Future fund's misuse
: Fund meant to invest in tomorrow is becoming piggy bank for today
The Future Response Fund, now under review by the National Assembly as part of next year's budget, is showing signs of becoming the Lee Jae Myung administration's personal piggy bank, just as critics feared.
The government plans to launch the 162.3 trillion won ($121.5 billion) fund next year, using additional tax revenue generated by the semiconductor export boom. It is meant to prepare for "the future" through investment in four areas: advanced industries, young people, regional development and education and talent development.
In reality, however, little of the proposed spending appears to serve that mission.
According to the National Assembly Budget Office, nearly half of the 45.4 trillion won allocated to these four priority areas next year will fund recurring programs, including basic allowances for children, basic income for farming and fishing communities and the Future Savings Account for young people.
Nor is populist spending in short supply. The plan includes 1 million won grants for newlyweds and scholarships for students entering regional national universities. It also sets aside 5.67 billion won for ministerial and vice-ministerial residences and 100 billion won for special allowances at public institutions.
Such expenditures are plainly a far cry from investment in the future. A fund created to address long-term national challenges should not become a convenient source of money for routine expenses or politically attractive giveaways.
The central government is authorized to increase spending on individual fund projects by up to 30 percent without parliamentary approval. The usual ceiling for changes to individual projects funded through such accounts is 20 percent. Why should this fund be granted a higher limit? The 30 percent allowance looks like an arrogant bid to let the government alter projects at will, without seeking the National Assembly's consent.
Of the fund, 15.3 trillion won is earmarked for regional support, yet oversight of money transferred to local governments is also worryingly lax. Unspent portions of regular central government grants must be returned when a project is completed. Under a special provision for the Future Response Fund, however, local governments may keep unused money and spend it on similar projects. Such funds are liable to be squandered on local populist schemes.
The government is also seeking to make "multipurpose centers for public convenience" eligible for funding. It reportedly plans to select 90 local governments through an open competition and distribute 1.5 trillion won: 20 billion won each to 60 municipalities for new centers and 10 billion won each to 30 for renovations. The stated aim is to promote regional growth, but it is far from clear how these facilities meet the fund's intended purpose.
Meanwhile, controversy over central government support has intensified since Gyeonggi Province Gov. Choo Mi-ae described firefighters as a "drain on provincial finances." Some have suggested using the Future Response Fund to address the issue. Senior ruling party and government officials discussed on Sunday a plan to provide about 2 trillion won for firefighting budgets at local governments nationwide.
Firefighting is a basic public service that should, in principle, be financed through the regular budgets of central and local governments. The proposal raises the question of whether the government intends to tap the fund whenever it wishes, with little restraint.
The fund, moreover, depends on the semiconductor boom. A downturn in the chip industry would inevitably choke off its revenue stream, and the National Assembly Budget Office projects that additional tax revenue will dry up after 2029. Using a temporary tax windfall to bankroll expanding populist spending is reckless, irresponsible and wasteful.
The government and the National Assembly, particularly the ruling Democratic Party of Korea, must review the Future Response Fund from the ground up and, at a minimum, eliminate redundant projects and populist spending. Oversight of fund operation must also be further strengthened.
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