Gov’t to Increase Budget for Growth and Job Creation

The government announced on Tuesday that it will curb the expansion of welfare spending that the previous administration under Roh Moo-hyun sought in an effort to stimulate growth and create more jobs over the next five years. It has decided to regulate the increase in the welfare budget while maintaining it at a reasonable level.

Instead, the government plans to increase spending on R&D activities, social overhead capital projects and fostering human resources.

It will also introduce the so-called Land Bank System that will allow the Korea Land Corp. to purchase land needed for the construction of roads, railways and other infrastructure in advance before land price increases.

Along with these guidelines, it has decided to expand state scholarships to all university students registered with the national basic livelihood protection program, by 2011. Only freshmen eligible to the welfare program have been entitled to the scholarship.

○ Budget Priority is Growth

The government confirmed the ‘Guidelines for the 2009 Budget’ based on the decision of the cabinet on Tuesday, presided over by Prime Minister Han Seung-soo.

According to the guidelines, the government will put an emphasis on reviving the economy and creating jobs over the next five years as well as reexamining all state projects from scratch.

On the welfare budget, the Lee Myung-bak administration will take a completely different approach from that of the Roh administration, which addressed social polarization by increasing fiscal spending.

“The Lee Myung-bak administration believes that creating jobs through growth is the best welfare [policy],” said Vice Strategy and Finance Minister Bae Kook-hwan. Bae explained that economic growth would lead to an increase in jobs and, in turn, improve the social welfare system.

The new administration is expected to increase welfare state spending by a single-digit figure unlike the Roh Administration, which expanded the welfare budget by an annual average of 11.3 percent during his five-year tenure.

It will increase investment on R&D by some 50 percent by 2012, from the current annual budget of 10.8 trillion won to 16.2 trillion won, to stimulate growth.

It will try to attract more private investment and improve the investment efficiency of social overhead capital projects by focusing on completing ongoing projects rather than launching new ones.

○ Establishment of the Land Bank

The government will introduce the Land Bank System as a way to prevent land price hikes experienced during the construction of industrial complexes and infrastructure.

So far, when the government announced a major development plan, the land price of the targeted areas had jumped sharply, often costing several times the original budget.

In order to prevent this side effect, the Korea Land Corp. will establish the Land Bank and issue bonds to purchase land needed for public constructions in advance. In line with the measure, the government will revise the Land Compensation Act and the Korea Land Corporation Act.

“The Korea Land Corp. will finance its own spending required to purchase land. It plans to procure land at a low price by regulating prices. For instance, it will designate an area before the area’s development plan is announced,” Bae said.

higgledy@donga.com parky@donga.com