Provincial & Muncipal Mismanagement

In Busan’s Seo district, the population decreased from 226,800 in 1985 to 125,700 this year. Yet the number of government officials there has increased from 425 to 541 over the same period. In Pyeongchang County of Gangwon Province, the population fell 3.54 percent from 2004 to 2008 but the number of government workers jumped 31.86 percent. Of 246 provincial and municipal governments, 86 or 35 percent hired more workers despite a decline in their populations for five years. In other words, they wasted taxpayers’ money to hire more officials and secure more budget.

The provincial and municipal governments in question say they needed to hire more staff because of rising demand for new administrative services such as social welfare. They did not cut, however, the number of staff in sectors for which demand has fallen or been eliminated. Private companies do not recklessly hire more workers when new tasks spring up. Facing the central government’s regulation on the number of officials, certain provincial or municipal governments have even resorted to tricks in which they hire more staff without changing the number of workers on paper. When they cannot hire more regular workers, they resort to taking on non-permanent staff. In short, their power needs to be kept in check.

Since such governments are neither controlled by the central government nor kept in check internally, they literally squander taxpayers’ money. They have spent a bundle on pork barrel policies such as festivals, exhibitions and athletic competitions. In certain autonomous regions, the ratio of government expense transfers to the private sector has even surpassed 11 percent on average. Some even allotted more than 20 percent of their budget to private organizations. In other words, provincial and municipal officials spend tax money for their election campaigns. Newly emerging candidates will find it hard to beat incumbents in the June 2 local elections.

Since provincial and municipal governments fiscally depend on the central government, they are unlikely to go broke. This is no cause for a sense of relief, however. If their fiscal dependence on the central government decreases, they might face a fiscal crisis just like the U.S. state of California and the Japanese city of Yubari. Though belated, Washington and Tokyo introduced an early warning system to prevent state and municipal governments from facing a fiscal crisis. Japan forces provincial and municipal governments whose ratios of fiscal deficit or state bond issuance surpass a pre-set standard to devise plans to normalize their fiscal conditions. To prevent waste of tax money, the Japanese city of Ikeda spends part of its residence tax revenues on projects requested by its residents.

Provincial and municipal heads in Korea have wielded absolute authority, so their governments’ financial conditions have worsened. A change to their power is greatly needed. Greece faces a fiscal crisis due to careless management of public sectors and populism, resulting in Athens asking the International Monetary Fund for a bailout after it hesitated to reform its public sector. Korea must learn a lesson from Greece’s example.