessions” for each region, for which the government encourages active participation. As a result, 1,206 opinions were received per month, and various projects were proposed in all fields including health, welfare and general administration, as well as diplomacy and reunification. Specifically, health and welfare were 293 cases (24.3%), general and local administration 165 cases (13.7%), public order and safety 136 cases (11.3%), environment 130 cases (10.8%), employment 58 cases (4.8%), etc.; the proportion of welfare and society was relatively high (MOEF, 2020). In particular, the public's proposals focused on issues of high social interest, such as welfare issues regarding the elderly, the disabled, and child-rearing; environmental issues including fine dust and recycled products; and job issues concerning employment of youth and women. These 1,206 national proposals were sent to each department with jurisdiction to examine whether they were suitable for budget projects of the central government in five aspects: legitimacy, similarity, public interest, scope of effect, and continuity of effect. And for the proposals judged to be fitting, it went through a process of maturing as a budget project (MOEF, 2020). As a result, 30 ministries submitted the national participatory budget of KRW 532.3 billion (GBP 332 million) for 156 projects. The main or several projects reflected in the 2021 fiscal year's National PB are as follows (MOEF, 2020):
- Establish a system for effective response to night forest fires using special drones for forest fire extinguishing: Korea Forest Service, KRW 4.6 billion (GBP 2.9 million)
- Creation of a forest road in a children's protection zone to make a safe walking environment and a healthy living environment for children (reduction of fine dust, improvement of landscape): Korea Forest Service, KRW 10 billion (GBP 6.2 million)
- A high-tech unmanned helicopter (drone) mounted on a security ship and used in real-time maritime security sites such as crackdown on illegal fishing vessels, search, and rescue: Korea Coast Guard, KRW 2 billion (GBP 1.2 million)
- Eliminate shadow areas by installing base stations in the communication range of national parks: Ministry of Environment, KRW 1.3 billion (GBP 811,000)
- Creating a disaster prevention forest to block scattered sand to protect residents in the area behind the reclamation project: Saemangeum Development and Investment Agency, KRW 3.8 billion (GBP 2.4 million)
- Enhancement of information on buried cultural properties to resolve land use inconvenience: Cultural Heritage Administration, KRW 3.5 billion (GBP 2.2 million)
- Modernization of Invention Education Centre for Children and Adolescents: Korean Intellectual Property Office, KRW 970 million (GBP 605,000)
- Host a competition to solve AI challenges presented by large companies by startups: Ministry of SMEs and Startups, KRW 900 million (GBP 561,000)
- Policy support for start-ups using expertise, technology, and know-how possessed by senior retirees: Korean Intellectual Property Office, KRW 1.7 billion (GBP 1 million)
Participant Recruitment and Selection
The National PB group conducted a selection process targeting projects required by the Ministries, and 56 projects to a size of 110.6 billion won. The final ranking was decided by collecting the votes of the National PB group and a survey reflecting the general preference of 1,000 people. As a result, 39 projects, KRW 83.5 billion (GBP 52.1 million), were finally reflected in the 2021 budget plan. Subsequently, through deliberation on the budget of the National Assembly, 38 projects of KRW 92.8 billion (GBP 57.9 million) were confirmed as the budget for the 2021 fiscal year, an increase of about 11.1% compared to the government proposal.
The Korean government is making efforts to construct the system and manage it soundly by listening to the will of the people and the voices of the field, taking into account the characteristics of the National PB, where citizen participation is the fundamental factor (Kwon et al., 2017). To this end, above all, Korea aims to increase the accessibility to the system and expand the scale of participation so that more citizens can participate more easily.
An institutional subcommittee was built in the National PB group to discuss ways to improve the system to broaden the project effect of existing continuing projects, and enlarge the number of the National PB group, which had previously consisted of 300, to 400. The people participating in the general preference survey has also increased from 1,000 to 2,000, encouraging public participation (MOEF, 2020).
Methods and Tools Used
Since 2017, the Korean Ministry of Economy and Finance has operated the National PB website (MOEF, 2018). Here, it provides information on the participatory budgeting proposal method, the overall national budget, the progress of the proposed projects, and a search function so that the public can easily propose a budget project. It is also used as a platform for surveying netizens' opinions and activities for the National PB group. The National PB homepage enhances user convenience by making business proposals possible not only on PCs but also on mobile devices in consideration of the recent increase in Internet use through smart phones and tablet PCs. In this way, the National PB operation process and related information are disclosed for the actual participation of the people, expanding communication with the people, and allowing participating citizens to share mutual discussions and information. The Facebook account for the National PB has been also newly built and managed, thus the National PB content is shared by participants, experts, and the government, thereby including not only the PB group, but also the proposer. In other words, it strengthens communication between the government and the public by giving and taking data on the National PB organization, execution process, and public communication events through Facebook and the website (MOEF, 2018).
What Went On: Process, Interaction, and Participation
The Korean government is constantly improving the National PB system so that it is centers on the field by having the period for receiving public proposals be on a regular basis and expanding the business proposal briefing sessions. For actively discovering the National PB projects in 2022, the Ministry of Economy and Finance intensively received and promoted national PB proposals for two months from January to February (MOEF, 2021). Proposals received through the National PB website will be demanded as a budget project in 2022 by the end of May after qualification review by each competent department. Moreover, if the proposal is eligible and is selected as a budget project, a cultural gift certificate worth KRW 100,000 (GBP 62) is provided, and if it is reflected in the government budget, an “Excellent Proposal Certificate” and a predetermined souvenir are given (MOEF, 2021).
The proposed projects covers all areas of the national financial management plan, such as environment, health, welfare, industry, SMEs, and energy. Since 2020, not only new project proposals but also opinions on improvement of continuing projects have been collected. However projects subject to preliminary feasibility screening, such as large-scale SOC (Social Overhead Capital) projects, are excluded from the National PB (MOEF, 2018).
Budget projects proposed by the people in 2021 go through procedures such as a project proposal (January-May), suitability review (June-July), preference survey (July), reflection of the government budget (August), and the State Council. It is presented to the National Assembly afterwards. Finally, the budget proposal is deliberated and confirmed by the National Assembly (September-December).
The main implementation schedule is as follows (MOEF, 2021).
- January-February: Proposals for budget projects with public participation are intensively received for two months, and proposals received after March will be considered for reflection in the 2023 fiscal year’s budget proposal.
- March-May: Each relevant Ministry examines whether the proposed projects are competent as central government projects (March) carrying out work to materialize ideas through discussions at the support council and on-site discussions (April-May).
- End of May: Each Ministry submits the budget request, including the candidate project for participating budget, to the Ministry of Economy and Finance.
- June-July: The National PB group reviews and discusses the projects, subsequently condensing the candidate projects by conducting votes and surveys.
- August: The Ministry of Economy and Finance considers various conditions such as the ripple effect of individual projects as well as the results of the survey regarding the preferences of the participants, and presents the budget for public participation to the fiscal policy advisory meeting for discussion. It is presented to the National Assembly after it is submitted to the Cabinet meeting, to be finalized as the government budget for the 2022 fiscal year.
- September-December: The budget proposal for 2022 fiscal year submitted by the government is ultimately deliberated and confirmed by the National Assembly.
Influence, Outcomes, and Effects
The PB's biggest challenge in terms of influence might be the overlap or conflict with the Congress, which has the ultimate decision-making power over finances. Under representative democracy, the distribution of resources is deliberated and decided by a parliament delegated to power by vote, which is consistent with democratic principles. Therefore, there are opinions that it is desirable to operate the PB as a subsidiary means because it could wrap over with the parliament's budget deliberation and decision (Oh, 2017).
However, the National PB is meaningful in that it not only improves the transparency of fiscal management, expands the participation and interest of the people, but also reflects the opinions of the people directly in the national budget. Because it was merely first implemented in 2018 in Korea so its history is not that long, there are many tasks to be improved to stably establish and operate the system.
Analysis and Lessons Learned
In the case of the local government's participation budget, since most of the projects are small-scale projects that are close to the lives of people, it is relatively easy for residents to propose projects. On the other hand, in the case of the national budget, since there are many national projects and the size of the budget is large, it is difficult for citizens who lack specialized knowledge about the budget to propose appropriate projects (Lim, 2019). In order to compensate for the limitations of the National PB due to the complexity of the national budget, it is necessary to expand the qualifications for proposing participation budget projects (Yoon, 2021). Moreover, sufficient learning and discussion must be ensured during the process of screening and selecting the participation budget as well as strengthening the competence of participating citizens is also required (Kim, 2019). The process of organizing the national budget is strongly influenced by communities and groups in society because the budget is enormous and the ripple effect appears nationwide. Due to this characteristic, if the people directly participate in the budget process, there is a possibility that they may be exposed to interference or lobbying from social groups or organizations, which can cause problems in terms of fairness and transparency (Kopits and Craig, 1998). Therefore, so as to keep fairness and transparency in the process of operating the system, it is essential to secure and supervise the expertise in the process of selecting participants, proposing projects, reviewing, and making decisions (Park, 2018).
For citizens to participate in the budget process, various systems for citizen participation must be equipped. Performing such a system incurs multiple administrative expenses in the process of recruiting participating citizens, convening and holding meetings, and collecting national proposals. Furthermore, if the opinions of citizens differ from those of the government, there may be a side effect of delaying decision-making about the budget (Shah, 2007). Considering the needs of residents, there may also be contrary results of worsening financial soundness in the path of pursuing a populism project. Particularly, in PB, not all citizens can participate in the budgeting process, therefore securing the professionalism and representation of participating citizens is an important success factor. Since the budgeting process is a complex course that requires expertise, if ordinary citizens who lack relevant knowledge participate in the budgeting area, the rationality may decrease as projects with less validity are organized in the budget (Son and Kim, 2017).
What is more, the representativeness of participating citizens can also be an issue. The budget process also has a highly political characteristic of allocating financial resources to social groups, and as a specific individual or group related to the budget actively participates in PB sector, some distortion of the distribution of financial resources may occur. Particularly, in the case of PB projects of some local governments in Korea, there is also a concern about the contrary results such as corruption or irrationality due to local influential persons or organizations participating as PB members (Oh, 2017).
To improve the national PB, above all, it is necessary for all participants to communicate with each other members in real time along with efforts to consolidate communication between the people and the government (MOEF, 2018). It is also important to increase accessibility so that more citizens can participate more easily through the smooth operation of a platform that discloses all related information (Lim, 2019). In the future, not only the process for participating budget projects, but also an institutional device that can fortify the execution of selected projects and monitoring of project performance should be prepared (Yoon, 2021).
Another issue that has been raised in relation to the National PB is that the project execution rate is sluggish compared to other projects (Kim, 2019). It is pointed out that the process of selecting and operating the National PB group, which is a core management entity that participates in the process of project review and budget allocation, should be improved. The National PB group discusses and compresses candidate projects and proposes project preferences through voting. Additionally, after monitoring the progress of the project, they are in charge of raising opinions for system improvement through questionnaire surveys and meetings. Experts said, "In fact, it is somewhat difficult to say that the National PB group selected by random lottery properly verifies the necessity and efficiency of the project (Lim, 2019)." The government budget project is in contrast to the fact that the feasibility of the project is proved by each department from the planning stage, and appropriate controls are implemented in the process of undergoing strict screening by the Ministry of Economy and Finance. There is an opinion that the curriculum for the National PB group people after selection is also inferior. They judge the effectiveness of a project that receives only three hours of relevant education and spends tens of billions of pounds in budget (Lim, 2019). It is also pointed out that prioritizing projects through voting itself is more likely to flow into populism than considering the economics and rationality of the project. In exchange for attending the four meetings, merely KRW 600,000 (GBP 375) will be paid to them.
In 2017, the Korea Institute of Public Finance received a request from the Ministry of Economy and Finance to analyze the PB system introduced earlier by some local governments. It said that “the lack of expertise in project review is a concern, and it is necessary to enhance the capacity of participating citizens in order to deliberate on the complex national budget (Kwon et al., 2017).” An official from the National Assembly Budget Office also said, "As the National PB is increasing, strict preliminary screening and education are absolutely essential to reinforce the professionalism of the National PB group (Lim, 2019)."
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The first edition of this entry was written and submitted by Jinhee Yoon from the University of Southampton.