Evaluation of 2001 Budget

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Evaluation of 2001 Budget

The government's budget proposal for 2001 passed the cabinet ministers' meeting yesterday. Next year's budget is set at 101 trillion won ($89 billion), an increase of 6 percent over this year, and the burden on taxpayers will increase by 20.7 percent. The general goals include: cutting the financial deficit, expanding the information and telecommunications (IT) industry, and augmenting the welfare budget to establish a social safety net. The budget's direction and priorities seem to be right on target.

The government aims to eliminate the financial deficit by 2003 in order to stave off the possibility of a national crisis arising because of national debts. With this goal in mind, the government will lower the deficit from this year's 3.4 percent of GDP to around 1 percent next year. In addition, the government plans to stimulate high-tech industries by increasing expenditure on information infrastructure and in the research, development and education sector. However, several issues need to be probed in the National Assembly, and in-depth discussions and care are necessary in the course of managing next year's budget.

To begin with, the government has decreased the percentage of investment on infrastructure in the belief that the national economy will achieve a soft landing; the government has set next year's growth rate at 8-9 percent. However, even if the economy sees a soft landing next year, economic stabilization measures will be in great demand. The government suggests the expansion of private capital in the infrastructure sector, but in this respect last year's revision of the Private Investment Law has not brought particularly good results. In fact, dramatic deregulation is the only way to attract private capital.

Inflexible budgets -- subsidies to local governments and national defense expenditure -- account for too much of the new budget at 64 trillion won. With this structure, the government will have a hard time carrying out its financial functions such as the redistribution of resources. If nothing can be done about national defense expenditure, the government must study ways to slash subsidies to local government by revamping the self-autonomy system. One aspect of the budget that is of utmost importance but currently has a number of potential problems is the government's management of taxpayers' money. Joongang Ilbo reported yesterday that Korea is seeing the appearance of a large number of welfare cheats just as the new law guaranteeing a minimum living standard is about to be implemented. Each government ministry should come up with feasible measures to prevent such leakages of precious taxpayers' money.

It is important to draw up a good budget plan, but even more crucial is how well the government executes it.

by Bae Myong-bok

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