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Budget Control and the Role of the National Assembly Budget Office in Korea

Budget Control and the Role of the National Assembly Budget Office in Korea. Dr. Jhungsoo Park Director General for Budget Analysis NABO, Korea. contents. Introduction Government Spending and Budget Control Executive vs Legislative Power of the Purse Details about the NABO in Korea

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Budget Control and the Role of the National Assembly Budget Office in Korea

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  1. Budget Control and the Role of the National Assembly Budget Office in Korea Dr. Jhungsoo Park Director General for Budget Analysis NABO, Korea

  2. contents • Introduction • Government Spending and Budget Control • Executive vs Legislative Power of the Purse • Details about the NABO in Korea • Conclusion

  3. 1. Introduction 1-1 • New budget policy in Korea • Medium-term expenditure framework • Top-down budgeting system • Performance management • Digital budget and accounting system • Structure of Korean government and the budget process • Focus on the issue “Can legislature gain an effective voice in budget policy?” • Weak role of National Assembly in budget process, traditionally

  4. The budget process and the decline of control capacity 1. Introduction 1-2 • Today’s process is a layering of various processes developed over time • Significant development • Budget committee (standing, but special) • NABO • The decline of independence and control comes from three external • development • The rise of disciplined political parties • The enormous escalation in public spending • The rise in interest groups and corporatist political arrangements

  5. New roles requires 1. Introduction 1-3 • Legislators have to define a new role • Promoting fiscal discipline • Improving allocation of public money • Stimulating administrative entities to manage their operations more efficiently • Fulfilling these new roles requires • Enhancement of legislative capacity and resources • Changes in both executive and legislative budgeting • New tools for reconciling long term commitments • Redefinition of relationships with the government

  6. Characteristics of legislative budgeting 1. Introduction 1-4 • The legislature participates with the government in developing budget • policy • Still vote estimates • Setting out a medium-term framework • Sectoral allocation policies • Statements of policy

  7. 1. Introduction 1-5 • Three restrained characteristics of legislative budgeting • Budgets limit what the legislature may do with public money • Budgets intrude on other legislative functions, such as law-making • Budgets have the potential to turn legislative work into a technocratic • exercise • Focus on three subjects • Government Spending and Budget control • Executive vs legislative power of the purse • Role of the National Assembly Budget Office

  8. 2. Government Spending and Budget Control 2-1 • There are three major causes for the fiscal outcomes • General performance of the economy • The political commitment to fiscal discipline • The institutional arrangements for budgeting • Current legislative work on the budget • To discipline public finance by constraining the fiscal aggregates • To enlarge the legislature’s role in revenue and spending policy

  9. The seven institutional features that the OECD recommends 2. Government Spending and Budget Control 2-2 • Medium-term budget frameworks • Prudent economic assumptions • Top-down budgeting techniques • Relaxing central input controls • Focus on results • Budget transparency • Modern financial management practices

  10. 2. Government Spending and Budget Control 2-3 • The theory of bureaucracy by William Niskanen • … want more for their agencies and programs • Anthony Downs • “Why the government budget is too small in a democracy?” • … voters are consistently misinformed • Gordon Tullock’s theory • growth of the bureaucracy is self-generating • William Riker’s theory • Rulers are trapped in a system of exchange of benefits • The larger government grows, the more policies become their own causes

  11. Legislative roles and information needs 3. Executive vs Legislative Power of the Purse 3-1 Role in Policy Making Need for Information

  12. Heart of executive-legislative relations Planning Public Accountability INTERNAL Budgeting System Accounting System Internal Audit Independent Audit/Evaluation Cash/Debt Management System Budgeting Revenue & Expenditure Managerial Reporting CONTROLS Financial Reporting 3. Executive vs Legislative Power of the Purse 3-3 • The Budget Process

  13. 3. Executive vs Legislative Power of the Purse 3-4 Legislative powers to amend the budget

  14. 3. Executive vs Legislative Power of the Purse 3-5 In practice, does the legislature generally approve the budget as presented by the government?

  15. Comparison of the Changes of GDP and Government Budget Changes of Government Budget Changes of GDP 60 50 40 30 Year 20 10 0 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 -10 -20 Growth rate 3. Executive vs Legislative Power of the Purse 3-6 Comparison of the growth rate of GDP and government budget in Korea

  16. Legislative influence 3. Executive vs Legislative Power of the Purse 3-7 • Explaining the differences • Presidential vs parliamentary systems • Design of parliamentary powers to amend the budget • Party political dynamics • Legislative budget research capacity • Access to relevant information • Legislative committees as the engine room for financial scrutiny • Time for scrutiny and the timing of the budget process

  17. Strengthening the capacity of the legislatures 3. Executive vs Legislative Power of the Purse 3-8 • Responsible and effective legislative action on the budget depends on • adequate information concerning the activities financed with public • funds and the results ensuing from government programs. • The supply of information has enriched by building the capacity of audit • offices and independent budget office to assist the legislature. • To make effective use of the avalanche of information, modern • legislatures have added staff, invested in IT, and professionalized their • operations. • Examples in the US and in a number of other countries (Philippines, Uganda, Poland, Georgia) establish that a nonpartisan, independent, objective, analytic unit can provide budget information without polarizing the relationships between the executive and the legislature.

  18. General information 4. The National Assembly Budget Office in Korea 4-1 • NABO was created by the National Assembly Law (Article 22-2) on • October 20, 2003 • Mission • Conduct research and analysis on budget and fund, settlement of • accounts, and performance of fiscal operations • Estimate costs for bills • Analyze and evaluate national programs and medium/long-term fiscal • requirements • Conduct research and analysis on the requests by committees or members • of the National Assembly

  19. NABO’s organization and staffing 4. The National Assembly Budget Office in Korea 4-2 • NABO has about 92 full-time staffs • Chief appointed by the Speaker and approved by the House Steering • Committee • Chief appoints all NABO staff, in case of higher level approved by the • Speaker, based solely on professional competence, not political • affiliation • 90+% of NABO professional staff hold advanced degrees in economics, • public policy, accounting or related fields

  20. Five objectives which the NABO pursuits 4. The National Assembly Budget Office in Korea 4-3 • Set its status as a specialized organization with authority supporting • fiscal control • Make sure the national budget is well spent by making analyses of • budget and economic policies • Analyze budget and economic issues based on public opinions • Produce reliable research results through enhancing its expertise • Establish a reputation as a world class budget analysts and policy • evaluators.

  21. Job philosophy 4. The National Assembly Budget Office in Korea 4-4 • Impartiality • Timeliness • Responsiveness • Expertise • Excellence • Reliability • Activeness

  22. Organization of NABO 4. The National Assembly Budget Office in Korea 4-5

  23. 5. Conclusion 5-1 • The success of reforms and innovations in budgeting will ultimately be • determined by the cooperation of the legislative body • The importance of talking full advantage of the opportunities offered by • developments in IT system • Rather than as controllers of public finance, legislatures should aim to • promote fiscal discipline, improve the allocation of public money and • stimulate public bodies to manage their financial operations more • efficiently • In order to do this, it is necessary to enhance the legislative capacity to • deal with budget issues.

  24. Thank you for your attention

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