Central Control of Local Finance in South Korea

Abstract

In an analysis of central government control over South Korean local government, nothing provides a clearer picture than the status of local government finance. It is precise, quantitative, and convincing. The evidence that the central authority holds a tight grip on the local government in this regard is abundant. The spheres of central control are wide and the results are successful. In almost every aspect of local government finance, there is evidence of central control. The essential areas of local fiance controlled by the central authority are as follows: Local taxation central grants and subsidies Local budgetary process Auditing and inspection Thus, local finance in the Republic of Korea is characterized by two interdependent phenomena: central domination and local dependence. To provide an over-all picture, a brief introduction to the Korean economy is in order. The Gross National Product (GNP) in South Korea amounted to 695 billion won (equivalent to approximately 2.5 billion) in 1965, an increase of 99 billion won over 1964. During the fiscal year 1965, government expenditures at all levels reached an all-time high of 227 billion won (0.8 billion), which was approximately 32 per cent of GNP. Thus both the size and the proportion of the governmental sector in the South Korean economy is large. It is not only large, but it is also pervasive in that governmental expenditures affect almost every aspect of economic life, ranging from grain operation to the ownership of various public corporations.