Budget of Seoul City and the Necessity of Innovation

in Public Service

2012.6.13

Seoul Development Institute (Jun Sik Bae)

1

Contents

1. Fiscal Status of Seoul Metropolitan City

2. Essentials for Public Services Innovation

3. Case Studies in Public Budgeting and

Public Services

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1. Fiscal Status of Seoul Metropolitan City

3

Seoul Metropolitan Government

Population: 10,520,000

(1) The Budget of Seoul Metropolitan City

4

Source : Seoul Metropolitan Statistics(2012)

Units(%) = Ratio of Total Budget

Operating Cost 6 %

supporting Fund

35%

Debt Redemption

3%

Program Cost

54.3%

Reserve Fund

2%

5

Share of Seoul City in National Budget

Source : Seoul Metropolitan Statistics(1999-2012)

Units : Million Won, %

7.5% 7.8%

8.4% 7.7%

8.8% 9.4%

8.7% 7.3%

8.2%

8.1%

8.4% 7.4% 7.0%

-

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Seoul City's Budget National Budget

6

Structure of Budget Spending in Seoul Metropolitan City

Source : Seoul Metropolitan Statistics(2008-2010)

Units(%) = Ratio of Total Expenditure

0%

5%

10%

15%

20%

25%

30%

Administrative Public Safety Walfare Education Environment Culture Development

2008 2009 2010

(2) Tax Revenue of Seoul Metropolitan City

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Annual Tax Revenue

Source : Seoul Metropolitan Statistics, General Accounting (1996-2012)

Units : Million Won,%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Tax Revenue Growth Rate

8

Annual Gab between Budget and Real Revenue in Seoul

Source : Seoul Metropolitan Statistics(1996-2012)

Units : Million Won

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Budget RealTax Revenue

Annual Fiscal Gratification of Seoul

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Fiscal Gratification(%)=Standard Fiscal Revenue /Standard Fiscal Demand Source : Seoul Metropolitan Statistics(2000-2012)

60 65 62 60

66 65 61 58

77 79 72 70 67

6.4% 8.7%

-4.3% -4.2%

9.9%

-0.6% -6.3%

-4.9%

31.7%

3.5%

-9.2% -3.1%

-4.4%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

0

20

40

60

80

100

120

140

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Fiscal Gratification Growth Rate

(3) Debts of Seoul Metropolitan City

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Annual Debts

Source : Seoul Metropolitan Statistics (2000-2012)

Units : Million Won,%

2%

-11% -33%

-4%

-6%

13% 19%

36%

75%

18%

-140%

-90%

-40%

10%

60%

110%

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Debts Growth Rate

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Annual Financial Independent Rate

95% 95% 95% 95%

95%

93%

89%

86%

90%

83%

89% 89%

75%

80%

85%

90%

95%

100%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Financial Independent Rate = (Ordinary tax + Objective tax- Debts) / Total revenue Source : Seoul Metropolitan Statistics(2001-2012)

(4) Welfare and Budget of Seoul City

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Annual Growth Rate of Welfare Budget in Seoul

Source : Seoul Metropolitan Statistics (2004-2012)

Units : Million Won, %

-0.4%

20.8%

12.8%

18.3%

33.6% 31.3%

-8.8%

7.3% 9.0%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

2004 2005 2006 2007 2008 2009 2010 2011 2012

Walfare Budget Growth Rate

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Annual Welfare Investment of Seoul

Source : Seoul Metropolitan Statistics (2012)

Units (%) = Million Won

4,702,265

5,238,599

5,923,746 6,198,364

7,225,797

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

2011 2012 2013 2014 2015

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Tax Revenue vs Welfare Budget

8.0%

4.6%

-7.0%

22.8%

10.6%

13.6%

-10.2%

-0.5%

3.3% -0.4%

20.8%

12.8%

18.3%

33.6%

31.3%

-8.8%

7.3% 9.0%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2004 2005 2006 2007 2008 2009 2010 2011 2012

Growth Rate of Tax Revenue Growth Rate of Welfare Budget

Source : Seoul Metropolitan Statistics (2004-2012)

Units (%) = Growth Rate

2. Essentials for Public Services Innovation

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What is Necessary?

Fiscal

Decentralization

Motivation Doing

Together

Financial

Soundness

(1) Financial Soundness

Financial soundness is one of important facing

problems for innovation of pubic services

Requisites for financial soundness

Introduce the fiscal rule

Maximize cost-effectiveness

Prevent reverse spillover effect

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(2) Fiscal Decentralization

Reform the decentralization system for 25 autonomous districts in Seoul Metro City

Give greater financial autonomy to 25 districts

Reform tax system between Seoul Metropolitan Government and 25 districts in Seoul

Alleviate financial inequality among 25 districts

Change paradigm of decentralization

☞ Improve fiscal monopolism by upper level government

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(3) Doing Together

Encourage community involvement

Promote private organizations to participate

in public services

CSR(Corporate Social Responsibility)

☞ Provide advantages for CSR in public procurement

Invigorate local communities

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(4) Motivation

Compensate districts for the efforts for

public services innovation

Improve the incentives of Arbitration Subsidy

Program

Present 3 measures for subsidy incentives

☞ Financial Stability, Soundness & Efficiency

Add public services innovation as a measure

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3. Case Studies : Public Service Innovation

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Seoul Public Investment Service

Ondol-Welfare Project

(1) Seoul Public Investment Service

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Seoul Public Investment

Service was established

by Seoul Metropolitan

Government in 2012

Analysis of project feasibility in public investment project

Support private investment projects

Study and education for public officers

(2) Ondol-Welfare Project in Seoul

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Ondol-welfare project refers to share hopes

with the local communities

Develop local network

Construct social safety net

Welfare plan with community map and on-line

Thank you

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