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BRIEF

D-Brain in South Korea

October 27, 2015

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According to the Open Budget Index of 2010, South Korea is one of the top performers in budget transparency in the Asia Pacific Region (OBI 2010). As noted by the International Budget Partnership, “South Korea’s OBI 2010 score indicates that the government provides the public with significant information on the central government’s budget and financial activities during the course of the budget year. While some deficiencies remain, the amount of information published is generally sufficient for citizens to assess how their government is managing public funds” (OBI 2010).

The Korean road to these accomplishments has been far from easy. The democratic transition of Korea in 1987 underscored the need for fiscal transparency, but progress was at first limited because of a divided government and convoluted inter-party politics (You & Lee 2011). The first transparency reforms were implemented in the beginning of the 1990s, when Kim Young-sam, a former opposition leader and the first civilian president, assumed office and led several ambitious transparency initiatives, including a law that mandated high-level public officials to disclose their assets (in 1993) and the Information Disclosure Act (in 1996).

However, these reforms fell short of improving budget transparency or curbing corruption (You & Lee 2011). In fact, widespread corruption in the public sector, the deficient management of the Korean “chaebols,” and a malfunctioning financial sector threw the country into a financial turmoil in 1997 (Mo and Weingast 2009; You & Lee 2011).

In the midst of the financial crisis and an IMF bailout, long-time opposition leader Kim Dae-jung was elected president in December 1997. Dae-jung “declared the end of government-business collusion or crony capitalism” and launched a series of structural reforms in the financial, corporate, and public sectors (You 2011). These reforms also aimed to increase transparency and citizen participation in the budget process. Civil society organizations significantly contributed to this move, as they have been pushing for fiscal transparency reforms since the beginning of the 1990s. 

Policy intervention

The transparency reform included several components. First, in 1999, Dae-jung mandated to conduct “preliminary feasibility studies” for all budgetary items, aiming to assess the economic validity of the proposed project in budget preparation. In 2000, the government established the Center for Public Investment Management at the Korea Development Institute to conduct feasibility studies. All budgetary projects have to be reviewed and approved by the center (You & Lee 2011). Further, in 2004, the Korean government launched a budgetary initiative called the “Three Plus One Reform.” The reform included the introduction of National Fiscal Management Plan (an annual fiscal plan which is developed in an iterative manner and open for broad participation by civil society and experts), Top-Down Budgeting (decentralizing the budget process and delegating responsibilities from the central budget agency to individual ministries), Performance Management system (introducing monitoring and evaluation measures as part of the budget process), and Digital Budget & Accounting System (also known as D-Brain) (Center for Public Investment Management at the Korea Development Institute to conduct feasibility studies. All budgetary projects have to be reviewed and approved by the center (You & Lee 2011).

Further, in 2004, the Korean government launched a budgetary initiative called the “Three Plus One Reform.” The reform included the introduction of National Fiscal Management Plan (an annual fiscal plan which is developed in an iterative manner and open for broad participation by civil society and experts), Top-Down Budgeting (decentralizing the budget process and delegating responsibilities from the central budget agency to individual ministries), Performance Management system (introducing monitoring and evaluation measures as part of the budget process), and Digital Budget & Accounting System (also known as D-Brain) (Center for Public Investment Management at the Korea Development Institute to conduct feasibility studies.

All budgetary projects have to be reviewed and approved by the center (You & Lee 2011). Further, in 2004, the Korean government launched a budgetary initiative called the “Three Plus One Reform.” The reform included the introduction of National Fiscal Management Plan (an annual fiscal plan which is developed in an iterative manner and open for broad participation by civil society and experts), Top-Down Budgeting (decentralizing the budget process and delegating responsibilities from the central budget agency to individual ministries), Performance Management system (introducing monitoring and evaluation measures as part of the budget process), and Digital Budget & Accounting System (also known as D-Brain)

The primary objective of the D-Brain System was to enable an accurate analysis of the fiscal data and information, providing policymakers with real time support for policy formulation. The system also aimed to improve the credibility of the national budget by introducing double-entry book-keeping and accrual accounting that include assets, debt, and cost information as well. It also tried to integrate and connect fiscal information systems in line ministries, local governments, and public enterprises. D-Brain was meant to enhance efficiency, transparency, and public participation in the national fiscal management. It introduced the following features (Kuriyan et al. 2011):

  • Transparency. Integrated web-based system providing real time analysis on government’s fiscal activities including all documents related to the preparation, execution and reporting of the budget, the budget guidelines that are distributed by the central budget agencies to the ministries, information on account settlement and performance management.
  • Citizen participation. The website enables citizens to engage in budget monitoring from preparation and execution of the budget spending to the auditing and account giving phases of policy cycles. Citizen participation is enabled throughout the budgeting process through Internet surveys, an online bulletin board, online bidding, a cyber forum, and “d-budget participation corner.” Further, citizens can report on budget waste to the Budget Waste Report Center of D-Brain. The reporting citizens can receive budget saving rewards up to $30,000 in case their reports prove to be correct and lead to budget savings.

Outcomes and Effects

  • Comprehensive transparency policy. The main advantage of the D-Brain platform is that fiscal information is now easily available for both public officials and the general public. This information can then be “used for monitoring progress on nationwide projects and making improvements to them as the project unfolds. Also this provides the public detailed information on what the government’s expenditure are on different major nationwide projects.” (Kuriyan et al. (2011), p. 38).
  • Budget efficiency. Similarly to Recovery.gov, D-Brain appears to be particularly useful for public officials. As Kuriyan et al. (2011) explain “The dBrain acts as the middleman for the central government, local government and public agency to exchange information about the respective processes of fiscal activity and provide them the basis for strategic planning.” (p. 38) The system makes treasury operations more efficient and help agencies to collect payments easier and faster. (p. 38). The system seems to be beneficial for the political system in general—it made it considerably easier for public representatives to review the budget process and receive information on a variety of budget allocations. It also made it the budget analysis conducted by the Korean Budget Authority more effective (Kuriyan et al. 2011, Chambers 2012).
  • Corruption. According to surveys conducted by the Korea Institute of Public administration, the percentage of citizens who believed bribes were common when dealing with public officials declined from 69 percent in 2000 to 57 percent in 2008. Further, the percentage of citizens who reported that they paid a bribe to public officials during the last year fell from 25 percent in 2000 to 5 percent in 2008 (Jang 2008).
  • Citizen participation. Despite the high ICT capacity of Korea, and similarly to the situation with Recovery.gov, it seems that citizen participation is the weakest part of the D-Brain project. As noted by Kuriyan (2011), “although the public participation rate has increased, it has shown that they have the tendency to remain as a passive user only making electronic payments and transfers.”
  • Civil society participation. There are no documented accounts of how civil society used the D-Brain system to hold government accountable for its activities or budget decisions. While the literature that analyzes budgetary transparency in Korea does refer to several accomplishments of CSOs that used governmental information to expose cases of corruption, this information did not originate from the D-Brain system (Ramkunar 2008, You & Lee 2011). In one case, Citizens’ Coalition for Economic Justice exposed that an excessive budget was invested in the construction of the National Cancer Center and triggered an audit by the independent Board of Audit and Inspection, which identified budgetary waste in the process (Ramkunar 2008). In a different case, Citizens’ Against Budget Waste successfully used the Information Disclosure Act of 1996 to obtain information about governmental procurement processes and revealed corruption in the governmental contracting system (You & Lee 2011). 

Discussion

Generally, the most important factor that contributed to the enhanced transparency of the Korean budget is its democratization process (You & Lee 2011). Significant transparency reforms took place after the financial crisis of 1997, driven by the newly elected liberal government. The growing civil society in the country and free media also played a significant role, pressing the government to implement budget transparency reforms. Local autonomy empowered grassroots NGOs, and the monitoring of the budget waste and the practice of participatory budgeting spread throughout the country over time. After the financial crisis in 1997, civic movements for transparency in government, corporate governance, and business-government relationship expanded.

Further, the implementation of the transparency reforms was made possible because of political leadership—two liberal presidents, Kim Dae-jung and Roh Moo-Hyun, launched transparency reforms and closely monitored their implementation. Aside from transparency reforms, the liberal administrations also aimed to change bureaucratic behavior and encourage openness and responsiveness to the public.

Similarly to the United States, the introduction of a sophisticated open budget platform was made possible because of the high ICT capacity and developed ICT infrastructure in the country (Kuriyan et al. 2011). Korea has the highest internet user rate as a percentage of the population and one of the highest rates of broadband penetration in the world (Chambers 2012). Further, Web-participation is common in Korea, which provides most of its governmental services over the web. However, it is not clear to what extent these advantages translate into higher rates of citizen engagement in the budget process. 

Secondary sources

  • Jang, Ji-Won (2008). Hanguk Gonggong Bumuneui Bupae Siltae Chooi Bunseok (A Survey on the Trends of Public Sector Corruption in Korea). Hanguk Haengjeong Yeonguwon (Korea Institute of Public Administration)
  • Kuriyan, Renee, Bailur, Savita, Gigler, Bjorn-Soren & Park, Kyung Ryul (2011). “Technologies for Transparency and Accountability: Implications for ICT Policy and Implementation,” Open Development Technology Alliance, World Bank.
  • Mo, Jong-rin and Barry Weingast. (2009). Political Economy of Korea’s Transition, 1961-2008.
  • You, Jong-sung & Lee, Wonhee (2011). “Budget Transparency and Participation—Korean Case Study.”