🚨 Regional Balanced Development Special Account

Today Korean Social News for Beginners | 2025.11.14

0️⃣ Expanding Local Autonomy and Fiscal Soundness Challenges

📌 Expanding Local Fiscal Autonomy… 'Regional Balanced Development Special Account' Tripled

💬 The government has significantly expanded the local discretionary account within the Regional Balanced Development Special Account from 3.8 trillion won to 10.6 trillion won in the 2026 budget. This is about a three-fold increase, meaning that local governments now have much more freedom to decide their own project priorities and manage their budgets. President Lee Jae-myung announced the principle of "local priority, local preference" at the Central-Local Government Cooperation Council, presenting a policy direction to reduce concentration in the capital region and strengthen local self-reliance. However, experts point out that simply increasing the budget is not enough to secure real autonomy. Challenges still remain, including central government control structures, fairness of regional allocation standards, and local fiscal soundness. These issues need substantial improvements to make the system work effectively.

💡 Summary

• The local discretionary account was tripled from 3.8 trillion won to 10.6 trillion won.
• Local governments now have expanded fiscal authority to decide project priorities autonomously.
• Challenges remain in central control, allocation standards, and fiscal soundness.

1️⃣ Definition

Regional Balanced Development Special Account refers to a special budget operated by the central government to reduce development gaps between regions and promote balanced national development. This account consists of two main parts. First, there is a 'regional support account' where the central government designates and supports specific projects. Second, there is a 'local discretionary account' where local governments can plan and implement their own projects.

This budget expansion specifically focuses on greatly increasing the local discretionary account to strengthen local governments' fiscal choice and autonomy. When local governments can directly decide on projects that match regional characteristics and residents' needs, it is expected to achieve more effective regional development than the central government's one-size-fits-all policies.

💡 Why is this important?

• The development gap between the capital region and local areas is widening, increasing the need for regional balanced development.
• Securing fiscal autonomy is essential for genuine local self-governance.
• Customized policies matching regional characteristics can improve budget efficiency.
• It can strengthen democratic decision-making through local government accountability and resident participation.

2️⃣ Current Status and Problems of the Regional Balanced Development Special Account

📕 Background of Expanding the Discretionary Account

• Concentration in the capital region is intensifying. Key situations include:

  • Most resources including population, economy, education, and culture are concentrated in the capital region.
  • Local cities face problems like population decline, aging, and declining economic vitality.
  • Young people continue moving to the capital region for education and jobs.
  • Income gaps and living condition differences between regions are widening.

• Limitations of central government-led policies have been revealed. Main problems include:

  • Projects uniformly decided by the central government often fail to reflect regional characteristics properly.
  • Local governments could only choose projects according to central ministry guidelines, lacking real autonomy.
  • Central approval and control continued during budget execution, restricting local creativity.
  • The structure reflected the central government's policy priorities rather than actual local residents' needs.

📕 Main Contents of Expanding the Discretionary Account

• The budget scale has been significantly increased. Key details include:

  • The local discretionary account increased about three-fold from 3.8 trillion won in 2025 to 10.6 trillion won in 2026.
  • This means the discretionary account's share in the total Regional Balanced Development Special Account has greatly increased.
  • Local governments have more resources to use autonomously, expanding their fiscal management scope.
  • The government plans to continue expanding the discretionary account share in the future.

• Local governments' decision-making power has been strengthened. Major changes include:

  • Local governments can directly plan and implement projects matching regional characteristics and residents' needs.
  • They can autonomously set project priorities without detailed central ministry guidelines.
  • Local councils and resident participation become more important in budget planning and execution.
  • They can invest in various areas like regional economic revitalization, residential environment improvement, and cultural infrastructure development.

📕 Challenges That Still Remain

• Central control structures have not completely disappeared. Main problems include:

  • Although called a discretionary account, choices are only possible within the framework set by central ministries.
  • While autonomous at the budget planning stage, central approval is often needed during execution.
  • Central government standards still strongly apply in project evaluation and performance management.
  • More fundamental power transfer is needed for genuine local autonomy.

• There is controversy over fairness of regional allocation standards. Main issues include:

  • Various criteria like population, area, and fiscal independence work together but are not clear.
  • Capital region local governments complain because only non-capital regions receive allocations.
  • There are equity issues between regions with poor fiscal conditions and relatively better ones.
  • Experts continuously point out the need for transparent and objective allocation standards.

• Concerns about local fiscal soundness are raised. Main problems include:

  • Some local governments are rapidly increasing local bond issuance due to large SOC projects.
  • In major regions like Chungcheong, fiscal burdens are increasing, raising soundness risks.
  • Greater autonomy also brings possibilities of wasteful spending or inefficient project choices.
  • Institutional mechanisms to enhance local government accountability and transparency must be prepared together.

💡 Key Issues of Regional Balanced Development Special Account

1. Real Autonomy: Complete autonomy is difficult as central control structures still remain
2. Allocation Standards: Ongoing controversy over fairness and transparency of regional allocation
3. Fiscal Soundness: Fiscal risks from increasing local bonds and indiscriminate project implementation
4. Securing Accountability: Need to strengthen local government accountability and transparency with expanded autonomy
5. Performance Management: Inadequate system to objectively evaluate budget efficiency and policy outcomes

3️⃣ Tasks for System Improvement

✅ Readjusting Authority Between Central and Local Governments

• Substantial power transfer is needed. Main directions include:

  • Local autonomy should be expanded not only in budget planning but also in execution and evaluation stages.
  • Central ministries' detailed guidelines and approval procedures should be greatly simplified.
  • Legal grounds should be clarified and institutional foundations strengthened through Local Autonomy Act amendments.
  • The central government should focus on strategic direction and coordination, leaving detailed project decisions to local governments.

• Local councils and resident participation should be activated. Main measures include:

  • Local councils' deliberation functions should be strengthened in the budget planning process.
  • The participatory budgeting system should be expanded to actively reflect local residents' opinions.
  • Project selection and implementation processes should be transparently disclosed to strengthen resident oversight.
  • Advisory bodies with local experts and civic groups should be operated.

✅ Establishing Fair Allocation Standards

• Objective and transparent standards should be established. Main tasks include:

  • Quantitative indicators should be developed comprehensively considering population, area, fiscal capacity, and regional underdevelopment.
  • Qualitative assessments reflecting regional specificities should also be included.
  • Allocation standards and calculation methods should be clearly disclosed to increase predictability.
  • Standards should be regularly reviewed and improved to continuously ensure fairness.

• Incentives to encourage inter-regional cooperation are needed. Main measures include:

  • Bonus points could be given for joint projects between adjacent local governments.
  • Separate budgets should be allocated for metropolitan-level cooperative projects to create synergy.
  • Additional incentives should be provided to high-performing local governments to encourage competition.
  • Correction mechanisms should be prepared to alleviate inter-regional gaps.

✅ Strengthening Fiscal Soundness Management

• Local bond management should be systematized. Main directions include:

  • Local bond issuance limits and purposes should be clearly defined to prevent indiscriminate borrowing.
  • Fiscal soundness indicators should be regularly checked, and early warnings should be issued when risk signals are detected.
  • The central and local governments should cooperate to build a fiscal crisis prevention system.
  • If necessary, the central government should prepare fiscal support or restructuring measures.

• Performance evaluation and feedback systems should be built. Main tasks include:

  • Performance indicators for each project should be clearly set and regularly evaluated.
  • Multi-dimensional evaluation including budget efficiency, resident satisfaction, and contribution to regional development is needed.
  • Evaluation results should be reflected in next year's budget allocation to create a virtuous cycle.
  • Best practices should be identified and shared with other local governments through a learning system.

4️⃣ Related Terms Explained

🔎 Local Finance Act

• The Local Finance Act is a law that defines the basic principles of local government fiscal operations.
  • The Local Finance Act is enacted to ensure fiscal soundness and transparency of local governments and enable efficient fiscal operations. It governs core matters of local finance including fiscal relations between central and local governments, allocation of local taxes and local allocation tax, and local bond issuance.
  • Main contents include: First, it stipulates principles for local governments' budget planning and execution. Second, it specifies the central government's local fiscal support system. Third, it defines local bond issuance limits and procedures. Fourth, it imposes fiscal soundness management and disclosure obligations.
  • The Regional Balanced Development Special Account operates based on this law and promotes regional balanced development through fiscal adjustment between central and local governments. The system is being improved to expand local fiscal autonomy through recent amendments, and the expansion of discretionary accounts is being promoted within this legal framework.

🔎 Central-Local Government Cooperation Council

• The Central-Local Government Cooperation Council is an official consultative body where the central government and local governments cooperate.
  • The Central-Local Government Cooperation Council is the highest consultative body between the government and local governments, chaired by the President. It serves to discuss important national policy matters related to local areas and seek cooperation measures.
  • The council consists of the President as chair, the Prime Minister, the Minister of Interior and Safety, and other central government officials, along with heads of metropolitan governments. It meets regularly and can hold extraordinary meetings when needed.
  • At this meeting, President Lee Jae-myung announced the principle of "local priority, local preference" and declared a significant increase in the local discretionary account. This is meaningful in clearly showing the central government's will while functioning as a channel to reflect local governments' opinions in policies. Major policy issues like retirement age extension and responses to local extinction will also be discussed through this council.

🔎 National Assembly Research Service Report

• The National Assembly Research Service is a professional institution supporting legislative activities of the National Assembly.
  • The National Assembly Research Service is an independent professional institution that analyzes policy issues and prepares reports to support legislators' legislative activities. It performs bill reviews, policy analyses, and international comparative studies.
  • In 2023, the Research Service published a report pointing out tasks to improve transparency and autonomy of the Regional Balanced Development Special Account. The report analyzed that the discretionary account at that time lacked real autonomy. Specifically: First, it pointed out that choices were only possible within the project framework presented by central ministries, restricting true autonomy. Second, it revealed that central control continued at the budget execution stage. Third, it analyzed that performance evaluation criteria were designed with a central focus.
  • This report provided the theoretical basis for expanding the discretionary account and will be used as an important reference for future system improvements. The National Assembly uses such professional analyses to review related bills and oversee policies.

🔎 Local Fiscal Soundness

• Local fiscal soundness is an indicator showing how healthy a local government's fiscal condition is.
  • Local fiscal soundness refers to a local government's ability to operate finances stably and manage debt. Main indicators include fiscal independence, debt ratio, and fiscal pressure index.
  • Recently, some local governments' fiscal soundness has been deteriorating. First, local bond issuance is surging due to large SOC projects. In major regions including Chungcheong, fiscal burdens are increasing from large projects like administrative capital relocation and railway construction. Second, local governments with weak revenue bases are overly dependent on central support. Third, while local tax revenues are decreasing due to aging and population decline, welfare spending is increasing.
  • Expanding the discretionary account broadens local fiscal choices but can also increase fiscal risks from indiscriminate budget execution. Therefore, institutional mechanisms to maintain fiscal soundness are essential, including strengthening accountability with expanded autonomy, transparent disclosure, and building an early warning system. The central government should also prevent systemic risks through appropriate support and restructuring during local fiscal crises.

5️⃣ Frequently Asked Questions (FAQ)

Q: Which regions receive the Regional Balanced Development Special Account?

A: It is mainly allocated to non-capital regions excluding the capital area, considering population and fiscal conditions.

• The Regional Balanced Development Special Account was created to reduce capital region concentration and promote local development, so it is mainly allocated to non-capital regions. Seoul, Incheon, and Gyeonggi Province are excluded from allocation in principle or receive very limited support. Metropolitan cities and provincial-level local governments are the main recipients, and they redistribute to cities, counties, and districts.
• Specific allocation criteria include: First, population is an important criterion. Areas with larger populations receive more budget. Second, more is allocated to regions with lower fiscal independence to enhance equity. Third, regional underdevelopment and development needs are also considered. Fourth, past execution performance and evaluation results are partially reflected. However, these criteria are not always clearly disclosed, causing transparency controversies, and inter-regional equity issues are continuously raised. More objective and transparent allocation standards need to be prepared in the future.

Q: What projects can be done with the local discretionary account?

A: Various projects matching regional characteristics can be autonomously chosen, but within a certain scope.

• The local discretionary account is budget created so local governments can relatively freely plan and implement projects. Main project areas include: First, regional economic revitalization projects are possible, including small business support, job creation, and tourism infrastructure development. Second, residential environment improvement projects can be implemented, such as old housing renovation, park creation, and expansion of living convenience facilities. Third, cultural and welfare infrastructure development is possible, including libraries, cultural centers, and sports facilities. Fourth, region-specific projects can be developed, such as smart farms in rural areas or festival hosting in tourist cities.
• However, it is not completely free. Local governments choose detailed projects within broad categories presented by the central government, and cannot pursue national inherent duties like defense and diplomacy or projects prohibited by law. Also, to receive the budget, project plans must be submitted and feasibility proven. Accounting regulations must be followed during execution, and performance must be reported through post-evaluation. Therefore, even with expanded autonomy, ensuring accountability and transparency together is important.

Q: Will expanding the discretionary account actually help local finances?

A: Budget expansion is positive, but system improvements must accompany it to be effective.

• Tripling the discretionary account will definitely help local finances significantly. When local governments have more resources, they can more actively pursue regional development projects. Especially local governments with fiscal difficulties could hardly do large projects without central support, but this increase is expected to provide relief. Also, budget efficiency can improve by implementing customized projects matching regional characteristics.
• However, budget expansion alone is insufficient. First, central control structures still remain, limiting true autonomy. System improvements are needed to reduce central interference at budget execution and evaluation stages. Second, managing local fiscal soundness is important. Indiscriminate project implementation that increases local bonds could actually worsen finances in the long term. Third, local government capacity must be supported. Without project planning and budget management capabilities, simply increasing budgets won't be effective. Fourth, transparent execution and resident participation are essential. Systems to monitor and evaluate whether budgets are properly used must function. Ultimately, real local development can be achieved when budget expansion, system improvement, and capacity building work together.

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