5.7% rise proposed in 2011 budget

By Cho Jin-seo

The Ministry of Strategy and Finance proposed a 5.7-percent increase for the 2011 national budget, Tuesday, based upon an optimistic economic growth forecast.

The budget proposal amounts to 309.6 trillion won ($270 billion) — up from 292.8 trillion won in 2010 — from an expected 314.6 trillion won in tax income, an 8.2-percent jump year-on-year.

The ministry’s projection is based on the assumption that Korea’s gross domestic product (GDP) will grow at an average of 5 percent from next year and beyond, bringing in more tax revenue. But other institutions such as the International Monetary Fund and the Samsung Economic Research Institute have forecast a more modest growth of 3.5 to 4.5 percent for next year.

“Our projection is not so unrealistic,” Kim Dong-yeon, the ministry’s director of budget affairs, said about the upbeat growth forecast. He said that growth potential is still large in Korean industries, and this expansionary budget by itself will promote stronger economic growth.

According to the rosy picture, the ratio of national debt to GDP will fall to 31.8 percent by 2014 from 36.1 percent this year, making Korea’s budget one of the healthiest ones in the world in a time of global fiscal difficulty.

The budget bill is to be submitted to a Cabinet meeting and to the National Assembly for approval next month.

The ministry explained that the 2011 budget bill is “people-friendly” and encompasses the “fair society,” which has become the political slogan of President Lee Myung-bak this year. “The budget will solve economic hardship of mid- and low-income households, so that they will be able to share the benefit of economic recovery,” it said in a press release.

“The overall plan aims to inject taxpayer money into areas that can help more people benefit from the recent economic gain, ensure continued economic growth and strive for fiscal sustainability by cutting back on unnecessary spending,” said Vice Finance Minister Yoo Sung-kull.

A record-high 86.3 trillion won will be spent on welfare, an increase of 5.1 trillion won from this year. Some of the extra money will be spent on providing nursery expenses for households with a monthly income of less than 4.5 million won, or below 6.5 million won if both parents have jobs. Several programs will be enacted to give financial help to multicultural families.

In the most radical move, the government has also decided to pay tuition for all 480,000 students enrolled at vocational high schools, in order to discourage young people from going college.

“Currently, about 82 percent of high school graduates go to college, which is too high. As a result, the unemployment rate is high among the young generation, but industries have a severe shortage of workers who have had vocational training,” the press release said.

The defense budget is to go up by 5.8 percent to 31.3 trillion won. Education expenses, not including the tuition payment program for vocational schools, are 41.3 trillion won, and some 53.2 trillion won is to be distributed to regional governments.

Some 14 trillion won is to be set aside for interest payment of sovereign bonds. Expenditure for overseas development aid programs will rise from 1.3 trillion won to 1.6 trillion won.

Despite the ministry’s claim that the proposal is focused on helping low-income families, opposition parties made it clear that they will demand more for welfare. They also attacked President Lee for increasing the budget for his controversial four-river refurbishment project.

“The 2011 budget proposal only reflects that the Lee Myung-bak administration is pushing for the four-river project. It is a budget of ignorance and miscommunication. It is a budget for the people’s despair,” the Democratic Party said in a typically rhetorical press release.

The ruling Grand National Party has a majority in the unicameral National Assembly. The final budget is to be set in December.