🚨 Differential Support Index

Today Korean Social News for Beginners | 2025.12.18

0️⃣ Fiscal Differentiation and Integrated Metropolitan City Initiative to Address Regional Decline

📌 Ministry of Interior and Safety to Revive Regions with 'Differential Support Index'… Promoting Integrated Metropolitan City Launch

💬 The Ministry of Interior and Safety has decided to introduce a 'Differential Support Index' by year-end to ease metropolitan concentration and respond to regional decline. This index is a system that differentiates fiscal and tax support by comprehensively reflecting distance from Seoul, socio-economic development level, and population structure. Based on this, the ministry plans to promote an 'Integrated Metropolitan City' system with high autonomy and increase regional autonomy and competitiveness. It will also strengthen the resident participation base by lowering the recall voting age to 18 and fully implementing resident councils. A fiscal decentralization plan to gradually increase the local allocation tax rate and transfer central resources to regions will also be promoted. These policies are evaluated as comprehensive measures to ease fiscal gaps between regions and promote development of underdeveloped areas.

💡 Summary

• The Differential Support Index is a new standard that differentiates fiscal support reflecting regional development levels.
• Introducing integrated metropolitan cities strengthens regional autonomy and administrative efficiency.
• Establishing a practical local autonomy foundation through expanded resident participation and fiscal decentralization.

1️⃣ Definition

The Differential Support Index is a reference indicator for differentially allocating government fiscal and tax support by comprehensively reflecting regional development level, population structure, industrial base, and distance from Seoul. The Ministry of Interior and Safety is promoting its introduction within 2025 to ease metropolitan concentration and respond to the regional decline crisis.

The core purpose of this index is to resolve regional imbalances by ensuring more fiscal support goes to underdeveloped areas. Previously, resources were allocated based on simple criteria like population or area, but the Differential Support Index comprehensively considers regional development degree, economic level, and population decline risk. Through this, the allocation methods for major fiscal programs like local allocation tax, balanced development special accounts, and regional decline response funds are expected to improve in fairness and effectiveness.

💡 Why is this important?

• It eases fiscal gaps between regions and promotes balanced nationwide development.
• It can strengthen practical support for areas with high population decline and extinction risk.
• It contributes to easing metropolitan concentration and increasing regional self-sufficiency.
• It can maximize policy effects by increasing transparency and fairness of fiscal support.

2️⃣ Current Status of Differential Support Index and Decentralization Policies

📕 Background for Introducing Differential Support Index

• Metropolitan concentration and regional decline crisis are intensifying. Current situation:

  • As of 2023, the metropolitan area population ratio exceeds about 50% and continues to increase.
  • More than half of the nation's 228 basic local governments are classified as extinction risk areas.
  • Youth population outflow from regions is accelerating, shrinking regional economies.
  • Criticism arose that central government fiscal support does not sufficiently reflect actual regional needs.

• Limitations of existing fiscal allocation methods were revealed. Key problems:

  • Simple allocation criteria centered on population and area failed to reflect regional practical needs.
  • Equity problems occurred from applying the same criteria to underdeveloped and developed regions.
  • Low fiscal support efficiency resulted in insufficient regional development despite budget investment.
  • Customized support was difficult due to failure to consider regional specificities.

📕 Integrated Metropolitan City and Local Autonomy Strengthening Measures

• The Integrated Metropolitan City system is newly promoted. Key details:

  • Integrate adjacent local governments to grant high autonomy comparable to Seoul.
  • Integrated metropolitan cities have independent administrative and fiscal authority to manage regional industry and population policies comprehensively.
  • The goal is to increase administrative efficiency and strengthen regional competitiveness to ease metropolitan concentration.
  • Integration discussions are ongoing in several regions including Daegu-Gyeongbuk, Busan-Ulsan-Gyeongnam, and Gwangju-Jeonnam.

• The resident participation base is expanded. Key measures:

  • Lower the recall voting age from 19 to 18 to guarantee youth political participation.
  • Fully implement resident councils nationwide so residents can directly participate in regional policies.
  • Activate resident-led regional issue resolution and budget formation participation.
  • The purpose is to strengthen the practical foundation of local autonomy and expand democracy.

📕 Fiscal Decentralization Promotion Direction

• Gradually increase the local allocation tax rate. Key plans:

  • Gradually increase the current 19.24% local allocation tax rate to expand local finances.
  • Transfer more central government revenue to regions to increase fiscal independence.
  • Create conditions for local governments to autonomously formulate and execute budgets.
  • Fiscal decentralization is expected to simultaneously increase regional responsibility and efficiency.

• Balanced development special accounts and extinction response funds are strengthened. Key directions:

  • Balanced development special accounts focus investment on regional infrastructure construction and industry development.
  • The regional decline response fund is reformed to focus on population inflow performance to increase effectiveness.
  • If the Differential Support Index is reflected, more resources will be allocated to underdeveloped areas.
  • The goal is to build regional self-sufficiency through customized regional support.

💡 Key Issues in Introducing Differential Support Index

1. Index Design: Equity controversy between regions possible depending on what criteria are reflected and how
2. Regional Conflict: Concerns about resistance from areas with reduced support and equity issues
3. Fiscal Burden: Need for balance between central government fiscal capacity and local finance expansion
4. Integration Resistance: Potential for regional identity and interest conflicts when promoting integrated metropolitan cities
5. Effectiveness Verification: Need for performance management to ensure differential support actually leads to regional development

3️⃣ Tasks for Effective Implementation

✅ Ensuring Fairness in Differential Support Index Design

• Indicator selection and weighting should be transparent. Key directions:

  • Objective indicators like distance from Seoul, economic level, population structure, and industrial base should be selected.
  • Weights for each indicator should be set reasonably so no specific region is advantaged or disadvantaged.
  • Social consensus should be reached through discussions involving experts, local governments, and citizens.
  • Index calculation methods and results should be transparently disclosed to ensure credibility.

• Regular verification and adjustment are needed. Key tasks:

  • The Differential Support Index should be periodically recalculated reflecting regional changes.
  • Monitor support effects and evaluate performance to improve the index.
  • Quickly supplement if unexpected side effects or unfair cases occur.
  • Continuously develop the system by gathering regional feedback.

✅ Careful Approach to Integrated Metropolitan City Promotion

• Regional residents' opinions should be sufficiently gathered. Key measures:

  • Democratic procedures should be guaranteed through resident referendums or public hearings during integration.
  • The necessity and expected effects of integration should be fully explained to residents for understanding.
  • Integration methods should be designed respecting regional identity and historical specificities.
  • Region-led autonomous integration should occur rather than unilateral promotion.

• Practical benefits after integration should be guaranteed. Key tasks:

  • Grant practical administrative and fiscal authority to integrated metropolitan cities to increase autonomy.
  • Create visible results like industry development, job creation, and infrastructure expansion.
  • Pursue balanced development so no disadvantages or marginalized areas result from integration.
  • The central government should provide sufficient fiscal support and policy backing to integrated metropolitan cities.

✅ Fiscal Decentralization and Strengthening Accountability

• Accountability should be increased along with fiscal autonomy. Key directions:

  • If local finances expand through increased allocation tax rates, budget execution transparency should be strengthened.
  • Local governments should use resources efficiently and report performance to residents.
  • The central government should supervise local fiscal operations without infringing on autonomy.
  • Strengthen sanctions for fiscal waste or improper use to ensure trust.

• Budget formation through resident participation should be activated. Key measures:

  • Residents should directly decide budget uses through resident councils and participatory budgeting.
  • Expand bottom-up decision making where residents identify regional issues and set priorities.
  • Strengthen resident monitoring functions by transparently disclosing budget execution processes and results.
  • Grant practical authority so resident participation doesn't remain formalistic.

4️⃣ Related Terms Explained

🔎 Local Allocation Tax

• Local allocation tax is a fiscal support system the central government transfers to regions.
  • Local allocation tax means the central government transfers part of national tax revenue to local governments to ease fiscal gaps and support local finances. Based on the Local Allocation Tax Act, 19.24% of domestic taxes are allocated as allocation tax.
  • Types of allocation tax include: First, ordinary allocation tax is paid as general resources to regions with poor fiscal conditions. Second, special allocation tax is paid to respond to disasters or special fiscal needs. Third, real estate allocation tax allocates real estate-related tax revenue to regions. Fourth, fire safety allocation tax is paid to expand fire personnel and equipment.
  • The Ministry of Interior and Safety plans to gradually increase the allocation tax rate to expand local finances. If the Differential Support Index is introduced, allocation tax calculation will be adjusted to allocate more resources to underdeveloped areas. This is expected to contribute to reducing fiscal gaps between regions and strengthening regional self-reliance foundations.

🔎 Balanced Development Special Account

• The balanced development special account is special financing to resolve regional gaps.
  • The balanced development special account is a special fiscal account established to reduce development gaps between regions and build regional self-sufficiency. Created in 2004 based on the 'Special Act on Balanced National Development,' it is used for regional development, industry development, infrastructure construction, and job creation.
  • Main projects of the account include: First, regional industry development and innovation ecosystem creation. Second, expansion of regional infrastructure like transportation, culture, and welfare. Third, support for underdeveloped area development and environmental improvement. Fourth, programs for youth jobs and population inflow.
  • If the Differential Support Index is reflected, budget allocation of the balanced development special account is expected to be subdivided according to regional development level. The goal is to achieve practical balanced development by concentrating investment in underdeveloped and extinction risk areas. However, resources can be used efficiently only if transparency and performance management of budget execution occur together.

🔎 Integrated Metropolitan City

• An integrated metropolitan city is a new local government form with high autonomy.
  • An integrated metropolitan city is a local government that integrates several adjacent local governments to receive high autonomy and administrative functions comparable to Seoul Special City. It is being promoted as a new local administrative model for strengthening regional competitiveness and improving administrative efficiency.
  • Characteristics of integrated metropolitan cities include: First, they have independent ordinance enactment rights and administrative authority. Second, autonomous budget formation is possible with finances and revenue transferred from the central government. Third, they can establish wide-area plans by managing industry policy, transportation, and environment comprehensively. Fourth, they can promote comprehensive policies to prevent population outflow and revitalize regional economies.
  • Integration discussions are currently ongoing in several regions including Daegu-Gyeongbuk, Busan-Ulsan-Gyeongnam, and Gwangju-Jeonnam. For integrated metropolitan cities to succeed, regional resident consensus and practical authority transfer from the central government are essential. Also, respecting regional identity and achieving balanced development after integration are important tasks.

🔎 Regional Decline Response Fund

• The regional decline response fund is a fiscal fund supporting population-decreasing areas.
  • The regional decline response fund is a special fiscal fund established to respond to population decline and regional extinction crisis. Operating at about 1 trillion won annually since 2022, it is used for population inflow and regional revitalization projects in extinction risk areas.
  • Main support areas of the fund include: First, youth job creation and settlement condition improvement projects. Second, childbirth and childcare support and educational environment improvement. Third, culture, tourism, and welfare infrastructure expansion projects. Fourth, return-to-farming/village programs and regional economic revitalization programs.
  • The government is currently reforming the regional decline response fund to focus on population inflow performance. If the Differential Support Index is introduced, fairness and effectiveness of fund allocation are expected to improve. However, it should focus on building regional self-sufficiency from a mid-to-long-term perspective rather than obsessing over short-term results.

5️⃣ Frequently Asked Questions (FAQ)

Q: How will our region be affected when the Differential Support Index is introduced?

A: Fiscal support may vary depending on the region's development level and population structure.

• The Differential Support Index differentiates fiscal support by comprehensively reflecting distance from Seoul, economic level, and population decline risk. Underdeveloped areas or areas with severe population decline can receive more fiscal support. Conversely, relatively developed areas may face reduced support.
• Specifically, which regions will be affected and how much depends on the index design method and weights. The government plans to transparently disclose indicator selection and calculation methods and gather opinions from local governments and experts. From residents' perspective, it's important to be interested in what support their region will receive and participate in regional policy discussions. Also, they should monitor budget execution and provide opinions so differential support actually leads to regional development.

Q: Is it good for our region if an integrated metropolitan city is created?

A: Regional competitiveness can increase, but gathering resident opinions and practical authority transfer are important.

• Integrated metropolitan cities help strengthen regional competitiveness by increasing administrative efficiency and enabling comprehensive policies at the wide-area level. Integrating finances and personnel enables large-scale infrastructure projects or industry development, and more authority can be transferred from the central government.
• However, there are also concerns that regional identity may weaken or specific areas may be marginalized during integration. Also, if practical authority is not granted even after integration, it may become 'a special city in name only.' Therefore, opinions should be sufficiently gathered through resident referendums and public hearings from the integration discussion stage, and the necessity and expected effects of integration should be clearly confirmed. Also, the central government should grant practical fiscal and administrative authority to integrated metropolitan cities and prepare institutional devices to guarantee regional balanced development.

Q: What changes occur when the recall voting age is lowered to 18?

A: Youth political participation expands and the democratic nature of local autonomy is strengthened.

• Lowering the recall voting age to 18 allows youth including high school students to participate in recalling local government heads or local council members. This has the effect of expanding youth political rights and increasing interest and participation in local politics.
• Also, if resident councils are fully implemented, residents can directly identify regional issues and participate in budget formation. These systems contribute to strengthening the practical foundation of local autonomy and activating resident-led democratic decision making. However, for the system not to remain formalistic, practical authority should be granted and sufficient information and education should be provided so residents can participate responsibly. Active interest and participation from youth and residents are most important.

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