Posted by Ian Lienert
There are a variety of ways in which countries organize ministries for performing the planning, budgeting and public financial management functions. Many countries have a single “ministry of finance” covering all functions. The Republic of Korea (RoK) and Brazil were amongst the few countries that had a Ministry of Planning and Budget, separate from the Ministry of Finance. This changed in the Republic of Korea in March 2008 when the new government decided to merge the two ministries into a single Ministry of Strategy and Finance.
After assuming office in February 2008, RoK President Lee Myung-Bak pointed to the need to boost economic growth and create more private sector jobs. Concerning the public sector, the President announced intentions to downsize government and improve its effectiveness. His vision included government structures that would henceforth act as a helper to the private sector, not hinder it. Jobs not meant for the government would be privatized and competition in the public sector would be enhanced. This would result in incremental reductions in the number of public servants and abolition or reform of unnecessary or complex government regulations.
Throughout his election campaign, the new RoK President had stressed “small and efficient government”. Accordingly, soon after inauguration he began streamlining by restructuring five ministries and five commissions, which were either abolished or merged into new structures. More than 3,000 civil servants of central government will be impacted. President Lee’s drive for efficiency and deregulation in part reflects his previous business experience as the chief executive officer of the Hyundai Corporation.
Regarding budget-related ministries, the former Ministry of Finance and Economy (MOFE) and the former Ministry of Planning and Budget (MPB) were merged into a new Ministry of Strategy and Finance (MOSF). The old MOFE was responsible for overall macroeconomic management, statistical, revenue and treasury functions, whereas the old MPB was mainly in charge of planning, budget preparation and budget execution. Some functions, such as oversight of the Free Economic Zones, a function under the old MOFE, were transferred to a new Ministry of Knowledge-Based Economy, which combines portions of the previous ministries of commerce, of industry and energy, of science and technology, and of information and communication. At this stage, it is difficult to know the extent of downsizing. However, according to reports in late April 2008, the number of civil servants in the new MOSF (excluding its regional operations for customs, tax, procurement, etc.) could be reduced to roughly 900 staff (about a 13 percent reduction).
At the time of this posting, the English version of the new ministry’s website did not include a description of the purpose, history and organization of the MOSF.
PFM Blog Comments. Re-organizing public financial management (PFM) functions at the center of government can broadly move towards either (1) consolidation or (2) dispersal of authority.
Consolidated PFM functions under one ministry can be more effective, by integrating planning, budget preparation, budget execution, treasury operations, and government accounting. Also, government-wide coordination of budget and financial management issues can be facilitated; in particular, a single ministry at the center speaks with one voice to the various spending ministries and agencies. A strong, central fiscal administrator also helps to assure fiscal discipline.
On the other hand, one ministry at the center may hinder budget and financial management development in spending ministries, depending on the size of the ministry (number of staff) and degree to which it sets policy (steers) or makes detailed sector or line-item spending decisions on-behalf of line ministries (rowing). Finally, one large ministry in the center, rather than two smaller ones, can be more unwieldy to manage.
