Wanted: More Fertility Program Funds

The government has decided to fully review funding plans to tackle Korea’s low fertility rate. This move is aimed to secure additional funds for a comprehensive plan to tackle low fertility to be announced next week.

An alarmingly low total fertility rate of 1.08 of last year has forced the government to decide to change its original plan of spending 30.5 trillion won on the low fertility problem from 2006 to 2010.

But there are mixed opinions within the government over the possibility of increasing the funds because funding plans announced early this year are not going well.

Cho Won-dong, a director of the economic policy bureau of the Ministry of Finance and Economy, said on May 9, “[On top of the 20 trillion won included in a mid-term plan,] we planned to spend an additional 10.5 trillion won over the next five years beginning this year. But as we are making plans from the scratch, this figure is no longer meaningful. We may need more funds.”

The government reflected 20 trillion won of budget needed for the ‘Hopeful Korea 21’ project in the mid-term financial plan when it unveiled the project at the end of last year.

It also decided to fund 4.9 trillion won out of the additional funds of 10.5 trillion won through the reduction in tax exemptions and tax breaks, and the remaining 5.6 trillion won through the restructuring of government expenditures.

However, the funds in need are expected to increase as the government prepares additional measures to overcome the drop in the fertility rate to a shocking level.

An official at the Ministry of Planning and Budget (MPB) said, “The current budget of 20 trillion won and 5.6 trillion won, an amount we will secure through the restructuring of government expenditures out of the additional funds, were already reflected in the 2006 to 2010 mid-term financial plan to be confirmed in June or July. But when additional measures are confirmed next week, we must increase funds, by, say, making further changes in government spending.”

The official added, “Three to four new measures are being considered, including the child allowance system.” According to the MPB, under the child allowance system, a family with a child aged 0-3 will receive a monthly allowance of 100,000 won. This system costs 1.15 trillion won annually, amounting to 5.75 trillion won over the five years from this year.

Director Cho noted, “We will first focus on reducing expenditures of government ministries and offices as much as possible and then see if there is any room for reducing tax exemptions and tax breaks.”

But the schemes to secure funds by reducing tax exemptions got off to a shaky start as the plan for securing 2 trillion won in funds for the next four years through the elimination of additional tax exemptions for a family of one or two ran into public opposition and faltered early this year.

Moreover, the government will have difficulties in reducing tax benefits because taxi drivers, farmers’ associations, and health organizations are calling for the extension of the period they can get tax benefits in the run-up to the May 31 local elections.

An official at the Presidential Committee on Ageing Society and Population Policy said, “Restructuring government expenditures does not concern us a lot. But the key will be how much funds can be secured through the reduction in tax breaks and tax exemptions.”

Hyun-Jin Park witness@donga.com legman@donga.com