Policy Analysis in South Korea 9781447362593

Table of contents :
Front Cover
Half-title
Series information
Policy Analysis in South Korea
Copyright information
Dedication
Table of contents
List of figures, tables and boxes
List of abbreviations
Notes on contributors
Acknowledgements
Editors’ introduction to the series
Foreword
Part One Overview of policy analysis in Korea
ONE An introduction to policy analysis in Korea
The emergence and development of policy analysis in Korea
Characteristics of policy analysis in Korea
Looking to the future
References
TWO Policy analytical styles and public institutions in Korea
Introduction
The concept of policy analytical style
Performance management of Korean public institutions
The policy analytical style of performance management system
Quantitative evaluation and the rational modern style
Qualitative evaluation and the potential for manipulation
Does the performance evaluation make any difference?
Conclusion
Note
References
THREE The policy analysis profession in Korea
Introduction
A brief history of the policy analysis profession in Korea
Policy analysis professionals in academia and as practitioners
Qualifications for policy analysts
Conclusion
Notes
References
Part Two Policy analysis by governments
FOUR Policy analysis and government capacity
Introduction
Capacity building and the preliminary feasibility study process
Outsourcing expertise: the Public and Private Infrastructure Management Center
The preliminary feasibility study process
Pursuit of evidence-based policy analysis
Economic analysis
Policy and local ripple effect analyses
Analytic hierarchy process analysis
Conclusion
Notes
References
FIVE Regulatory impact analysis:
Introduction
The evolution of Korean regulatory impact analysis
Introduction
Evolution
Preparation for Korean regulatory impact analysis
Scope of application and procedures
Regulatory overview
Necessity of the regulation and its alternatives
Appropriateness of the regulation
Effectiveness of the regulation
Implementation plan and overall conclusion
Korean regulatory impact analysis criteria and regulatory costs
Current situation and limitations
Conclusion
Notes
References
SIX Policy analysis in quasi-governmental institutions in Korea
Introduction
Types of public institutions in Korea
Performance management of public institutions
Institutional foundation
Performance evaluation procedures
Evaluation metrics
Subjects of evaluation
Weighting of evaluation measures
Evaluation methods
Quantitative measures
Qualitative measures
Evaluation of social values
Job creation
Equal opportunity and social integration
Social security and environment
Collaboration and local development
Conclusion
References
SEVEN Policy analysis in Korean local governments
Introduction
The nature of policy analysis in Korean local governments
The dominant role of the central government in policymaking
The policy analysis system in Korean local governments
Implementation of feasibility studies for policy analysis
Limitations and potential improvements to policy analysis by Korean local governments
Conclusion
Notes
References
EIGHT The myth of local government incompetency
Introduction
Debate over local governments’ inability to make rational decisions
Adoption of local government feasibility studies in Korea
Data collection
Internalisation of rational analysis in the policymaking process
Do LFS represent the interests of public officials and politicians?
Changing the behaviour of external institutes and public officials
Conclusion
Acknowledgements
References
Part Three Committees, consultants, media, public inquiries and public opinion
NINE Policy advisory bodies in Korea
Introduction
Policy advice practices
Policy advisory bodies in Korea: administrative and advisory committees
Case 1 – resuming the construction of two nuclear reactors: the role of the Atomic Energy Commission
Case 2 – Policy Coordination Committee for Persons with Disabilities
Case 3 – Presidential Committee on Balanced National Development
Conclusion
Note
References
TEN Public concerns and public inquiry in Korea
Introduction
Public inquiry: concept and origin
Concept
Origin
Committees in the Korean government and public inquiry
Advisory committees
Administrative committees
Independent regulatory committees
Committees and public inquiry
Public inquiry practices in Korea
Presidential Truth Commission on Suspicious Deaths
The National Committee for Investigation of the Truth about the Jeju 4.3 Events and Restoration of the Honor of Victims3
Truth and Reconciliation Commission
Presidential Commission on Suspicious Deaths in the Military5
The Commission for Inquiry into Human Rights Abuses Suffered by Persons Affected by Hansen’s Disease6
Truth Commission on the BUMA Democratic Uprising7
Special Investigation Commission on the Humidifier Disinfectant Disaster and April 16 Sewol Ferry Disaster8
Subcommission on the Humidifier Disinfectant Disaster
Subcommission on the April 16 Sewol Ferry Disaster
Presidential Truth Commission on Deaths in the Military9
Understanding the distinctive characteristics of Korean public inquiries
Conclusion
Notes
References
ELEVEN National Assembly committees and support organisations
Introduction
The Korean National Assembly committee system
History of the committee system
Committee functions and authority
Standing committee types and duties
Subcommittee structure
Committee activities and evaluations
Bill reviews
Budget reviews
Petition reviews
Support organisations of the National Assembly
The National Assembly Secretariat
The National Assembly Research Service
The National Assembly Budget Office
The National Assembly Library
Conclusion
Notes
References
TWELVE Media policy and the public interest in Korea
Introduction
Deregulation and media policies in Korea
Regulatory agencies and media policies
Convergence and ownership regulations
Competition policy
The must-carry rule and retransmission of broadcasting programmes
Localism and programming
Digital broadcasting
The changing media environment and competition
Conclusion
References
Part Four Parties, interest groups and advocacy-based policy analysis
THIRTEEN Business associations and policy analysis
Introduction
Overview of business associations
Federation of Korean Industries
Korea Federation of SMEs
Korea Employer’s Federation
Federation of Middle Market Enterprises of Korea
Korea Federation of Micro Enterprises
Case studies of the role of business associations
Joint responses to policy issues
Contribution to improved governance for SMEs
Becoming legal entities for elevated status
Establishing think tanks to enhance expertise
Conclusion
Notes
References
FOURTEEN Policy analysis and labour movements in Korea
Introduction
Historical legacies of the developmental state and industrial relations in Korea
Social dialogue since the 1987 democratisation and the 1997 Asian financial crisis
Institutional obstacles, labour market polarisation and inclusive social dialogue
Conclusion
References
FIFTEEN Changes in social enterprise policy in Korea
Introduction
Social enterprise policy in Korea
Period one: from infancy and growing concerns to social enterprise
Period two: government commitment to designing a social enterprise promotion policy
Period three: initiation of social enterprise policy
Discussion: for what is it used?
Social enterprise policy revisited
Sustainability of social enterprises
Conclusion
Notes
References
Part Five Academia, research institutes and policy analysis
SIXTEEN Think tanks and policy analysis in Korea
Introduction
Think tanks in Korea
Government-funded research institutes
Local government-invested research institutes
Think tanks established by political parties
Think tanks established by private companies
Independent think tanks
History and development of think tanks in Korea
Dominance of government-funded think tanks in Korea
Public policy analysis and government-funded think tanks
The NRC and government-funded research institutes
Role of the NRC in the relationship with government-funded think tanks
Status of government-funded research institutes under the NRC
Performance evaluation system of government-funded research institutes under the NRC
Evaluation of think tanks in Korea
Conclusion
Notes
References
SEVENTEEN The role of Korean academics in policy analysis
Introduction
President Kim Dae-jung
President Kim Dae-jung’s policy demands
Research during the term of President Kim Dae-jung
President Roh Moo-hyun
President Roh Moo-hyun’s policy demands
Research during the term of President Roh Moo-hyun
President Lee Myung-bak
President Lee Myung-bak’s policy demands
Research during the term of President Lee Myung-bak
President Park Geun-hye
President Park Geun-hye’s policy demands
Research during the term of President Park Geun-hye
Conclusion
Note
References
EIGHTEEN Policy analysis education in Korea
The introduction of policy analysis education in Korean universities
Characteristics of policy analysis education in Korea
Education of civil servants, public policy analysis and public values
Challenges and future direction
Note
References
Index

Citation preview

INTERNATIONAL LIBRARY OF POLICY ANALYSIS SERIES EDITORS: IRIS GEVA-MAY & MICHAEL HOWLETT

POLICY ANALYSIS IN

South Korea

Edited by T.J. Lah and Thomas R. Klassen

POLICY ANALYSIS IN SOUTH KOREA

International Library of Policy Analysis Series editors: Iris Geva-May, Simon Fraser University, Canada, Carleton University, Canada and Michael Howlett, Simon Fraser University, Canada This major series brings together for the first time a detailed examination of the theory and practice of policy analysis systems in a specific country. It therefore provides a key addition to research and teaching in comparative policy analysis and policy

Each volume includes a history of the country’s policy analysis well as the country in question. In doing so, the books in the series provide the data and empirical case studies essential for instruction and for further research in the area. They also include expert analysis evolution and operation. Volumes in the series include the following countries: Australia • Brazil • Czech Republic • France • Germany • Japan • Israel • The Netherlands • Turkey • Colombia • Spain • Mexico • Taiwan • USA • Canada • Belgium • Ireland and build into an essential library of key reference works. The series will be of interest to academics and students in public policy, public administration and management, comparative politics and government, public organisations and individual policy areas. It will also interest people working in the countries in question and internationally. Journal of Comparative Policy Analysis. See more at comparativepolicy.org/about-jcpa-icpa-forum/ or at policy. bristoluniversitypress.co.uk/international-library-of-policy-analysis.

POLICY ANALYSIS IN SOUTH KOREA Edited by T.J. Lah and Thomas R. Klassen With a foreword by Pan Suk Kim

International Library of Policy Analysis, Vol 18

First published in Great Britain in 2023 by Policy Press, an imprint of Bristol University Press University of Bristol 1–​9 Old Park Hill Bristol BS2 8BB UK t: +​44 (0)117 374 6645 e: bup-​[email protected] Details of international sales and distribution partners are available at policy.bristoluniversitypress.co.uk © Bristol University Press 2023 British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN 978-​1-​4473-​6257-​9 hardcover ISBN 978-​1-​4473-​6258-​6 ePub ISBN 978-​1-​4473-​6259-​3 ePdf The right of T.J. Lah and Thomas R. Klassen to be identified as editors of this work has been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved: no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior permission of Bristol University Press. Every reasonable effort has been made to obtain permission to reproduce copyrighted material. If, however, anyone knows of an oversight, please contact the publisher. The statements and opinions contained within this publication are solely those of the editors and contributors and not of the University of Bristol or Bristol University Press. The University of Bristol and Bristol University Press disclaim responsibility for any injury to persons or property resulting from any material published in this publication. Bristol University Press and Policy Press work to counter discrimination on grounds of gender, race, disability, age and sexuality. Cover design: Qube Design Front cover image: iStock Bristol University Press and Policy Press use environmentally responsible print partners. Printed and bound in Great Britain by CPI Group (UK) Ltd, Croydon, CR0 4YY

To those in government, civil society and educational institutions who practise and teach public policy

Contents List of figures, tables and boxes List of abbreviations Notes on contributors Acknowledgements Editors’ introduction to the series Foreword Pan Suk Kim

ix xii xiv xix xx xxii

Part One:  Overview of policy analysis in Korea one two three

An introduction to policy analysis in Korea Cheol H. Oh Policy analytical styles and public institutions in Korea Suho Ji and Sounman Hong The policy analysis profession in Korea Inwon Lee

3 13 25

Part Two:  Policy analysis by governments four five

six seven eight

Policy analysis and government capacity Jiwoong Yoon Regulatory impact analysis: The experience of policy analysis in the Korean central government Song June Kim and Sun Gwon Ha Policy analysis in quasi-​governmental institutions in Korea Hyung Jun Park, Jiye Ju and Hyung Gun Park Policy analysis in Korean local governments Hyunsang Ha The myth of local government incompetency Kilkon Ko and Ran Kim

39 50

71 86 99

Part Three:  Committees, consultants, media, public inquiries and public opinion nine ten eleven twelve

Policy advisory bodies in Korea Tae Hee Kim Public concerns and public inquiry in Korea Sangyub Ryu National Assembly committees and support organisations Yongmo Lee and Inseok Seo Media policy and the public interest in Korea Namkee Park

117 137 153 175

vii

Policy Analysis in South Korea Part Four:  Parties, interest groups and advocacy-​based policy analysis thirteen Business associations and policy analysis Sam Youl Lee and Mean Sun Noh fourteen Policy analysis and labour movements in Korea Jooha Lee fifteen Changes in social enterprise policy in Korea Chisung Park

193 211 225

Part Five:  Academia, research institutes and policy analysis sixteen

Think tanks and policy analysis in Korea Cheol Liu and Byung-​duk Cho seventeen The role of Korean academics in policy analysis Min-​gil Kim and Rosa Minhyo Cho eighteen Policy analysis education in Korea Yui-​ryong Jung and Yiyoon Chung

243

Index

286

viii

262 276

List of figures, tables and boxes Figures 2.1 2.2 4.1 4.2 5.1 6.1 8.1 8.2 8.3 8.4 8.5 11.1 11.2 11.3 11.4 11.5 11.6 11.7 11.8 11.9 14.1 14.2 15.1 16.1

Three categories of performance indicators Number of public services and quantitative performance indicators The PFS process PFS process flow Basic RIA procedure Examples of performance evaluation practices The PIMAC feasibility study process BC ratio of proposals as estimated by the external institutions and PIMAC LFS BC ratio of proposals as estimated by the local government department and PIMAC LFS Differences in the BC ratios between the external institutions and the PIMAC LFS (2012 to 2016) Impact of LFS on decision making by the local council IRC Flowchart of the legislative process Types of bill reviews and proportion of government bills Magnitude of adjustments to budgets through standing committee preliminary examinations Petition reviews by the National Assembly Organisation overview of the National Assembly Secretariat Structure of the National Assembly Research Service Structure of the National Assembly Budget Office Procedure for requesting estimates of required costs and replying to the requests Structure of the National Assembly Library Union density by company size (as of December 2018) Typology of social dialogue Change in the number of preliminary social enterprises over time Classification of think tanks

17 18 43 45 56 79 106 107 108 110 110 157 160 161 163 165 166 168 170 171 217 219 233 244

Tables 1.1 1.2 1.3 1.4 1.5 5.1 5.2

Types of yearly research on the policy process Types of policy stages examined in policy studies Types of evaluation Types of research Analytical methods Changes in guidance on evaluation of regulatory impact Regulatory overview

6 7 8 8 9 53 58 ix

Policy Analysis in South Korea 5.3 5.4 5.5 5.6 5.7 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 7.1 7.2 7.3 7.4 8.1 8.2 8.3 9.1 9.2 9.3 9.4 9.5 10.1 11.1 11.2 11.3 13.1 13.2 13.3 13.4 13.5 13.6 13.7 14.1 15.1 x

Regulatory alternatives (example) 59 Regulatory cost analysis (example) 62 Annual reviews of RRC legislation 63 RIA by sector 64 Regulatory cost analysis by department 65 Number of public institutions by category 73 Areas of evaluation in performance management of public institutions 75 Evaluation indices and weighted scores 77 Social value indices in the Korea public institution performance 80 evaluation system Criteria for job creation evaluation 81 Criteria for equal opportunity and social integration evaluation 82 Criteria for social security and environment evaluation 83 Cumulative probability and standard z-​scores for trend analysis 83 Criteria for collaboration and local development evaluation 84 Statistics on projects where Korean local governments performed 89 feasibility studies Requirements for research institutes performing feasibility studies 90 Regular applications 91 Feasibility study procedure 92 Project cost and number of PFS by sector from 1999 to 2016 103 Seoul Public Investment Management Center’s feasibility 105 review cases Rejection rate of LFS reviewed proposals by the local council 108 (2012 to 2016) Location of advice and degree of government influence 120 Legal foundation of committees 122 Committees by ministry and office 123 Committee representation by position 125 Member composition of selected committees 127 Public inquiries conducted in Korea 143 Brief history of the committee system 154 Types and duties of committees 158 Comparison of rates of approval for bills by standing committees 159 and plenary sessions Comparison of business associations 194 Timeline of major FKI events 196 Timeline of major KBIZ events 197 Timeline of major KEF events 199 Timeline of major FOMEK events 200 Timeline of major KFME events 201 Comparison of business association research institutes 207 Labour market polarisation and the insider/​outsider divide (%) 220 Social enterprise policy in Korea over three periods 227

List of figures, tables and boxes 15.2 15.3 15.4 15.5 16.1 16.A1 17.1 17.2 17.3 17.4 17.5 17.6 17.7 17.8 18.1

Approved social enterprises in Korea by type/​category Approved social enterprises in Korea by organisational type Proportion of employees from vulnerable social groups hired by job creation type social enterprises Social enterprise survival rate Vision and goals of the NRC Annual expenditure by the government-funded research institutes (settlement in 2017, in KRWmillions)  Governing objectives of President Kim Dae-​jung Word frequency in abstracts of studies performed during the Kim Dae-​jung administration Governing objectives of President Roh Moo-​hyun Word frequency in abstracts of studies performed during the Roh Moo-​hyun administration Governing objectives of President Lee Myung-​bak Word frequency in abstracts of studies performed during the Lee Myung-​bak administration Governing objectives of President Park Geun-​hye Word frequency in abstracts of studies performed during the Park Geun-​hye administration Policy courses taught in undergraduate public administration and public policy programmes at major universities in Korea

229 230 232

Proposal upon the foundation of KBIZ (23 May 1962)

203

235 252 259 264 265 267 268 269 271 272 274 280

Box 13.1

xi

List of abbreviations ACRC ALIO AMPI BAI CETS CIRC EBP EDP EPB FAAR FKI FKTU FOMEK GMAC ILO IRC KBC KBIZ KCC KCTU KDI KEF KERI KFME KHNP KIPA KIPF KISTEP KoRIA KRW (₩) LFS MEL MFDS MHW MOEF MOTIE MSIT NABO NAL NARS xii

Anti-​Corruption and Civil Rights Commission All Public Information In-​One Act on the Management of Public Institutions Board of Audit and Inspection Center for Economy and Technology Survey Central Investment Review Committee evidence-​based policymaking Economic Development Plan Economic Planning Board Framework Act on Administrative Regulations Federation of Korean Industries Federation of Korean Trade Unions Federation of Middle Market Enterprises of Korea Government Investment Management and Analysis International Labour Organization Investment Review Committee Korean Broadcasting Commission Korea Federation of Small and Medium Enterprises Korean Communications Commission Korean Confederation of Trade Unions Korea Development Institute Korea Employer’s Federation Korea Economic Research Institute Korea Federation of Micro Enterprises Korea Hydro & Nuclear Power Korea Institute of Public Administration Korea Institute of Public Finance Korea Institute of Science and Technology Evaluation and Planning Korean regulatory impact analysis Korean won (currency) local government feasibility study Ministry of Employment and Labor Ministry of Food and Drug Safety Ministry of Health and Welfare Ministry of Economy and Finance Ministry of Trade, Industry and Energy Ministry of Science, ICT, and Future Planning National Assembly Budget Office National Assembly Library National Assembly Research Service

List of abbreviations

NAS NGO NRC NST OGPC PAE PFS PIMAC PQM QGO RCMS RIA RRC RRTF SCBA SCE SEPA SNU SOE SSCC

National Assembly Secretariat non-​governmental organisation National Research Council for Economics, Humanities, and Social Sciences National Research Council for Science and Technology Office for Government Policy Coordination policy analysis ecosystem preliminary feasibility study Public and Private Infrastructure Management Center Policy Quality Management quasi-​governmental organisation Regulatory Cost Management System regulatory impact analysis Regulatory Research Centre Regulatory Reform Task Force Special Committee on Budget and Accounts Special Committee on Ethics Social Enterprise Promotion Act Seoul National University state-​owned enterprise Self Support Community Centre

xiii

Notes on contributors Byung-​duk Cho is Director General of the Research Planning Office at the National Research Council for Economics, Humanities and Social Sciences, Republic of Korea (South Korea). His research interests include national R&D strategy, performance management in public agencies and organisational culture. Rosa Minhyo Cho is Professor in the Graduate School of Governance at Sungkyunkwan University in Seoul, South Korea. Her research interests include evaluating the various effects of social welfare policy, education policy, immigrant policy and labour policy using large-​scale quantitative datasets. She has served on multiple Korean government evaluation committees of public organisations including the Ministry of Strategy and Finance, the Ministry of Health and Welfare and the Ministry of Personnel Management. Yiyoon Chung is Associate Professor of Public Administration and Public Policy at Konkuk University in South Korea. Her research interests focus on empirical analysis of social policies and their effects on the welfare of disadvantaged children and families. She is interested in building knowledge about how the intersection of multiple domains of social policy shapes the risks and opportunities for disadvantaged children, families and communities. Hyunsang Ha is Associate Professor of Public Administration at Kookmin University, South Korea. His research interests include local autonomy and community development, sustainable development and environmental policy. His work appears in the American Review of Public Administration, Economic Development Quarterly, International Review of Public Administration and other journals. Sun Gwon Ha is a researcher at the Biotechnology Policy Research Center at the Korea Research Institute of Bioscience and Biotechnology, South Korea. His research interests include regulatory policy, science and technology policy, public choice theory and social network analysis. His recent papers include ‘Rearranging government regulations toward efficient certification system’ in the Korean Policy Studies Review (2020), and ‘The effect of the WTO/​TBT agreement on the trade: MRQAP and policy implications’ in the Journal of Regulation Studies (2018). Sounman Hong is Professor at Yonsei University in South Korea. His research focuses on bureaucratic control, innovation and reform and how to achieve a more efficient, responsive and accountable public administration. He holds a Master of Public Policy and a doctorate from Harvard University and a bachelor’s degree from Yonsei University. Before pursuing his graduate studies, he worked for PwC, McKinsey and the Korean government. xiv

Notes on contributors

Suho Ji is a doctoral student at Yonsei University in Korea. He holds a Master of Public Administration degree from Yonsei University. His research interests include local finance, how to achieve accountable public administration and how to improve public performance. Jiye Ju is Post-​doctoral Fellow in the Graduate School of Governance at Sungkyunkwan University, South Korea. Her research interests include policy design, civic participation in policy process and policy narrative in policy change. She is a co-​author of articles on deliberative democracy, collaborative governance, conflict management, social problems and inclusive policy case studies. Yui-​r yong Jung is Associate Professor of Public Administration at Korea National University of Transportation. He has earned his PhD in Public Administration from Yonsei University in Korea. His research interests focus on welfare state theory, social policy, labour policy and policy evaluation. He is interested in comparing the labour policy of welfare states and analysing the effectiveness of social policy. Min-​g il Kim is a PhD candidate in the Graduate School of Governance at Sungkyunkwan University in Seoul, Korea. His research interests include evaluating the various effects of social welfare policy, childcare policy, immigrant policy and gender policy. Ran Kim is a PhD candidate in the Graduate School of Public Administration at Seoul National University. Kim received her BA from the University of California, Los Angeles, and her MA from Cornell University. Her research interests span diverse topics in governance, behavioural public administration, decision-​making processes, international development and policy networks. Song June Kim is Professor of Public Administration at Kyungpook National University, Korea, and President of Korea Society for Regulatory Studies. His current research interests include regulatory political economy and topics of classical liberalism. He is author of several books on public policy and public choice theory. Tae Hee Kim is Assistant Professor in the Department of Public Administration at Seoul National University of Science and Technology in South Korea. Her research focuses on public management, performance management, personnel management and, in particular, topics related to diversity. Thomas R. Klassen is Professor in the School of Public Policy and Administration at York University in Toronto, Canada. He has been Visiting Professor in the Department of Public Administration at Yonsei University, South Korea, and Visiting Researcher at the Korea Labor Institute. Recent xv

Policy Analysis in South Korea

co-​edited books include Ageing in Asia-​Pacific: Interdisciplinary and Comparative Perspectives (Routledge, 2018), The Routledge Handbook of Global Public Policy and Administration (Routledge, 2017) and Korea’s Retirement Predicament: The Ageing Tiger (Routledge, 2014). Kilkon Ko is Professor in the Graduate School of Public Administration at Seoul National University, South Korea. He earned his PhD in Public and International Affairs from the University of Pittsburgh in 2006. His scholarly research focuses on improving the understanding of the policymaking process, corruption and ethics. He currently serves as an advisor for the President’s National Economic Advisory Council. He is the editor-​in-​chief of the Asian Journal of Political Science and the director of the Asia Regional Information Center at the Seoul National University Asia Center. He is the author of numerous books and articles, including the foundational textbook Efficiency Analysis, Categorical Data Analysis, and Data Visualization in Social Science. T.J. Lah is Professor in the Department of Public Administration at Yonsei University, South Korea. He received his PhD in Public Affairs from Indiana University, USA, in 2001. His research focuses on public management, environmental policy and social conflict. He currently serves as the President of the Korean Association for Policy Studies and a board member of Policy Sciences. He is co-​editor of the Routledge Handbook of Global Public Policy and Administration (Routledge, 2017). Inwon Lee is Full Professor in the Department of Public Administration at the University of Seoul, South Korea. His research areas are urban policy, collaborative governance, interorganisational management and policy evaluation. His work has appeared in, among others, Urban Affairs Review, Public Administration Review, Policy Studies Journal and Economic Development Quarterly. Jooha Lee is Professor in the Department of Public Administration, Dongguk University, South Korea. His main research interests are social policy, welfare politics, governance and policy implementation. He is co-​author of The Korean State and Social Policy (OUP, 2011), and his work has been published in Policy Sciences, Voluntas, International Review of Administrative Sciences, Journal of Democracy and International Journal of Social Welfare, among others. Sam Youl Lee is Professor in the Department of Public Policy and Management at Yonsei University, South Korea. His research interests cover science and technology policy, policy analysis and evaluation, ministerial leadership and bureaucratic politics. His research has been published in renowned academic journals including Governance, International Public Management Journal and Administration and Society.

xvi

Notes on contributors

Yongmo Lee is Professor in the Department of Public Administration at Konkuk University, South Korea. He teaches courses in public finance, financial management and statistical analysis. His research focuses on the empirics of fiscal decentralisation and the political economy of government reform in South Korea. He received his PhD in Public Administration from New York University and his master’s degrees from MIT (business) and Harvard (public policy). Cheol Liu is Associate Professor at the KDI School of Public Policy and Management, South Korea. His research agenda accommodates budgeting, taxation, public financial management and performance management. He diagnoses various risks in the government’s fiscal health, including corruption, and identifies implementable proposals for reform. Currently, he is the head of the Experiment Lab for Public Management Research. Mean Sun Noh is Research Fellow of the Korea SMEs and Startups Institute and Director of the Division of Future Strategy Research. His research interests include human resource management of SMEs, technology innovation and policy evaluation. Cheol H. Oh earned his PhD in Policy Studies from the University of Illinois-​ Urbana and served as Professor in the Department of Political Science as well as Director of the Office of Government Research and Service at Arkansas State University. He is currently Professor at the School of Public Administration at Soongsil University, South Korea, and also serves as Dean of its Graduate School. He has actively consulted with the Government of Korea, serving on many major government committees, and also has been involved in many international activities and organisations. He has written extensively on knowledge utilisation, eGovernment, research methodology, and programme evaluation and is the author of several books on public administration in the digital society. Chisung Park is Professor at the School of Public Service at the Chung-​ Ang University, Seoul, Korea, and Director of the Ethics Center, Chung-​Ang University. His research interests centre on public policy theories applying network analysis and text analytics. He is co-​author of Identifying Policy Frames Using Semantic Network Analysis (Sage, 2019). His recent work has been published in Policy Sciences and Policy Studies Journal. Hyung Gun Park is Assistant Professor in the Department of Public Administration at Myongji University, South Korea. His research interests include public finance, special districts and citizen participation. His recent work can be found in Public Performance Management Review, Social Science Quarterly, Journal of Public and Nonprofit Affairs and Public Finance and Management.

xvii

Policy Analysis in South Korea

Hyung Jun Park is Professor of Department of Public Administration and Graduate School of Governance at Sungkunkwan University in South Korea, and director of its Governance and Policy Evaluation Institute. He is a Mosher Award winner, for best academic journal paper from the American Society for Public Administration in 2009. His research on collaborative governance, policy analysis, policy change and other many policy and government innovation topics has been published in Urban Affairs Review, Public Administration Review, Public Management Review, American Review of Public Administration, Public Performance & Management Review and International Review of Public Administration, and many Korean academic journals. He is also co-​author of Collaborative Governance in East Asia: Evolution Towards Multi-​Stakeholder Partnerships. Namkee Park is Professor in the Department of Communication, Yonsei University, South Korea, where he is currently the Director of the Social Science Research Institute. His research interests include social psychological uses of communication technologies, computer-​mediated communication and human–​ computer interaction. Sangyub Ryu is Associate Professor at Yonsei University, South Korea. His research interests include public network management and managerial networking, human resource management and emergency management. His research has been published in Public Administration Review, American Review of Public Administration, International Public Management and other journals. Inseok Seo is Assistant Professor in the Department of Public Administration at Anyang University, South Korea. His research interests include policy evaluation, policy analysis and the theory of public policy. Recent research publications include ‘Policy naming, symbolism, and policy acceptances’ (2014), ‘Sustainability of a policy instrument rethinking the renewable portfolio standard in South Korea’ (2019) and ‘Factors affecting government-​funded research’ (2018). Jiwoong Yoon is Professor of Public Policy at Kyunghee University, Seoul, South Korea, and Director of Future Innovation Policy Institute. His research interests include Science & Technology Innovation Policy, the evaluation and analysis of R&D policy and performance management in public agencies. He is a member of the Policy Coordination Expert-​Committee of the National Science and Technology Committee.

xviii

Acknowledgements This work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-​2017S1A3A2067636). We are grateful for the invitation from the Series Editors –​Iris Geva-​May and Michael Howlett –​to add South Korea to the list of nearly two dozen countries included in the International Library of Policy Analysis. We extend our thanks to the contributors to this volume. Each has extensive expertise and knowledge. Taken together they provide a comprehensive and timely perspective on the theory and practice of policy analysis in South Korea. This book would not exist without their willingness to share their knowledge. Martin Bax conducted the initial editing of chapters. His work has ensured that the volume is as accessible as possible to a wide range of audiences. We also thank Hanbyeol Yoo, Dajeong Jeong, Sunghee Lee, Myungseong Han, Jungwon Jeon, Kyungkyu Pyo and Seoyoung Kang, graduate students in the Department of Public Administration at Yonsei University in Seoul, South Korea, for their assistance in preparing individual chapters for publication. At Bristol University Press/​Policy Press we have been blessed by the support and assistance of Jay Allan, Caroline Astley, Emma Cook, Zoë Forbes and Laura Vickers-​Rendall. Lastly, we are indebted to the many colleagues in government, educational institutions and other organisations who over the past decades have taught us about policy analysis, and in some cases provided us with the ability to contribute to public policy. T.J. Lah, Seoul, South Korea Thomas R. Klassen, Toronto, Canada October 2022

xix

Editors’ introduction to the series Professor Iris Geva-May and Professor Michael Howlett, ILPA series editors

Policy analysis is a relatively new area of social scientific inquiry, owing its origins to developments in the US in the early 1960s. Its main rationale is systematic, evidence-based, transparent, efficient, and implementable policy-making. This component of policy-making is deemed key in democratic structures allowing for accountable public policies. From the US, policy analysis has spread to other countries, notably in Europe in the 1980s and 1990s and in Asia in the 1990s and 2000s. It has taken, respectively one to two more decades for programmes of public policy to be established in these regions preparing cadres for policy analysis as a profession. However, this movement has been accompanied by variations in the kinds of analysis undertaken as US-inspired analytical and evaluative techniques have been adapted to local traditions and circumstances, and new techniques shaped in these settings. In the late 1990s this led to the development of the field of comparative policy analysis, pioneered by Iris Geva-May, who initiated and founded the Journal of Comparative Policy Analysis, and whose mission has been advanced with the support of editorial board members such as Laurence E. Lynn Jr., first co-editor, Peter deLeon, Duncan McRae, David Weimer, Beryl Radin, Frans van Nispen, Yukio Adachi, Claudia Scott, Allan Maslove and others in the US and elsewhere. While current studies have underlined differences and similarities in national approaches to policy analysis, the different national regimes which have developed over the past two to three decades have not been thoroughly explored and systematically evaluated in their entirety, examining both sub-national and non-executive governmental organisations as well as the non-governmental sector; nor have these prior studies allowed for either a longitudinal or a latitudinal comparison of similar policy analysis perceptions, applications, and themes across countries and time periods. The International Library for Policy Analysis (ILPA) series fills this gap in the literature and empirics of the subject. It features edited volumes created by experts in each country, which inventory and analyse their respective policy analysis systems. To a certain extent the series replicates the template of Policy Analysis in Canada edited by Dobuzinskis, Howlett and Laycock (Toronto: University of Toronto Press, 2007). Each ILPA volume surveys the state of the art of policy analysis in governmental and non-governmental organisations in each country using the common template derived from the Canadian collection in order to provide for each volume in the series comparability in terms of coverage and approach. Each volume addresses questions such as: What do policy analysts do? What techniques and approaches do they use? What is their influence on policy-making in that country? Is there a policy analysis deficit? What normalises the work xx

Editors’ introduction to the series

done by policy analysts working in different institutional settings? Contributors focus on the sociology of policy analysis, demonstrating how analysts working in different organisations tend to have different interests and to utilise different techniques. The central theme of each volume includes historical works on the origins of policy analysis in the jurisdiction concerned, and then proceeds to investigate the nature and types, and quality, of policy analysis conducted by governments (including different levels and orders of government). It then moves on to examine the nature and kinds of policy analytical work and practices found in non-governmental actors such as think tanks, interest groups, business, labour, media, political parties, non-profits and others. Each volume in the series aims to compare and analyse the significance of the different styles and approaches found in each country and organisation studied, and to understand the impact these differences have on the policy process. Together, the volumes included in the ILPA series serve to provide the basic data and empirical case studies required for an international dialogue in the area of policy analysis, and an eye-opener on the nuances of policy analysis applications and implications in national and international jurisdictions. Each volume in the series is leading edge and has the promise to dominate its field and the textbook market for policy analysis in the country concerned, as well as being of broad comparative interest to markets in other countries. The ILPA is published in association with the International Comparative Policy Analysis Forum, and the Journal of Comparative Policy Analysis, whose mission is to advance international comparative policy analytic studies. The editors of each volume are leading members of this network and are the best-known scholars in each respective country, as are the authors contributing to each volume in their particular domain. The book series as a whole provides learning insights for instruction and for further research in the area and constitutes a major addition to research and pedagogy in the field of comparative policy analysis and policy studies in general. We welcome to the ILPA series Volume 18, Policy Analysis in South Korea, edited by T.J. Lah and Thomas R. Klassen, and thank the editors and the authors for their outstanding contribution to this important encyclopedic database. Iris Geva-May Emerita Professor, Simon Fraser University, Vancouver, British Columbia, Canada. Honorary Research Professor, SPPA, Carleton University, Ottawa, Ontario, Canada. Founding President and Editor-in-chief, International Comparative Policy Analysis Forum and Journal of Comparative Policy Analysis. Michael Howlett Burnaby Mountain Professor and Canada Research Chair (Tier 1), Simon Fraser University, Canada. xxi

Foreword Pan Suk Kim Member of the International Civil Service Commission (appointed by the United Nations General Assembly) and former Minister of Personnel Management of the Republic of Korea

Public policy analysis is the evaluation of socioeconomic and political problems to provide solutions that can be authorised by legislatures and subsequently implemented by public officials in the executive branch. A key component of policy analysis is the assessment of existing public policies and programmes to determine their effectiveness and efficiency. Public policy analysis is a careful evaluation and study of the formulation, adoption and implementation of a course of action intended to improve economic, social, or other public issues. Tackling unprecedented problems such as COVID-​19, global warming and climate change, natural hazards, and the economic and social bipolarisation of society, and preparing an adequate safety net are gaining more importance, locally and globally. These problems are volatile, uncertain, complex and ambiguous by nature. Accordingly, the missions and roles of public policy have never been more important, not only in South Korea, but also worldwide. South Korea, officially the Republic of Korea (and henceforth ‘Korea’), has reached an advantageous position in the global community. Its economy is the tenth largest by nominal gross domestic product in the world, identifying it as one of the G-​20 major economies. Its exports have increasingly reached beyond manufactured goods such as cars and semiconductors to include pop culture, a phenomenon now referred to as the Korean Wave. From prize-​winning dramas and films, to popular music and cuisine, Korea has a prominent place in many boardrooms and homes across the world. At home, Koreans enjoy a vibrant democracy, high educational standards, and a safe society with advanced levels of health care and innovative technologies. Public policy analysis or the study of government actions with the aim to improve programme and policy outcomes has always occupied a principal place in Korea. This book shares South Korea’s experience in public policy analysis. As illustrated by several thoroughly analysed chapters in this book, even though policy analysis is mostly exercised within public agencies, it is by no means restricted to these. The editors, T.J. Lah and Thomas R. Klassen, have compiled it such that it will prove to be a major contribution to research and pedagogy as well as valuable reading for specialists, whether they are students, scholars or practitioners. I believe the readers of this book will find it informative and helpful in understanding the policy process, particularly policy analysis and evaluation. They can sample thorough discussions of key policy issues, such as policy styles and public institutions, the policy analysis profession, bureaucratic capacity, regulatory xxii

newgenprepdf

Foreword

impact analysis, policy analysis in local government and quasi-​governmental institutions, policy advisory bodies, legislative committees, media policy and public interest, interest groups, think tanks, the role of academics, as well as policy analysis education in Korea.

xxiii

Part One Overview of policy analysis in Korea

ONE

An introduction to policy analysis in Korea Cheol H. Oh

The emergence and development of policy analysis in Korea It is not new in social sciences for information or knowledge to be used as the basis for government policy, programmes or social reform. Normally, the results of policy research can enable the government to review existing programmes or introduce new programmes by raising new policy issues or presenting new interpretations or solutions to existing problems. A long time ago, the traditional policy sciences stressed that the key to promoting human dignity and improving the welfare of human beings was enhancing the rationality of the policy process, and that this requires appropriate policy information and knowledge. It was essential that such information identify potential policy problems in advance and provide a thorough analysis and evaluation of values and facts related to the problem (for more detail, see Oh, 2015). All knowledge of the policy process can be used as policy information, but the analysis and evaluation of policy phenomena and the ensuing consequences are very important forms of policy information for rational policymaking. However, policy analysis and evaluation did not emerge and spread overnight. Although accurately tracing the history of development is not possible, it is safe to say that policy analysis and evaluation have been around since public administration or policy studies were first adopted as specialised academic fields. In South Korea (henceforth ‘Korea’), policy studies emerged under the name policy science in general or policy formation as part of the regular curriculum for public administration in the late 1960s. In the late 1970s, full-​scale education regarding policy science began as a separate academic field that was independent from law, political science, and public administration. Since the 1980s, education programmes related to policy science have been actively promoted at graduate schools, and the Korea Association for Policy Studies, a professional organisation for students of policy science, was founded in 1992 (see Oh, 2016). On the other hand, the time when policy analysis began to draw attention in Korea also overlaps with the introduction of policy studies and its development period in a broader context. As has been noted, a range of analytical techniques have been developed across various social science fields. It seems that policy analysis began to gain recognition and take root as an independent field in the 1960s (Rho, 2006). At this time, the United States faced a number of domestic problems including social welfare, urban development and public 3

Policy Analysis in South Korea

education, and interest was naturally drawn to different measures for rational policymaking (for example, planning, programming and budget systems) within the government. In particular, alongside traditional methods and perspectives from social sciences such as sociology and economics, the development of new policy analysis methods such as systems analysis and advanced statistical techniques helped to enable in-​depth prior analysis of government policies and programmes (Rho, 2006). In Korea, the need for policy analysis was gradually recognised in the late 1970s, and some universities began to include policy analysis as part of courses in policymaking or general policy science. In the 1980s, some schools began offering policy analysis as a separate course, and the government began providing education on policy analysis to middle-​management level officials (Rho, 2006, p 4). Similar to other areas of policy sciences, policy analysis was able to establish itself as a separate and independent field of research and education in the 2000s, but some differences remain in the level of research interest and education between individual universities. The following sections briefly discuss some of the distinctive features of Korea’s policy analysis field and offer some suggestions.

Characteristics of policy analysis in Korea In general, policy analysis and evaluation are similar in that they are intellectual activities targeted at policies. However, from a different perspective, it is also desirable to distinguish between the two, for example, in the purpose or timing of the analysis or evaluation (Gang, 2006). In other words, the purpose of policy analysis is to provide valid information needed for quality policymaking, while assessment (or evaluation) is aimed at improving existing policies or programmes through feedback mechanisms. It is thus more effective and practical to distinguish between analysis and evaluation from a pedagogical perspective. Although this article focuses on Korea’s policy analysis, the nature of policy analysis in Korea makes it unrealistic to deal only with this specific field. Above all, there is one interesting feature in Korea regarding policy analysis. That is, policy analysis and policy evaluation were not initially introduced as two independent separate concepts and have therefore not developed into separate fields of study or education. It seems that policy analysis and evaluation have not been intentionally separated from one another since the early days of when policy analysis was introduced to Korea. Some universities offered independently or integrated policy analysis and evaluation courses depending on factors such as number of professors or the specialisation of faculty members. For example, if there is a faculty member in the public administration department who specialises in evaluations in general, then a policy evaluation course is more likely to be offered instead of policy analysis. That professor may touch upon analysis as part of the policy evaluation course or the two areas may be integrated and offered as one course. 4

An introduction to policy analysis in Korea

On the other hand, the majority of research also tends to deal with policy analysis and evaluation together, with a greater focus on evaluation studies rather than analysis in particular. There are many different reasons for this but most are deeply related to the government’s position in one way or another. In other words, it is important to note that the Korean government’s interest lies more in assessing policies or programmes post-​execution rather than recognising the importance of analysis in the early stages of policymaking. More interestingly, numerous government-​led reviews or evaluations are typically carried out. In Korea, most programmes or projects conducted by the government are required to undergo a mandatory programme evaluation after implementation every year under the Framework Act of Government’s Work Evaluation. Many policy professionals, including professors, are active on evaluation-​related committees run by individual ministries at the level of central government and are also involved in research contracts on evaluations of specific programmes under individual ministries. Policy experts, who are mostly professors, naturally encounter opportunities to gain experience and knowledge in evaluation rather than policy analysis, and this experience tends to lead to education and research in evaluation-​related subjects more often than analysis-​related fields. Of course, this is not to say that the government does not perform any prior policy analysis when considering policies or programmes. The point is that there is a large gap between reality and the reasonable expectation that prior analysis should be conducted. For example, as a means of reducing policy failures, the Roh Moo-​hyun administration employed an interesting policy measure called Policy Quality Management (PQM) which was, to a large extent, made up of a checklist for each stage of the overall policy process. Interestingly, part of the checklist contained checkpoints directly related to policy analysis. Government officials were then required to apply the measures to major programmes (referred to as government work) in accordance with a presidential executive order before making a final decision, as well as monitoring to be conducted throughout the process. However, after the change in government, the PQM system became of little use and government officials’ interest in policy analysis, whether at the central or local level, sharply declined. In light of this situation, the terms policy analysis and evaluation will from time to time be used together in this paper without necessarily distinguishing between them. Moreover, I might add that much of what is discussed about evaluation could also be applicable to policy analysis, at least in the context of Korea. Second, narrowing our focus to policy analysis, it is not difficult to see that systematic research on policy analysis itself has not regularly taken place in Korea. For example, it is not easy to find a survey or study that examines how much attention has been paid to policy analysis in the field of policy science on either a research or educational level. Furthermore, the few previous studies of policy analysis do not directly address policy analysis itself or related issues. Instead, they dealt with policy analysis and evaluation together or attempted to examine 5

Policy Analysis in South Korea

the current state of policy assessment. This common denominator among the small number of studies shows that in Korea, more attention has been given to evaluation than other stages of the policy process. For example, as shown in Table 1.1, according to Hong (2015) research in policy evaluation accounted for an overwhelming 60 per cent of studies, followed by policy formation and policymaking with 15.6 and 12.5 per cent, respectively. On the other hand, policy implementation accounted for the smallest portion of the research with 6.3 per cent. It is noteworthy that policy formation and policymaking are examined separately, despite the similarity in terms. In this case, policy formation seems to involve the pre-​policymaking phase, including the so-​called agenda setting and policy analysis. In this regard, one can make a somewhat logical guess, albeit indirectly, that academic interest in policy analysis in Korea has remained relatively high in the early 2000s. In particular, there are many reasons for the high demand for policy evaluation, which is often thought to be used as a means for analysing the performance of government programmes or giving them legitimacy. However, there is another possibility that should be considered. Most countries became interested in performance management and programme evaluation in the 1990s, mainly due to such imminent and persistent issues as the global financial crisis, unstable international politics and new challenges to government roles and action since the 1980s. Korea also experienced the 1998 Asian financial crisis and the 2008 global financial crisis, and such experiences are believed to have influenced the government as well as the academic community and are thereby reflected in policy research trends (Hong, 2015, pp 35–​6). Other similar studies also show that studies on policy analysis and evaluation account for a higher proportion than other stages of the policy process. According to an analysis of articles published in the Korean Journal of Public Administration over the past 60 years (see Table 1.2), articles directly examining policy evaluation account for the largest chunk with 37.5 per cent, while only 12.2 per cent deal with issues related to policymaking, followed by 4.5 per

Table 1.1: Types of yearly research on the policy process Year 09

10

11

12

Total

Percentage Valid (%) percent %

0

2

1

3

1

15

3.0

15.6

0

0

0

1

1

6

2.4

12.5

1

0

0

0

0

6

1.2

6.3

9

7

7

3

4

56

11.2

58.3

0

0

1

1

0

2

7

1.4

7.3

7

10

10

9

7

8

96

19.2

100.0

03

04

05

06

Formation

1

1

2

3

1

Making

0

2

5

2

1

Execution

0

1

2

1

1

Evaluation

8

6

5

3

4

Others

0

2

1

0

Total

9

12

15

9

Source: Hong, 2015, p 36

6

07

08

An introduction to policy analysis in Korea

Table 1.2: Types of policy stages examined in policy studies Number of articles

Percentage (%)

Formation

27

4.5

Making

73

12.2

Implementation

25

4.2

Analysis and evaluation

224

37.5

Others (not applicable)

248

41.5

Total

597

100.0

Source: Oh, 2016, p 110

cent examining issues related to policy analysis, such as problem definition or agenda setting, and 4.2 per cent examining issues of policy implementation. In short, it can be seen in Korea that policy research by students of public administration tends to focus on particular stages (policy evaluation or analysis) rather than covering all stages of the policy process. In particular, the relatively large number of studies on policy analysis or evaluation over the past 60 years seems to indicate that the participation of scholars in government evaluations and policy discussions might have led to the persistent accumulation of experience and data on policy evaluation and analysis. This could in return serve as a valuable resource for policy-​related research or education (see Oh, 2016, pp 22–​3). In addition to the general features of Korea’s policy analysis and evaluation described as previously discussed, studies of policy evaluation in specific areas also show a similar pattern. That is, much of the research has been done on policy evaluation, but this does not mean it has focused solely on issues related to policy evaluation. There is also ongoing research on policy analysis in terms of the timing of evaluations, although it only accounts for a small proportion. For example, post-​hoc (or summative) evaluation such as performance evaluation appears to account for 51.1 per cent or more of research on evaluation of information programmes (see Table 1.3). This indicates that scholarly attention seems to have focused on the assessment of post-​implementation results from the performance management perspective, at least in the area of information programmes. In terms of the life cycle perspective of government programmes, however, a systematic and balanced examination is required of the entire process of programme planning, execution and outcomes. Fortunately, a few studies are still being done on ex-​ante evaluation, or policy analysis, but a greater focus is needed on pre or process evaluation. In addition, it is also needed to identify the consistent policy implications of evaluation results or to conduct a meta-​evaluation for checking on whether evaluation itself is properly planned, designed and implemented. In short, students of evaluation seem to be interested in a range of aspects of evaluation. If these efforts continue to accumulate, they could ultimately serve 7

Policy Analysis in South Korea

Table 1.3: Types of evaluation Number of articles

Percentage (%)

Ex-​ante evaluation

3

6.4%

Process evaluation

2

4.3%

Post-​ante evaluation

24

51.1%

Others (meta evaluation, etc)

11

23.4%

Not applicable Total

7

14.9%

47

100.0%

Source: Oh, 2009, p 11

Table 1.4: Types of research Explanatory study

Descriptive study

Total

Number of articles

14

33

47

Percent

29.8%

70.2%

100.0%

Source: Oh, 2009, p 14

as an important component of an effective feedback mechanism to reduce policy or programme failures. Finally, as Table 1.4 indicates, most of the studies tend to be either exploratory in examining evaluation systems or methodologies or seek to develop evaluation indicators or criteria through case comparisons. Most of the studies on information programme evaluation over the past decade appear to deal with fact-​finding or evaluation of the process rather than examining either the causality or causal structure of programmes through hypothesis testing. If we stretch this tendency a little further, policy analysis and evaluation need to be studied in a way that balances fact-​finding and causal analysis, which could lead to a better understanding of programme evaluation and thereby improve the theory building of policy analysis or evaluation. On the other hand, as shown in Table 1.5, studies of evaluation are less likely to use quantitative analysis techniques. Of the quantitative analysis studies, 42.6 per cent appear to use only basic statistics, while 23.4 per cent employ crosstab analysis and t-​testing and 12.8 per cent use advanced analysis techniques such as regression and multivariate analysis. Overall, it can be said that there is not enough quantitative analysis in studies of information programme evaluation, and where such analysis is employed, it remains at a basic level. This trend seems to extend beyond specific areas such as information policy to cover policy evaluation and analysis in general. Of course, using advanced statistics does not necessarily lead to a high quality study, but theoretical discussions or hypothesis testing in policy analysis or evaluation will, by their very nature, require advanced statistical analysis over a more basic approach. 8

An introduction to policy analysis in Korea

Table 1.5: Analytical methods Basic statistics Cross tabs/​T-​test Regression Multivariate analysis

Used

Not used

Total

20

27

47

42.6%

57.4%

100.0%

11

36

47

23.4%

76.6%

100.0%

6

41

47

12.8%

87.2%

100.0%

6

41

47

12.8%

87.2%

100.0%

Source: Oh, 2009, p 16

Looking to the future As mentioned earlier, policy analysis has become a sub-​area of the field of policy science in Korea rather than an independent field. There is greater interest in issues related to policy evaluation or formation in comparison to other issues such as policy implementation. It is also true that there has been a consistent stream of research on policy analysis, but in most cases, it is more likely to be studied alongside or as part of policy evaluation than as an independent field. One practical reason for this trend is that the government’s interest mostly lies in policy evaluation rather than policy analysis (or pre-​evaluation), and many experts including college professors are involved in post-​evaluations rather than policy analysis. In order to further develop policy research in Korea and especially the area of policy analysis, the community of policy experts needs to act in a manner that reflects the changing policy environment. The following section contains a few suggestions to this end. First, more attention must be given to the so-​called ‘ecosystem’ of policy analysis. The policy analysis ecosystem (PAE) is a field of policy analysis that encompasses the production, distribution, dissemination and utilisation of knowledge (or information) related to policy analysis. It is also the platform in which policy analysis capable of affecting interactions as well as cooperative competition among people or groups actually takes place (Yoo and Oh, 2011, p 6). The purpose of PAE is not simply to produce and efficiently manage knowledge or information related to policy analysis such as intentional control and coordination of policy analysis but also to utilise, share and manage such information and knowledge to promote rational decision making by individuals or organisations. In order to improve the quality of future policies, strategic alternatives for generating and utilising valid analytical information and knowledge are needed (Yoo and Oh, 2011, p 18). Interest in the policy analysis ecosystem did not appear out of the blue but was rather inherent in policy studies from the very beginning. Distinctive 9

Policy Analysis in South Korea

characteristics (often called orientations) such as contextuality, problem-​ orientation and multi-​disciplinary approaches were suggested by the pioneers of early policy studies based on a recognition of the fundamental limitations of disjointed and separate research methods. Consequently, policy studies explicitly intend to integrate these two types of knowledge, that is, knowledge of policy and knowledge in policy. Accordingly, it is a logical expectation that policy studies should try to produce policy-​related information in an integrated manner. However, it is not clear how much policy analysis or evaluation research has been concerned with generating integrated knowledge on analysis or evaluation (of course, there are some exceptions such as the triangulation method). Recent changes in the research environment coupled with the increasing complexity and multi-​dimensionality of policy problems have added to the need to perform policy analysis and evaluation in an integrated and cooperative manner. Before long, policy analysis and evaluation may be reduced to a simple task performed by machines rather than an intellectual field pursued by human beings. It is thus imperative to establish a research ecosystem for policy analysis and evaluation that can transcend academic boundaries, breaking down the seemingly formidable walls surrounding the closed circle of experts. This can be achieved by gradually nudging views on policy that are rapidly becoming outdated. Second, it is necessary to enhance cooperation and collaboration between experts in the policy analysis community. As mentioned earlier, the policy analysis ecosystem is made up of multi-​layered networks: a human network of productive communication among actors who produce knowledge or information about policy analysis; a network of policy analysis information and knowledge where ideas and information are shared among those who produce such information through cooperation or competition; and a technology-​based network that links information and knowledge on policy analysis through communication networks. In other words, the key to PAE lies in the actions and interactions between actors who produce information and knowledge on policy analysis (Yoo and Oh, 2011). Accordingly, close collaboration among actors in an open environment is needed more than ever so that such knowledge and information can contribute to rational policymaking through the timely production and sharing of policy information. The potential for systematic and integrated policy analysis will be reduced if different agencies conduct independent analyses or evaluation of the same or similar programmes, acting as separate actors without sharing their results. The results of analysis on a programme under consideration cannot always be combined because they may differ in terms of the level, focus or method of analysis. However, prior to conducting policy analysis or a pre-​evaluation it is also worthwhile for agencies to seek out any existing information or knowledge of analysis and try to put it together in the context (Oh, 2013). In addition, it is necessary to be aware that recent social problems have been becoming increasingly complicated, and that government programmes created to solve such policy problems are not simple either. Accordingly, it is extremely 10

An introduction to policy analysis in Korea

difficult to understand complex policy phenomena from a single perspective or specific technique, and consequently, policymakers face limitations in terms of developing adequate and valid policy options that reflect reality. A single analytical technique or perspective cannot sufficiently explain everything or examine the causality between policy problems and effects. This is why more cooperation and collaboration is needed in policy analysis and evaluation (Oh, 2015). Third, a life-​cycle perspective needs to be added to discussions of issues related to policy analysis. The reality is that it is difficult to link or combine different policy analyses due to differences in legal bases, the agencies in charge or the criteria (or indicators) used in the analysis. For example, policy analysis before budget planning (the preliminary evaluation of a programme in terms of effectiveness, efficiency and technical feasibility) and analysis after budget formation appear to operate as if they were two separate activities. This tendency inevitably puts serious limits on the performance of the Korean government in that it prevents the government from verifying whether government programmes have achieved their original goals. After all, it is not easy to make a reasonable interpretation of evaluation results to see if the programme under evaluation is a success or not. Therefore, it is difficult to make an appropriate diagnosis to improve the programme under evaluation. In the future, close links between policy analysis, process evaluation (programme monitoring) and post-​evaluation are required so that policy analysis can be performed and studied more systematically from a life-​cycle perspective in conjunction with other evaluation activities. Finally, it is necessary to further enhance evidence-​based policymaking (EBP) by improving policy analysis. With the emergence of a hyper-​connected society, data, information and knowledge play a key role in a wide range of administrative activities including organisational management, HR and finance. Similarly, the use of knowledge and information has become indispensable in the process of government activities. Recently, policymakers of the Korean government seem to have an expectation that data or information may help them resolve social problems more rationally than otherwise. Under the circumstances, EBP has naturally been accepted as desirable for policymakers and researchers, irrespective of the validity of the assumption. Evidence is believed to provide policymakers and potential users with a basic set of initial guidelines for policies and a greater understanding of the nature or scope of policy issues. It is also believed that evidence in the policy process is helpful for suggesting solutions to or the possible future effects of policy problems. Accordingly, students of EBP argue that policymakers benefit from using evidence in several ways (Campbell et al, 2007, p 5, cited in Oh, 2015). Most of the activities that produce and share policy information and knowledge capable of being used as evidence in the policy process are the result of policy analysis and evaluation. This is why one effective way to improve the quality of policies is providing timely and relevant policy analysis such that policymakers can choose the most rational options. Recognising that past studies of policy analysis lack systematic examination under this theoretical view, greater efforts 11

Policy Analysis in South Korea

are needed to underscore the importance of policy analysis and promote more research in this field. We also need to be aware that policy analysis simply for the sake of analysis is of little use. Rather, it is best to remember that the combination of analysis and policy is very important in the sense that analysis can improve the quality of policies. In this regard, there is a need for improvements to institutions and laws so that evidence can play a greater role in the policy process. References Campbell, S., Benita, S., Coates, E., Davies, P. and Penn, G. (2007) Analysis for Policy: Evidence-​Based Policy in Practice, London: Government Social Research Unit. Gang, G.B. (2016) Policy Analysis, Seoul: Dymbook. Hong, H.D. (2015) ‘A study on network analysis and characteristics of current policy research in Korea’, Korean Policy Studies Journal, 24(1): 27–​51. Oh, C.H. (2009) ‘Evaluation research on informatization: an empirical review’, Informatization Policy, 16(4): 3–​26. Oh, C.H. (2013) ‘A view on policy evaluation in the Park Geun-​H ye administration’, paper presented at the Spring Meeting of the Korean Association for Policy Analysis and Evaluation, 1–​25. Oh, C.H. (2015) ‘Evidence and its use in policy-​making: research trend and suggestions’, Korean Policy Studies Journal, 24(1): 53–​75. Oh, C.H. (2016) ‘Policy paradigm and the trend of policy studies in Korea’, Korean Public Administration Review, 50(5): 87–​126. Rho, W.J. (2006) Policy Analysis, Seoul: Parkyoungsa. Yoo, J.M. and Oh, C.H. (2011) ‘A review of studies on knowledge ecosystem’, Informatization Policy, 18(4): 3–​21.

12

TWO

Policy analytical styles and public institutions in Korea Suho Ji and Sounman Hong

Introduction Previous studies have reported that different patterns and styles of policy analysis are found in different jurisdictions, policy sectors, and organisational contexts (Kelman et al 2013; Kelman and Hong 2015; Howlett and Lindquist, 2007). Research has also shown that the patterns and styles of policy analysis are important for its successful implementation (Radin, 2000). As Peled (2002: 219) puts it, ‘[i]‌n practice, ideologically similar administrative reforms differ greatly in style, and style plays an important role in determining their fate’. Research has also shown that the effectiveness of different styles of policy analysis depends on the governance and administrative contexts in which the analysis is performed (Heineman et al, 2002; Peled, 2002; Christensen et al, 2003; Howlett 2004a). That is, the influence of policy analytical styles is conditioned by contextual elements, including cultural, institutional or other aspects of the policymaking context (Howlett and Lindquist, 2004). Given the importance of the style of an administrative or policy reform, it is critical to understand the uniqueness of policy analytical styles widely adopted in the Korean public administration system. In this chapter, we describe the policy analytical styles reflected in the performance management of the Korean public institutions, one of the most important policy evaluation systems in Korea. In Korea, the Ministry of Economy and Finance evaluates and analyses the annual performance of public institutions, which are large state-​owned enterprises and quasi-​governmental organisations. We describe the styles of the evaluation and analyses, explain their positive and negative aspects, and suggest potential theoretical and practical implications. The remainder of the chapter proceeds as follows. In the next section, we first define the elusive concept of policy analytical styles with a brief summary of the relevant previous works. We then explain the background for the evaluation of the performance of public institutions in Korea. We then proceed the description of the detailed institutional features of the policy analysis system, including its styles, how they changed over time and how they might influence the behaviours of policy actors. Lastly, we conclude the study and discuss our findings. 13

Policy Analysis in South Korea

The concept of policy analytical style It is important to define clearly the elusive conception of a policy analytical style. The general idea of a policy analytical style is not new, although there has been relatively little research on it. The idea can be traced back to the foundational studies of bureaucracy in the early and mid-​19th century (for example, Waldo, 1948; Weber, 1978). However, there has been little effort to clearly define the concept. More recently, Howlett (2004b) defined administrative style as ‘a more or less consistent and long-​term set of institutionalized patterns of politico-​ administrative relationships, norms, and procedures’. In this study, we follow Howlett (2004b), defining a policy analytical style as the consistent and long-​term set of institutionalised patterns observed in a policy analysis system. An important aspect of our definition is that we focus on the institutional aspect. While the concept of a policy analytical style may include both behavioural and institutional aspects, we posit that the behaviours of relevant actors, including public administrators, politicians and citizens, operate within an institutional context (Damonte et al, 2014; Weaver, 2015; George et al, 2019; Howlett et al, 2020; Bayerlein et al, 2021). As March and Olsen (1996, p 249) note, institutions ‘constitute and legitimize political actors and provide them with consistent behavioral rules, conceptions of reality, standards of assessments, affective ties and endowments, and thereby with a capacity for purposeful action’. We thus strongly believe that the unique institutionalised patterns of a policy analysis system shape the behaviours of administrative agents as well as other policy stakeholders. In other words, the institutional context surrounding administrative agents and policy stakeholders ‘serves to simplify decisions that might otherwise have been complex and incomprehensible’ (Egeberg, 1999, p 159). It is thus important to know the unique characteristics, norms and patterns of the institutional aspect of a policy analysis system in order to fully understand its impact. Previous studies have advanced our understanding of policy analytical styles with their empirical observations. For instance, Radin (2000) explained that US policy analysis may be grouped into two distinct styles by time: the rational ‘modern’ style of policy analysis of the 1960s and 1970s that includes quantification of economic costs and benefits, and the ‘post-​modern’ style, which considers the social construction and political process of the public policy. Similarly, on the basis of observations of the European public administration system, Mayer et al (2001) classified different policy analysis functions into the following six distinct styles of policy analysis: rational, client advice, argumentative, interactive, participative and process. Each style employs specific analytical techniques, such as quantitative data analysis, as well as qualitative judgments (Howlett and Lindquist, 2007). This chapter aims to extend several strands of past scholarly work. First, it contributes to the literature by describing the unique institutional characteristics 14

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of Korean public administration. The Korean public administrative system is unique in that it has a strong meritocratic bureaucracy. Second, it also adds to the literature on administrative styles (Radin, 2000; Howlett, 2002; 2004a; Peled, 2002; Christensen et al, 2003). This study is also related to the growing interest in the role of administrative styles in the context of international organisations (Knill and Grohs, 2015; Enkler et al, 2017; Knill et al, 2019). Finally, the evidence presented in this chapter may also help policymakers (especially in developing countries) to benchmark the centralised policy analysis system successfully implemented in Korea.

Performance management of Korean public institutions In exploring the role of policy analytical styles, we investigate the key institutional features of the performance evaluation system of Korean public institutions. Public institutions include state-​owned enterprises (or public enterprises) and quasi-​governmental organisations. These organisations are legally separate entities from ‘the Korean government’. The Ministry of Economy and Finance may select and designate a certain organisation as a public institution among those receiving a substantial level of financial support from the government. The selection process may be seen as being highly political because the ministry has complete discretion on whether to designate an organisation as a public institution. Public institutions have a unique status in the Korean public sector because of its abnormally large size. The aggregate budget size of public institutions is much larger than the budget size of the Korean government (Hong, 2019). Many of the tasks performed by the Korean public institutions are conducted by government agencies in many advanced countries. Some scholars argue that public institutions serve as ‘hidden governments’, because those institutions’ activities are not as closely examined by the Korean National Assembly as are the government’s activities themselves. The Korean government thus sometimes uses public institutions to circumvent the National Assembly’s control. Although public institutions are not closely monitored by the National Assembly, they are strongly controlled by the Ministry of Economy and Finance. Once an organisation is designated as a public institution by the ministry, it is subject to an annual performance evaluation. This performance evaluation system was adopted in 1983 in tandem with the ‘new public management’ wave of management reforms and has been implemented since then. Under the system, the Ministry of Economy and Finance appoints a group of experts, including professors, accountants and lawyers, who evaluate the performance outcomes of public institutions on the basis of pre-​defined performance indicators. Roughly speaking, the Ministry of Economy and Finance designs the institutional aspect of the performance evaluation, including the list of performance indicators, and the independent experts decide the actual scores on the basis of those indicators. As we will explain, however, the ministry exerts significant influence over the scores as well. 15

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The outcomes of the performance evaluation are published as a letter grade, from A to E. An A grade may be interpreted as ‘excellent’, a B grade is ‘above average’, a C grade is ‘below average’, and either a D or an E indicates a ‘poor’ rating (Hong, 2019). Public institutions receive financial rewards if they receive good grades (that is, A, B and C). However, the heads of the institutions may be dismissed if the institutions receive bad grades (that is, D and E). These rewards and sanctions provide the institutions with strong incentives to perform well in the annual evaluation. In 2021, 350 organisations were designated as public institutions by the Ministry of Economy and Finance. Specifically, there are 36 state-​owned enterprises, 96 quasi-​governmental organisations and 218 other public institutions. Most state-​owned enterprises are public utilities, including those for electricity, water, gas, railways, airports and ports. These institutions sell their products or services to the citizenry and receive little financial support from the government. They are nonetheless classified as public institutions because the Korean government is the largest major shareholder. On the other hand, most quasi-​governmental organisations, with a few exceptions, receive annual financial support from the Korean government and are thus designated as public institutions.

The policy analytical style of performance management system Quantitative evaluation and the rational modern style In this study, we describe the distinct policy analytical style observed in the performance management system of Korea. In Korea, public institutions are evaluated on the basis of two broad categories: (1) general management and (2) key public services. Here, the performance of ‘general management’ measures the extent to which an organisation is efficiently and effectively managed, if at all. On the other hand, the performance of ‘key public services’ measures the extent to which an organisation successfully delivers its services to the citizenry, if at all. In this study, we explain the institutional features of the evaluation of ‘key public services’. We focused on ‘key public services’ because the evaluation of ‘general management’ is much simpler.1 The main difficulty in evaluating the performance of public institutions stems from the fact that each public institution provides a distinct and unique service. For instance, the state-​owned utilities are all monopolies with distinct sets of missions and activities. Thus, the style of the policy analysis of ‘key public services’ has always been the subject of criticism as well as a topic of curiosity to many outsiders who are not involved in the evaluation process. Hereafter, we focus exclusively on the ‘key public services’ evaluation. The performance indicators of the performance management system may be classified into three distinct categories: quantitative, qualitative and the adequacy 16

Policy analytical styles in Korea

Figure 2.1: Three categories of performance indicators Qualitative evaluation Quantitative evaluation

17

24

4

Adequacy of quantitative indicators

of the quantitative performance indicators. In Figure 2.1, we show the relative importance of the three categories. In 2020, out of 45 points (the maximum score an organisation can achieve in the ‘key public service’ evaluation), 24 points and 17 points are allocated for quantitative and qualitative indicators, respectively. The remaining four points are assigned to the evaluation of the adequacy of the quantitative indicators. Quantitative evaluation involves a set of performance indicators with specific formulas and targets. If an organisation achieves a target, it will receive the full score allocated for the indicator. However, if the organisation fails to achieve its target, the score is subtracted depending on its performance relative to the target. This quantitative evaluation comprises about 53 per cent of the maximum score an organisation can achieve and is thus the most critical part of the evaluation system. The scores of quantitative evaluations are calculated on the basis of pre-​ defined formulas. In Figure 2.2, we present two histograms that describe the distributions of the number of public services evaluated by the system and the number of quantitative performance indicators. On average, a public institution has 3.17 public services. This figure has changed very little from 2018 to 2020. The average numbers of quantitative performance indicators were 6.17 in 2018, 6.42 in 2019 and 6.39 in 2020. This suggests that organisations assigned about two quantitative performance indicators to each public service, on average. The quantitative indicators are heavily criticised for several reasons. First, each public institution provides a unique set of public services, and thus performance indicators also differ across institutions. Many have criticised the lack of comparability of the quantitative scores across organisations with different missions. In fact, this is a fundamental problem in the performance evaluation of most public organisations; for instance, the performance of an airport is compared with the performance of an energy utility company.

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Figure 2.2: Number of public services and quantitative performance indicators

.4

2019

2020

.3

2019

.2

.1

0

0

2020

.2

.6

1 .8

2018

.4

Number of quantitative performance indicators .5

Number of public services

2018

Note: The figure shows the number of public services (on the left) and quantitative performance indicators (on the right). The average number of public services was 3.17 in all three years from 2018 to 2020, whereas the average number of quantitative performance indicators was 6.17 (2018), 6.42 (2019), and 6.39 (2020).

Second, a possibly more critical issue is that the evaluated public institutions submit their own performance indicators by means of which their performance will be evaluated. Specifically, performance indicators are selected as follows. The evaluated public institutions submit the list of quantitative performance indicators that can effectively and accurately capture the impact of their services. The Ministry of Economy and Finance reviews the submitted indicators and approves (or rejects) them. The submission and approval occur two years before the actual evaluation is made, so that public institutions can prepare for the evaluation. However, while the ministry reviews the submitted indicators, it lacks the expertise to evaluate their adequacy. This is problematic because the public institutions have incentives to design the formula of the quantitative performance indicators in such a way that they can easily achieve the targeted score. In response to such criticisms, the Ministry of Economy and Finance created a separate performance indicator that evaluates the adequacy of the quantitative performance indicators. Experts appointed by the ministry judge the extent to which the quantitative performance indicators approved by the ministry are adequate, if at all, as well as the level of difficulty in achieving the target. In 2020, 4 points were allocated for this indicator. In sum, the performance evaluation of the Korean public institutions may be characterised as the rational modern style, which relies heavily on the quantification of service performance. In terms of its style, the system is similar to those that were widely used in the 1960s and 1970s in the US (Radin, 2000). A large part of the performance score is determined by a pre-​defined formula. However, to address the concerns that the performance indicators may be manipulated in the interests of the public institutions, the ministry also includes an evaluation of the quantitative performance indicators themselves. 18

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Qualitative evaluation and the potential for manipulation The use of a rational style of policy analysis that quantifies performance scores has its own advantages. For instance, the results of analyses do not depend on who makes the analyses, in contrast to qualitative performance evaluations. This is certainly an advantage, but quantitative evaluations are not perfect either. They can miss important parts of performance outcomes, thereby distorting the overall results of an analysis. Because of such concerns, the Korean government has also included a qualitative performance indicator. The qualitative evaluation process is rather simple, with a single indicator that asks whether and, if so, to what extent the institutions achieved the missions of their key public services. The experts appointed by the Ministry of Economy and Finance makes the judgments qualitatively. In total, 17 points are assigned to qualitative evaluation, which constitutes about 38 per cent of the total score. In terms of style, the qualitative evaluation may be viewed as postmodern (Radin, 2000), as experts who evaluate the performance also consider the social and political aspects of public services rather than just quantifying the policy impact. However, it also has features of the argumentative style (Mayer et al, 2001). The qualitative evaluation may be viewed as argumentative because the experts who make the judgments engage in debates about the pros and cons of the evaluated service (Howlett and Lindquist, 2007). Qualitative performance indicators are valuable additions to the performance evaluation system because quantitative performance evaluation is not perfect. By adding the qualitative aspects, the system can produce a more balanced evaluation of the evaluated organisations’ activities. Overall, the importance of qualitative performance indicators has increased over time because of growing criticisms against quantitative performance indicators’ capacity to capture the multi-​dimensional aspects of public administration, services and policies. However, some have also raised concerns that the process of performance evaluation may become distorted with the use of qualitative performance indicators. Specifically, there is concern that the Ministry of Economy and Finance, which administers the entire process, may distort the performance outcomes for its own interests. Hong and Kim (2017) have examined this subject using empirical data. Their empirical strategy takes advantage of the fact that public servants tend to become the heads of public institutions after they retire from the ministry. Hong and Kim (2017) hypothesised that the public institutions whose heads retired from the Ministry of Economy and Finance would receive a better performance grade than other institutions, which they termed the rent-​seeking hypothesis. Overall, the results supported the rent-​seeking hypothesis, finding that institutions led by retirees from the Ministry of Economy and Finance received more favourable evaluation outcomes, all else being equal. More striking evidence 19

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is that the rent-​seeking hypothesis was observed only in the qualitative evaluation outcomes. In other words, the heads of public institutions who retired from the Ministry of Economy and Finance received higher scores in the qualitative evaluation but not in the quantitative evaluation. This is suggestive but compelling evidence that supports the rent-​seeking hypothesis. All things considered, we seek to emphasise that both quantitative and qualitative evaluations have positive and negative side effects. In our view, this is exactly why policy analytical styles have evolved over time in many advanced countries, including the US and European countries (Radin, 2000; Mayer et al, 2001; Howlett and Lindquist, 2007). Does the performance evaluation make any difference? Another important feature of the performance evaluation system is that it is top-​down in nature. The Ministry of Economy and Finance can exert significant influence over the whole process of the evaluation. In addition, the ministry may also have significant influence over the size of the annual budget as well as the organisational structures of public institutions. All public institutions are expected to submit their annual budget and plans for their organisational size for approval every year. The ministry then reviews and approves the submissions. This heavy concentration of power in the hands of the ministry allows the Korean government to push public institutions in the direction proposed by the ministry and, more broadly, the government. The top-​down nature of the performance evaluation may have contributed to its success. Hong (2019) examined whether performance evaluations have changed the organisational behaviours of the evaluated institutions. Specifically, Hong tested whether public institutions try harder to improve their scores when they receive negative feedback than when they receive positive feedback. This is called the negativity bias hypothesis in performance evaluation. Prior research has presented evidence that supports this hypothesis. Taking advantage of the discrete performance outcomes, from A to E, and exploiting the discontinuities between grades, Hong’s 2019 study provides strong evidence that public institutions tend to pay greater attention to their scores when they receive negative feedback. A somewhat puzzling finding, however, is that the results are not fully explained by the formal sanctions attached to the performance outcomes. The strong influence of the system may be driven by the top-​down nature of the evaluation process. Similar findings have been reported in other performance evaluation systems similarly structured and managed by the Korean central government (Hong, 2017, 2020; Hong and Kim, 2019; Hong et al, 2020; Kim and Hong 2019; see also Han and Hong 2019). Although the centralised and top-​down style of the system often helps governments to achieve their goals quite quickly, it also has some negative aspects. For instance, in the current system, the Ministry of Economy and Finance has enormous influence on the formulation of the missions and goals 20

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of public institutions. These missions and goals are reflected in the targets of both quantitative and qualitative performance indicators. If the missions and goals are not properly set, however, the ministry’s powerful role may push public organisations in the wrong direction, resulting in a waste of public resources as well as significant welfare losses.

Conclusion In this study, we have described the policy analytical styles of the performance management systems of public institutions. Following Howlett (2004b), we first defined a policy analytical style as the ‘consistent and long-​term set of institutionalized patterns observed in a policy analysis system’. We then analysed the key institutional features of performance management systems that significantly shape the organisational behaviours of public institutions. Performance management systems have multiple quantitative performance indicators, producing a comparable scale of standardised scores. On the basis of the evidence, we explained that the system that was studied, that of the Korean government, may be viewed as displaying the ‘rational modern style’, as Radin (2000) puts it. We also explained that this rational mode and style has some merits, but on many occasions it is unable to capture the full impact of a public service or policy. In other words, the selected quantitative indicators are often not fully representative. The limitations of quantitative evaluation show the need to include a qualitative aspect in the system. Qualitative performance indicators carry much smaller weight than quantitative indicators, but the two complement each other well. Another important institutional feature of the Korean public administration is its top-​down nature, which stems from the strong power of the meritocratic bureaucracy (Hong and Lim, 2016). This power is especially concentrated in the hands of the Ministry of Economy and Finance. Thus, the government in charge of the performance evaluation process can exert significant influence during the whole process of the evaluation. This top-​down structure allows the government to push public institutions toward missions, goals and values determined centrally. If the initial direction is not properly set, however, the consequences may be much more harmful to society than the consequences that any bottom-​up style of public administration might produce. In sum, by describing the institutionalised patterns observed in a Korean policy analysis system, we attempted to explain that each policy analysis style has its own strengths and weaknesses. In other words, we believe that there is no perfect ‘one-​size-​fits-​all’ style for a policy analysis system that can always produce positive outcomes. The effectiveness of a policy analytical style may depend on larger contextual elements, including cultural, institutional or other aspects of the policymaking context. The combination of those contextual elements may make a particular style more prone to successful analysis of public policies. 21

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Note 1

The ‘general management’ part is evaluated by a number of common performance indicators and is thus much simpler than the ‘key public services’ part.

References Bayerlein, L., Knill, C. and Zink, D. (2021) The concept of administrative styles. In M. Howlett and J. Tosun (eds) The Routledge Handbook of Policy Styles, New York: Routledge, pp 153–​64. Christensen, T., Laegreid, P. and Wise, Lois R. (2003) Evaluating public management reforms in central government: Norway, Sweden and the United States of America. In H. Wollman (ed) Evaluation in Public Sector Reform: Concepts and Practice in International Perspective, Cheltenham: Edward Elgar, pp 56–​79. Damonte, A., Dunlop, C.A. and Radaelli, C.M. (2014) Controlling bureaucracies with fire alarms: policy instruments and cross-​country patterns. Journal of European Public Policy, 21(9), 1330–​49. Egeberg, M. (1999) The impact of bureaucratic structure on policy making. Public Administration, 77(1), 155–​70. Enkler, J., Schmidt, S., Eckhard, S., Knill, C. and Grohs, S. (2017) Administrative styles in the OECD: bureaucratic policy-​making beyond formal rules. International Journal of Public Administration, 40(8), 637–​48. George, B., Van de Walle, S. and Hammerschmid, G. (2019) Institutions or contingencies? A cross-country analysis of management tool use by public sector executives. Public Administration Review, 79(3), 330–​42. Han, Y. and Hong, S. (2019) The impact of accountability on organizational performance in the US federal government: the moderating role of autonomy. Review of Public Personnel Administration, 39(1), 3–​23. Heineman, R.A., Bluhm, W.T., Peterson, S.A. and Kearny, E.N. (2002) The World of the Policy Analyst: Rationality, Values, and Politics. New York: Seven Bridges Press. Hong, S. (2017) What are the areas of competence for central and local governments? Accountability mechanisms in multi-​level governance. Journal of Public Administration Research and Theory, 27(1), 120–​134. Hong, S. (2019) A behavioral model of public organizations: bounded rationality, performance feedback, and negativity bias. Journal of Public Administration Research and Theory, 29(1), 1–​17. Hong, S. (2020) Performance management meets red tape: bounded rationality, negativity bias, and resource dependence. Public Administration Review, 80(6), 932–​45. Hong, S. and Kim, T.K. (2017) Regulatory capture in agency performance evaluation: industry expertise versus revolving-​door lobbying. Public Choice, 171(1–​2), 167–​86. Hong, S. and Kim, Y. (2019) Loyalty or competence: political use of performance information and negativity bias. Public Administration Review, 79(6), 829–​40.

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Hong, S. and Lim, J. (2016) Capture and the bureaucratic mafia: does the revolving door erode bureaucratic integrity? Public Choice, 166(1), 69–​86. Hong, S., Kim, S.H. and Son, J. (2020) Bounded rationality, blame avoidance, and political accountability: how performance information influences management quality. Public Management Review, 22(8), 1240–​63. Howlett, M. (2002) Understanding national administrative styles and their impact upon administrative reform: a neo-​institutional model and analysis. Policy and Society, 21(1), 1–​24. Howlett, M. (2004a) Administrative styles and regulatory reform: institutional arrangements and their effects on administrative behavior. International Public Management Journal, 7(3), 317. Howlett, M. (2004b) Administrative styles and the limits of administrative reform: a neo-​institutional analysis of administrative culture. Canadian Public Administration, 46(4), 471–​94. Howlett, M. and Lindquist, E. (2004) Teaching policy analysis: policy styles and their implications for training policy analysts. Unpublished paper, Annual Meeting of the Canadian Political Science Association, University of Manitoba, Canada. Howlett, M. and Lindquist, E. (2007) Beyond formal policy analysis: governance context, analytical styles, and the policy analysis movement in Canada. In M. Howlett, D.H. Laycock and L. Dobuzinskis (eds) Policy Analysis in Canada, Toronto: University of Toronto Press, pp 86–​115. Howlett, M., Ramesh, M. and Capano, G. (2020) Policy-​makers, policy-​takers and policy tools: dealing with behaviourial issues in policy design. Journal of Comparative Policy Analysis: Research and Practice, 22(6), 487–​97. Kelman, S., and Hong, S. (2015) This could be the start of something big: linking early managerial choices with subsequent organizational performance. Journal of Public Administration Research and Theory, 25(1), 135–​64. Kelman, S., Hong, S. and Turbitt, I. (2013) Are there managerial practices associated with the outcomes of an interagency service delivery collaboration? Evidence from British crime and disorder reduction partnerships. Journal of Public Administration Research and Theory, 23(3), 609–​30. Kim, B.H. and Hong, S. (2019) Political change and turnovers: how do political principals consider organizational, individual, and performance information?. Public Choice, 181(3), 291–​308. Knill, C. and Grohs, S. (2015) Administrative styles of EU institutions. In The Palgrave Handbook of the European Administrative System. London: Palgrave Macmillan, pp 93–​107. Knill, C., Bayerlein, L., Enkler, J. and Grohs, S. (2019) Bureaucratic influence and administrative styles in international organizations. The Review of International Organizations, 14(1), 83–​106. March, J.G. and Olsen, J.P. (1996) Institutional perspectives on political institutions. Governance, 9(3), 247–​64.

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Mayer, I.S., Van Daalen, C.E. and Bots, P.W.G. (2001) Perspectives on policy analysis: a framework for understanding and design. In Association for Public Policy Analysis and Management. Washington DC. Peled, Alan (2002) Why style matters: a comparison of two administrative reform initiatives in the Israeli public sector, 1989–​1998. Journal of Public Administration Research and Theory, 12(2), 217–​40. Radin, Beryl A. (2000) Beyond Machiavelli: Policy Analysis Comes of Age. Washington DC: Georgetown University Press. Weaver, R.K. (2015) Getting people to behave: research lessons for policy makers. Public Administration Review, 75(6), 806–​16. Weber, M. (1978) Economy and Society: An Outline of Interpretive Sociology, Volume 1. Berkeley, CA: University of California Press. Waldo, D. (1948) The Administrative State: A Study of the Political Theory of American Public Administration. Piscataway, NJ: Transaction Publishers.

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THREE

The policy analysis profession in Korea Inwon Lee

Introduction The greater diversity and complexity of policy issues across societies in politics, economics and culture can be confirmed by the increase in volume of legislation and policy analysis reports and the greater numbers of staff that support the policy process professionally. In response to these changes, the role of policy analysis is becoming more critical in promoting rational policymaking and systematic implementation in the policy process. This chapter will provide a brief review of the history of the policy analysis profession in Korea, the realities of the profession and the requirements for future policy analysts in term of professional qualifications. The policy analysis profession played a critical role in formulating modernised national systems in Korea in the early 1960s. This was mainly driven by military elites and technocrats who were well versed in economics in particular. This tradition has lasted for several decades, although some parts of the roles and responsibilities have been shared by policy analysis professionals from other sectors such as academia, political parties and non-​governmental organisations (NGOs). Policy analysis was first recognised as an independent, and arguably most critical element of the policy process, in 1980, and it is now utilised in a much broader realm of public decision making than one might think. In this chapter we provide a brief history of the policy analysis profession in Korea, then shift to discussing how policy analysts with backgrounds in both academia and applied policy analysis addressed their mission to assist in shaping better public policy. We further provide an overview of the realities of how policy analysis professionals meet stakeholder expectations and address the challenges they face. Finally, we attempt to lay out the qualifications required for those who desire to become a policy analyst in terms of education, communication skills and ethics.

A brief history of the policy analysis profession in Korea The policy analysis profession first emerged in Korea in the early 1960s, when analysts played a critical role in formulating modernised national systems. This was mainly driven by military elites and technocrats with a background in economics. This period saw the advent of the tradition where the central

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government formulates the national development agenda and allocates limited resources to highly efficient public and private sector projects. The idea of an ‘administration of development’ was most adequately captured by the ‘Five-​Year Economic Development Plans’ and related policies, which lasted until 1996 (the 7th term).1 The Economic Planning Board (EPB) played a leading role in the implementation of the economic development strategy, including the Five-​Year Economic Development Plans, because the Nation Assembly’s legislative function was relatively weak at that time, and most meaningful policy coordination took place within the executive branch. However, the central government lacked educated research and policy experts who could formulate and support not only the five-​year plans but also the three-​year rolling plans and yearly economic management plans. To address this difficulty, the central government implemented a catch-​up strategy to provide government officials with educational opportunities, especially in highly regarded educational institutions in the US, and built a government-​funded think tank that was responsible for conducting research projects to evaluate development agendas and policy issues. The most immediate challenge at that time was the lack of home-​grown policy experts who were knowledgeable in both policymaking processes in a democratic society and advanced analytical methods. Most university professors were educated at either Seoul National University or had studied in Japan during the colonial period. This made policy implementation rather speculative and biased toward a legal approach. After passing the administrative examination, Korean public officials were put into the field immediately after a short period of training. Professors and public officials taught the systems adopted in more developed countries without even knowing the exact details of the administration, city, transportation, housing, welfare and medical policies in place in those countries. The leaders of the nation, including President Park Chung-​hee, firmly believed that the key to success in modernising the country was cultivating talented people who could promote and implement economic and social policies. They demanded that the US provide educational rather than material aid, and public officials and professors who had majored in public administration were sent to be educated at Syracuse University and Minnesota University with the help of the US government. When they returned, they became professors of public administration and high-​ranking public officials, serving as the flagship of the modernisation that Park envisioned. The core idea of ‘outbound globalisation’ was that the government would send public officials, universities would send professors and students, and businesses would send top employees abroad to learn global standards and bring them back to Korea within a short period of time. The focus on soft power, and especially the emphasis on human resources, became the typical catch-​up strategy that Korea pursued.2 To successfully implement this development plan, the most important factor was cooperation between the planning organisation (EPB) and actual administrative departments, that is, policy coordination. In order to bring about this coordination, it was critical for the planning organisation to not only 26

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have substantial authority but also exercise such authority in an appropriate manner. This meant acquiring sufficient knowledge and information about policy implementation from the administrative departments, which is impossible without voluntary cooperation from each department. This goal was achieved by both building institutional mechanisms that mandated administrative departments to provide sufficient information and data, and creating an informal situation where implicit pressure from the dictatorial leader forced them to provide such data. In order to efficiently perform the planning function, it was also important to have a think tank that could analyse the policies to be implemented. The Korea Development Institute (KDI) was established in 1971 to support the country’s economic development. The institute’s main mission was to conduct applicable policy research and analysis on fundamental economic and social issues. In doing so, it aimed to use scientific methods developed by contemporary policy studies to support Korea’s development efforts. It is also well known that this involved financial support from the United States, and research and policy experts who had been educated in the US played a critical role in establishing the think tank in its early stages. Since then, the KDI has become a pivotal public institute that not only implements extensive policy-​oriented research in the areas of macroeconomics, monetary and financial economics, public finance, industrial organisation and international trade but also plays a pivotal role in steering research in economic development in other sectors. In addition, the institute has made significant policy contributions on social welfare issues by providing policy discussions and investigating examples of policy implementation in developed countries. The areas of research include social welfare systems such as health insurance, industrial accident insurance, pension and retirement funds, and unemployment insurance. The KDI’s role and responsibilities expanded until the 1980s in line with the growing challenges of Korea’s rapidly changing economy and policy environment. This comprehensive research provided an important reference point for economists, policymakers, and both domestic and foreign economic organisations. However, the KDI’s roles and responsibilities were shared by members of the policy analysis profession from other sectors, such as academia, political parties, NGOs and private institutes, in part because policy analysis is utilised in a much broader realm of public decision making. As Korea became more democratic and capitalistic, there were growing concerns about the effectiveness and efficiency of a planned economy and centralised decision-​making system. As a result of this, government intervention was minimised and the role of the national think tank was limited to monitoring fiscal decision making. With this new challenge, one of the KDI’s new roles became conducting Preliminary Feasibility Studies on new public projects. A preliminary feasibility study, first legislated in 1999,3 is a government effort to formulate the budget and establish plans for managing funds in new large-​scale projects. The Public and Private Infrastructure Investment Management Center (PIMAC), an affiliated 27

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body of the KDI, serves as a gatekeeper for public investment by scrutinising large-​scale infrastructure projects and providing research to improve related policies and analytical tools. Responsibility for conducting Preliminary Feasibility Studies later came to be shared between several government research institutes, and the Government Investment Management and Analysis (GMAC), an affiliated body of the Korea Institute of Public Finance (KIPF), was also granted authority to conduct such studies. The function of conducting research on R&D-​related projects was transferred to the Korea Institute of Science and Technology Evaluation and Planning (KISTEP). On the other hand, responsibility for enhancing the efficiency and transparency of public and private investments by analysing the economic feasibility of projects and monitoring government fiscal activities was not limited to the administrative branch of government. From the perspective of checks and balances, a fundamental principle of democracy, the legislature’s monitoring of government fiscal activities and the policymaking process has become an increasingly important issue. The National Assembly Budget Office (NABO) was established in 2003 as part of a plan to efficiently check and monitor policymaking and its implementation by the administrative branch. A core function of the National Assembly is fiscal control through reviews of whether the national budget and funds are being properly structured and spent. Reviewing the appropriateness of budget spending is equivalent to examining the validity of policies. Through research and analysis of national finance policy and other policy fields, NABO not only supports the efficient execution of the National Assembly’s checks and balances on government fiscal management but also proposes policy alternatives. In particular, at the request of any National Assembly committee or member of the National Assembly, NABO provides various analyses necessary for assessing revenue and expenditure, as well as information for the budget settlement process. Support from NABO in the form of research and analysis enables the National Assembly to more efficiently deliberate on public projects and effectively implement its fiscal authority. The analysis and evaluation of major national projects, a major function of NABO, reinforces the fiscal control function of the National Assembly by evaluating the feasibility and adequacy of major policies, large-​scale financial investments and projects that emerged as social and political issues, while also diagnosing problems, and seeking improvements. Policy research and analysis focuses on major policies and projects under national development strategies and national goals, as well as projects related to social or political issues that are expected to draw public attention in the future. Through policy analysis, it is possible to ex-​ante evaluate the socioeconomic feasibility of and social agreement on major policies, as well as find problems with current projects and suggest alternatives in a timely manner. Policy analysis also makes it possible to identify factors that led to the success of already completed major projects that can be used as a basis for judgement on whether to implement a new policy or project. 28

The policy analysis profession in Korea

Policy analysis professionals in academia and as practitioners Based on their expertise in policy analysis and evaluation, policy analysts either directly participate in the formulation of new policies and projects and the implementation and monitoring of established policies and projects or provide professional advice on the adequacy and validity of the outcomes of each process. Policy analysts can work as experts in planning or analysis for government agencies, public corporations and institutions, local governments, businesses or consulting institutions. They can also receive independent contracts from the public or private sectors to conduct research and consulting in areas such as project exploration, the establishment of annual plans, feasibility analysis and monitoring performance evaluation. In recent years, government agencies at differently levels have been using recruitment systems to hire policy experts as contract workers or conduct special open hiring to have professionals serve as public officials. Changes in administrative structures, such as privatisation, the addition of institutions in charge or transfers of authority, are also accelerating the trend towards attracting experts to public office. The core function of policy analysts is to provide consulting to public organisations through research and analysis reports. This may be related to policy planning, monitoring to ensure proper implementation or consulting to provide feedback after an objective and scientific evaluation of the performance of a policy or project. This also includes consulting on the mid-​to long-​term strategies of public organisations, organisational structure, operating efficiency, financial structure or informatisation. This further includes the education and training of public organisation employees by enabling not only original professional knowledge and analytical skills but also practical experience acquired while working with different policy actors to be passed on to employees in the public sector. The importance of rational policymaking and systematic policy implementation is growing, and there is a great need to cultivate high-​quality professionals capable of carrying out these tasks with academic support. Public administration and policy programmes in most universities provide a curriculum that includes research methods, quantitative analysis, policy analysis, policy evaluation and capstone design (or writing a thesis) to meet professional qualifications in a specific field. Some students pursue further higher education opportunities in Master of Public Administration (MPA) and Master of Public Policy) MPP programmes, such as at the KDI School of Public Policy and Management. Junior policy analysts with education and basic training start their careers in either the academic or the practical field. Policy analysts working in academia usually belong to universities or government-​funded research institutes and focus on the development of policy theory or analysis methodology through journal papers and research reports. On the other hand, policy analysts working as practitioners work as public officials or perform the role of policy analysis experts in organisations or even interest groups, analysing the validity of policies 29

Policy Analysis in South Korea

or projects in the actual policy formation and implementation process. However, this distinction between academia and practical fields is not clear, and the two cooperate with each other in many ways, thereby equally contributing to the policy process, which entails continual information gathering, developing sophisticated alternatives, empirical learning and application to real cases. Critical thinking combined with knowledge about specific policy fields, analytical skills, and experience and learning are key elements in becoming an effective policy analyst who participates in the entire process of preparing, drafting, and reviewing policies and projects.

Qualifications for policy analysts Policy analysis essentially consists of the revised academic fields of political science and administration, system analysis, decision making theory, and economic theory. Policy analysis as an interdisciplinary study should take the form of a combination rather than a simple mixture in order to provide a more advanced form of knowledge. To this end, attention and effort need to be made to achieve a true synthesis of knowledge, skills and expertise, rather than simply transferring economic models to real-​world problems without any critical thinking (Dror, 1971). Policy analysis is characterised by continued learning and ongoing policy processes. It is therefore important that policy analysis achieves its main purpose, which can be defined as a clear explanation of issues, the creation of new alternatives, consideration for the future and efforts to transform important disagreements into secondary ones. It is also important to note that there are hardly any problems of a formal and orderly structure in the dynamic real world, as Simon (1972) pointed out. Instead, almost all policy problems exist in an informal, distracting structure that arises from severe conflict between stakeholders. In this sense, policy analysis is expected to play a key role in collective policymaking while also contributing to better analysis, novel ideas, future orientation, and systematic thinking in public problem solving. Policy analysts should be willing and ready to improve the policymaking process by fully considering a wide range of alternatives in a broader context. Although several decades have passed since Lasswell (1951) put forward ‘achieving a commonwealth of human dignity’ as the objective of policy science, the reality is that the policy analysis community in Korea remains stagnant at the technological level and is in need of improvement. In particular, there is still ongoing concern that policy analysis is limited to proposing gradual policymaking improvements at the tactical level while avoiding major political issues. It has also been criticised for focusing solely on value-​neutral research and theory based on the behaviourism tradition. In doing so, policy analysis fails to fulfil its goal of providing important strategic knowledge for better policymaking. By focusing simply on the production of information through technical analysis models, there is a risk of becoming disconnected from the interpretation and use of 30

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information in the actual policy process. This suggests that policy analysts need more education and training opportunities driven by qualitative and political analytical methods instead of being heavily dependent on quantitative ones. At the individual level, those who wish to become policy analysts in the future are expected to fulfil requirements in terms of education (knowledge and analytical techniques), communication skills and ethics. Policy analysts should possess profound knowledge of the field of policy they specialise in. They are expected to have a specific grasp of the problem at hand and should be familiar with the cognition and attitudes of target groups and the effective resources available to solve the problem. With this knowledge, policy analysts can identify important problems to analyse and choose suitable environments for testing their proposed solutions (Schachter, 1985). The knowledge required to become a competent policy analyst includes a substantial understanding of the policy process itself. In particular, policymaking becomes more complicated as more stakeholders participate in the policy process. This implies a wide range of groups and individuals who have interests in or are influenced by policy. The number of government agencies involved in the policy process is ever increasing such that no single policy actor can decide or act on their own. Accordingly, policy analysis has become an essential part of the policy process by providing independent and professional grounds for rational decision making and political mobilisation from supporters. In other words, policy analysts should be able to understand political phenomena such as political institutions and agents, political participation, and both negotiations and interactions between interest groups. A proper understanding of the policy process not only helps policy analysts create excellent policies but also helps them develop feasible strategies for the adoption of a certain policy. Policy analysis also requires analytical skills, which are essential for finding problems in uncertain situations and formulating solutions to them. With these skills, one can determine the criteria for assessing public policies, and analyse and compare policy alternatives. Knowledge of statistical techniques and analytical ability can be acquired through education and training. However, this does not mean that policy analysts only require skills to analyse the quantitative aspects of policy problems, such as cost-​benefit and cost-​effectiveness analysis. Since public policy aims to uphold both rationality and human dignity, policy analysis should be conducted in parallel with quantitative analysis, which analyses the dimension of efficiency, and qualitative analysis, which analyses the dimension of democracy and fairness. In other words, analysis should cover not only the estimated costs and benefits of a certain policy but also the democratic values and due process that reside in the policy formation process. Furthermore, it is necessary to investigate and analyse the political, economic, social and cultural impacts that a policy will have on society. The analytical skills contemporary policy analysts are advised to focus on are acquiring future foresight and learning the latest statistical methods including regression analysis, techniques to analyse discrete data (binary, ordinal, categorical 31

Policy Analysis in South Korea

and counted data), structural equation models, Data Envelopment Analysis (DEA), the Coulter model, the Delphi method, Q-​methodology, Analytic Hierarchy Process (AHP), the grounded theory approach and system dynamics. Forecasting the future is generally implemented through complex mathematical models, quantitative techniques or computer simulations. However, in practice, subjective judgments and creative predictions based on expert panels, scenario writing and policy Delphi, construct valuable input data. Accordingly, a composite approach that includes both quantitative analysis and qualitative measures is recommended for forecasting. In order to effectively conduct policy analysis, it is important to have the skills to communicate effectively with policy stakeholders. This is because data to be analysed tends to be acquired from stakeholders, and the results are also utilised by policymakers as the basis for rational decision making. Therefore, it is necessary to listen to the policy preferences of each stakeholder in order to properly define the problem and formulate solutions, and to communicate clearly so that policy actors can better understand the results. The importance of communication skills is growing as the number of stakeholders participating in every step of the policy cycle continues to increase. Communicating with the general public on policymaking has several benefits. Communication generally helps to promote political support, mitigate potential conflicts in the early stage of the policy process, increase the transparency of government and public institutions, promote greater acceptance of policies by building trust among citizens, and improve the work efficiency and morale of public officials. Another area of required expertise for policy analysts is ethics. As advisors to policymakers, policy analysts are expected to be ordinary citizens in a democratic society. Although they play an advocating role for policymakers, their actions should stay within the boundaries of the law and not be used to recommend or justify illegal activities. However, the concept of ethics has recently been interpreted in a more proactive sense, which means that professional ethics from policy analysts requires more than simply avoiding the promotion of illegal activities. Policy analysts have long been regarded as not directly responsible for the outcome of their advice, because it is policymakers who ultimately decide whether to implement the advice provided by policy analysts (Thompson, 1988, p 283). This approach is in line with the traditions of policy analysis, which have been particularly resistant to ethical considerations or arguments about values (Dunn, 1981, p 37). However, there is a growing awareness that policy analysis involves advocative behaviour (Jennings, 1987, p 131). In the actual policy analysis process, the same piece of information can lead to different views on the best policy action to be taken. This phenomenon often occurs in the process of converting designative information into evaluative or advocative information (Dunn, 1981, p 37). From a legal standpoint, a person who simply provides advice to others is not responsible for any harm caused by the other person. However, a person who incites others to act so is generally 32

The policy analysis profession in Korea

considered to be more responsible (Thompson, 1988, p 283). Furthermore, policy analysts have a great influence on actual policymaking, and the implementation of policy analysis is becoming increasingly competitive. In this process, everyone is likely to support a certain preference or interest. Therefore, policy analysts should not hide behind the myth of ‘nonpartisanship’, and admit that it is only natural for them to support certain values or interests. After all, the best course of action for any democratic society is to identify conflicts and resolve them politically rather than analytically (Lindblom, 1986, p 350). Although the primary goal of policy analysis is to produce adequate information that can be used to solve policy problems, in reality policy analysis is not limited to the production of objective information. It also includes the process of making sense of information such that it can suit a specific purpose and be used for rational decision making. In many cases, the important debate arising in this regard is not a matter of facts but of interpretation (Kim, 1989). In implementing policy analysis, policy analysts attempt to produce the best analysis outcomes in the light of both value and factual judgments. However, at the same time, they aim to increase the usability of the analysis by producing results that are congruent with the belief system of policymakers. If the outcomes drawn from policy analysis are consistent with that belief system, there is no ethical dilemma. However, if there is a discrepancy between the two, the moral ambiguity of policy analysts is likely to create ethical problems (Noh, 1989, p 232). In order to improve the quality of policymaking, policy analysts must clarify the values implied in policies, but since this work generally has a great influence on policymaking, itself, they have an ethical and moral obligation to conduct reliable analysis. In this sense, as experts, policy analysts need to consider three values: integrity in analysis, responsibility to clients and adherence to each individual analyst’s perceptions of a good society (Weimer and Vining, 1989, pp 16–​18). Therefore, in a situation where the three values conflict with each other, the ethical question eventually comes down to deciding which value should be sacrificed and to what extent (Weimer and Vining, 1989, pp 27–​8). There are four aspects to the ethics required by policy analysts as external experts (Patton and Sawicki, 1993, pp 44–​5). First, policy analysts must clarify their values and perspectives, the assumptions underlying their analysis, the analytical methods and policy instruments they use in policy problems, evaluation criteria and results, and the limitations of their analysis (ethics toward oneself). Second, it is important to ensure objectivity and neutrality in conducting policy analysis. If objectivity and neutrality cannot be maintained with respect to a certain job, it would be better for the policy analyst in question to not be involved (ethics toward clients). Third, the results of analysis should be released to other policy analysts so that the validity of the analysis can be scrutinised, except where confidentiality is required. This helps to shed light on the point of view underlying the analysis and how it was performed. In doing so, policy analysts can fulfil their social responsibilities not only to their client, but also to the policy analysis community 33

Policy Analysis in South Korea

(ethics toward colleagues and the professions). Fourth, policy analysts should not undermine the public interest by limiting their role to overly technical aspects. They need to be able to seriously consider how their work will affect real people by analysing both policy objectives and instruments (ethics toward the general public).

Conclusion Although Korea has a relatively short history as a modern country, the history of policy studies has been aligned with that of Western society. In particular, there is little difference in the policy analysis tradition of contributing to rational decision making and efficient policy implementation. This tradition largely arose because most of the public officials who contributed to the formation of the early modern state and the policy process were experts who had received education and training abroad. The establishment of modern Korea was mainly driven by military elites and technocrats who were educated in economics. This period saw the advent of the tradition where the central government formulates the national development agenda and allocates limited resources to highly efficient projects. Detailed project analysis was essential for efficient resource allocation, and the government focused on training bureaucrats capable of performing this work. Through the core idea of ‘outbound globalisation’, the government sent public officials abroad to learn global standards that could then be applied to Korea. Established in 1971, the KDI played a pivotal role in formulating national economic policies and conducting policy research and analysis as a specialised institution. The roles and responsibilities of the KDI have been shared with policy analysts from other sectors such as academia, political parties, NGOs and private institutes, in part because policy analysis is used in a broad range of public decision making. The legislature’s monitoring of government fiscal activities and the policymaking process has become an increasingly important issue. As a result, NABO was established in 2003 as part of a plan to efficiently check and monitor policymaking and its implementation by the administrative branch of government. NABO has reinforced the fiscal control function of the National Assembly by evaluating the feasibility and adequacy of major policies and projects. Currently, the social demand for policy analysts is rapidly increasing. Based on their expertise in policy analysis and evaluation, policy analysts directly participate in formulating new policies and projects, implementing established policies and projects, monitoring performance and providing professional advice on the adequacy and validity of the outcomes of each process. Junior policy analysts with education and basic training start their careers in either the academic or practical field. Policy analysts working in academia usually belong to universities or government-​funded research institutes, and their work focuses on the development of policy theory or analysis methodology through 34

The policy analysis profession in Korea

journal papers and research reports. On the other hand, policy analysts working as practitioners serve as public officials or perform the role of policy analysis experts in organisations or interest groups to analyse the validity of policies and projects in the real policymaking process. However, this distinction between academic and practical fields is not clear-​cut, and they contribute equally to the development of the policy process. At the individual level, those who wish to become policy analysts in the future will be expected to possess substantial knowledge about both policy process and the field of policy they specialise in, as well as analytical techniques, communication skills and ethics. In particular, a substantial understanding of the policy process itself and skills to communicate smoothly with policy stakeholders will help policy analysts create excellent policies while also developing feasible strategies for the adoption and successful implementation of those policies. In addition, contemporary policy analysts are advised to focus on acquiring the latest advanced techniques and insight into the future and should keep in mind that they have an ethical and moral obligation to conduct reliable and principled analysis. Notes 1

2

3

The end of this approach coincided with the Asian financial crisis, which fundamentally changed the economic and social systems of Korea. In 1998, with the support of the International Monetary Fund (IMF), the government abolished the Economic Development Plan on the grounds of promoting free private economic activity, participating in the globalisation movement, and stabilising the market economy. The government minimised interventions except for necessary fiscal policies and the provision of public goods. However, external shocks such as the financial crisis were not the only motivation for the end of the Five-​year Economic Development Plans, and there had been growing challenges to the performance of the planned economy as the economic system quickly transitioned towards capitalism. It is quite a symbolic observation that competent public officials from developing countries are now coming to Korean educational institutions including the KDI School of Public Policy and Management, just as promising Korean public officials studied abroad to learn the economic and social systems of developed countries several decades ago. The purpose of this body is to draw objective and neutral findings on the feasibility of large-​ scale fiscal projects before they are implemented, and to assist in making rational fiscal decisions. It is mandatory for national projects with a total project cost of ₩50 billion (approximately $46 million dollars) to undergo a preliminary feasibility study.

References Dror, Y. (1971) Ventures in Policy Sciences, New York, NY: Elsevier. Dunn, W.N. (1981) Public Policy Analysis, Englewood Cliffs, NJ: Prentice Hall. Jennings, B. (1987) ‘Interpretation and practice of policy analysis’, in F. Fischer and J. Forester (eds) Confronting Values in Policy Analysis, Newbury Park, CA: Sage, pp 128–​52. Kim, S.B. (1989) ‘Ethics in policy analysis and research’, Korean Journal of Policy Studies, 27(2): 207–​23. Lasswell, H.D (1951) ‘The policy orientation’, in D. Lerner and H.D. Lasswell (eds) The Policy Sciences, Stanford: Stanford University Press, pp 3–​15. 35

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Lindblom, C.E. (1986) ‘Who needs what social research for policymaking?’, Knowledge: Creating, Diffusion, Utilization, 7(4): 345–​66. Noh Hwa-​jun (1989) ‘Issues and realities of ethics in public analysis’, Korean Journal of Policy Studies, 27(2): 224–​55. Patton, C.V. and Sawicki, D.S. (eds) (1993) Basic Methods of Policy Analysis and Planning, Englewood Cliffs, NJ: Prentice Hall. Schachter, H.L. (1985) ‘Educating policy analysts’, News for Teachers of Political Science, 44: 1–​3. Simon, H.A. (1972) ‘Theories of bounded rationality’, in C.B. McGuire and R. Radner (eds) Decision and Organization, Amsterdam: North-​Holland Publishing Company, pp 161–​76. Song, K.W. (1989) ‘Roles, ethics and knowledge for policy analysts’, Korean Public Administration Review, 23(1): 601–​11. Thompson, D. (1988) ‘Ascribing responsibility to advisers in government’, in Joan C. Callahan (eds) Ethical Issues in Professional Life, New York, NY: Oxford University Press, pp 282–​90. Weimer, D.D. and Vining, A.R. (eds) (1989) Policy Analysis: Concepts and Practice, Englewood Cliffs, NJ: Prentice Hall.

36

Part Two Policy analysis by governments

FOUR

Policy analysis and government capacity Jiwoong Yoon

Introduction As government policies continue to grow in complexity, size and impact, there is a greater need to ensure government competence and the use of appropriate methodology in policy analysis, particularly due to the importance of fiscal soundness. The large programmes required to achieve policy goals entail significant time and expense, as detailed analysis of a programme’s alignment with policy objectives is crucial for monitoring and analysing the progress and outcomes of the programme. For this reason, the Korean government created a policy analysis tool called a preliminary feasibility study (PFS) to oversee expenditure (KDI, 2019). The PFS is an ex-​ante feasibility assessment designed and performed by the Korean Ministry of Economy and Finance. The purpose of the PFS is to validate large-​scale, publicly funded investment programmes using transparent and objective evaluation methods (KDI, 2020), which can provide helpful information in formulating the budget and establishing funding management plans (Article 38 of the National Finance Act). The Korean government designed this system to ensure the effective operation of PFSs and to build capacity through external expertise. PFSs are conducted by third-​party organisations that have no particular interest in the programmes, thereby allowing them to remain objective and neutral (KDI, 2017). To be a PFS candidate, a government programme must satisfy specific conditions. A PFS is conducted for new government programmes with a budget of ₩50 billion or higher, of which at least ₩30 billion is provided by the government (Article 38 of the National Finance Act). A PFS can also be conducted for private–​public investment programmes announced by the government (KDI, 2020). State-​owned enterprises (SOEs) and quasi-​governmental organisations (QGOs) either directly execute or indirectly support the government’s policy programmes for providing essential goods and services related to the livelihoods and welfare of citizens. These are either corporations or non-​corporate organisations that are distinct from local governments and operate through government investment or spending. SOEs and QGOs in Korea are established under the Act on the Management of Public Institutions (AMPI), a statute intended to ensure management efficiency and operational transparency to improve the quality of

39

Policy Analysis in South Korea

services for the public. As of January 2019, there were 339 SOEs and QGOs that met the qualification requirements under Article 4.1 of the AMPI. As the fiscal integrity of public institutions began to emerge as a major social issue in Korea, the National Assembly, Board of Audit and Inspection (BAI), and Anti-​Corruption and Civil Rights Commission (ACRC) raised the need for stronger third-​party PFSs as well as greater supervision of large-​scale investment programmes proposed by public institutions. The ACRC, for example, pointed out that the moral hazard of public institutions in Korea stemmed in part from a structure that allowed public institutions to undertake investment programmes unrelated to the original mission for which they were created. The ACRC stressed the need for a system to check the budgets of projects before they were carried out. After a general audit of public institutions, the BAI also pointed out that a number of these institutions had been making financially unsound decisions by neglecting the need to honour their founding mission and failing to conduct thorough feasibility studies. It was also noted that excessive competition between public institutions and the private sector was degrading the profitability of the former’s investment programmes and leading them to overlook potential risks when deciding to undertake investments. In acknowledgement of the growing concern with public institutions and their management, the Ministry of Economy and Finance (MOEF) held a fiscal strategy meeting and announced policies to improve feasibility reviews of public institutions’ investment programmes in May 2010. Along this line, the PFS was introduced in January 2011, pursuant to Article 50 of the AMPI, and the Budget Preparation Guidelines for SOEs and QGSs. The MOEF designated the Public and Private Infrastructure Management Center (PIMAC), part of the Korea Development Institute (KDI), as the specialised body in charge of organising PFSs for public institutions. Prior to this decision, public institutions only had to conduct their own feasibility studies on new investments and capital contribution programmes with total costs of ₩50 billion or higher, and include these programmes in their new budgets only after their feasibility was verified. No longer trusting that these independent feasibility studies were objective or reliable, the MOEF appointed an external agency exclusively in charge of organising PFSs so as to enhance the efficiency and fiscal integrity of public institutions’ programmes. Today, PFSs are conducted on each public institution programme with a total estimated cost of ₩50 billion or more that includes at least ₩30 billion or more in fiscal spending. In addition to general PFSs, the MOEF may also order PFSs on programmes other than those listed earlier, reviews of the appropriateness of programme plans and trial PFSs. For instance, PFSs may be required for programmes that have a high degree of interrelation with other projects and for which prioritisation is key (for example, programmes that are part of mid-​to long-​term plans for infrastructure development, such as road or railway programmes). These programmes include individual programmes under the Master Plan for Road Repair (national expressways), Five-​Year Plans for National and Local Roads, and National Railroad 40

Policy analysis and government capacity

Network Development Plans. The Minister of Economy and Finance may also require analysis of the financing plans, mid-​to long-​term fiscal implications and potential alternatives to planned programmes using means and processes equivalent to those of a PFS. Moreover, the minister may also order a trial PFS for programmes that are not included in the conventional scope of PFS-​required programmes but for which a PFS is necessary. PFSs for this last type of programme may be based on methods and approaches other than those used in typical PFSs.

Capacity building and the preliminary feasibility study process Outsourcing expertise: the Public and Private Infrastructure Management Center The necessity of PFSs arose amid the Asian financial crisis in the late 1990s. As the budget for 1999 was being prepared in 1998, the Ministry of Economy and Finance believed that having ministries conduct their own PFS for proposed large-​ scale programmes was not fair or efficient from the perspective of national budget management. This was based on concerns that ministries would not make investment decisions based on consideration of overall fiscal soundness and the effective use of government resources. However, the ministries in charge of such programmes argued that feasibility studies require a certain level of expertise, and there is no country in the world that has budgetary authorities conducting such studies (KDI, 2018). In the end, an agreement was reached that PFSs would be overseen by the Ministry of Economy and Finance and conducted by an independent third party. The Ministry of Economy and Finance established the PIMAC, a specialised agency, within the KDI to carry out PFSs. PIMAC was established by merging the KDI’s Public Investment Management Center (PIMA) and the Korea Research Institute for Human Settlement (KRIHS)’s Private Infrastructure Investment Center of Korea (PICKO) through an amendment of the Act on Public-​Private Partnerships in Infrastructure (APPPI) in January 2005 (ABD, 2011). PIMAC plays an important role in the Korean public sector today by objectively and impartially investigating and evaluating public investment programmes with a view to enhancing the efficiency and productivity of such programmes. By performing PFSs on large-​scale fiscal programmes and repeating feasibility studies for total cost management, the centre ensures transparency in decision making on fiscal investments as well as efficiency and integrity in fiscal management (KDI, 2018). PIMAC also provides services for public and private-​sector clients alike, including feasibility and importance analyses for investment plans, evaluations of business proposals, reviews of re-​financing plans, negotiation support and reviews of disputes in arbitration, as well as training (inside and outside Korea), detailed guidelines on programmes being carried out and policy R&D (ADB, 2011). Since 2011, PIMAC has served as the central agency conducting PFSs on certain public institution investment programmes. PIMAC produces impartial assessments on the feasibility of such programmes so as to enable public institutions 41

Policy Analysis in South Korea

to make more efficient decisions. As a specialised body tasked with evaluating the feasibility of public investment programmes, PIMAC also conducts research on an extensive range of related subjects, including the methods necessary for carrying out more objective and rational feasibility analyses (KDI, 2018). Furthermore, the centre is continuously building and expanding its database so as to assist the efficient management of public investment programmes in all stages. PIMAC also shares information on global policy issues with its clients and supports economic cooperation between Korea and developing countries worldwide, helping Korean companies make inroads into new markets abroad (ADB, 2011). There are a number of legal grounds that define the scope of the work entrusted to PIMAC. The centre, first and foremost, carries out PFSs on large-​ scale fiscal investment programmes except those concerning R&D. PIMAC is also authorised to analyse the feasibility of large-​scale private investment programmes and evaluate related plans pursuant to Article 23 of the APPPI. In addition, PIMAC conducts PFSs on public institution programmes pursuant to Article 40.3 of the AMPI, as well as the PFS Guideline for SOEs and QGSs. Article 142 of the Restriction of Special Taxation Act and Article 135–​2 of the Enforcement Decree under the same Act also designate PIMAC as the specialised agency in charge of researching and carrying out surveys on special taxation-​related evaluations. PIMAC consists of three offices; the Offices of Fiscal Investment Evaluation, Private Investment Support and Public Investment Policy. Each of these offices has a number of teams. The Office of Fiscal Investment Evaluation is divided into PFS Teams 1 and 2 and the Feasibility Reanalysis Team; the Office of Private Investment Support has the Program Survey Team, Private Capital Institutions Team, and Private Capital Team; and the Office of Public Investment Policy contains Public Institution Program Teams 1 and 2 and the Public Policy and Taxation Evaluation Team. As of March 2020, the centre employed 100 staff, including experts on a wide range of subjects such as economics, management, accounting, statistics and engineering.1 The preliminary feasibility study process The PFS Guidelines authorise the Minister of Economy and Finance to decide on the scope of programmes to be subject to mandatory PFSs, either as a matter of discretion or upon the request of other Cabinet ministers. Ministers are required, in principle, to submit a PFS request to the Minister of Economy and Finance at least two years prior to the year in which the proposed programme is to start, as it takes a considerable amount of time to complete a PFS and incorporate the findings and results into budget or financial management decisions. Where the programme concerned is on an urgent schedule and/​or there are other attenuating circumstances, ministers may request a PFS in the year preceding the year in which the planned programme is to start (KDI, 2020). The Minister of Economy and Finance reviews PFS requests according to the predetermined set of criteria that applies to the programme in question. In 42

Policy analysis and government capacity

the event that a programme is essential to budgetary and financial management planning, the minister may also order a PFS even where no request has been made by a competent minister. The KDI’s PIMAC and the Korea Institute of Public Finance are the two organisations authorised to conduct PFSs upon the request of the Minister of Economy and Finance (KDI, 2018). Having determined that a given programme should be subjected to a PFS, the MOEF files an official request with one of the agencies in charge of PFSs. The chosen agency then plans the study, the budget and the team of researchers. The chosen team of researchers then checks whether the programme proposal or plan submitted by the ministry is true to the facts, surveys the location and current conditions related to the programme, and organises a field visit to interview officials in related organisations or local governments. During this process, the researchers identify the main issues and obtain necessary materials. If the researchers are unable to obtain the details they require from the field survey and interviews, they can request supporting documents (KDI, 2019) (see Figure 4.1).

Figure 4.1: The PFS process Ministry of Economy & Finance Ministeries

Bureau of Fiscal Policy

Request PFS (prioritisation)

Prescreening

Notice

Select programs and ask for PFS

Advisory Council for Fiscal Program Assessment

PIMAC, etc

Urgency Priority reviewed

Conduct PFS Basic materials submitted

Notice

Consultation with relevant organisations Results announced

Report written up

Results announced

Postpone execution Source: MOEF, Guidelines for PFS, 2019

43

Policy Analysis in South Korea

Having obtained the requisite materials, the researchers analyse the findings of their field survey and interviews, the main issues and similar programmes to identify potential alternatives. They may also seek the input of experts from their own centre or outside organisations during progress meetings to fine-​tune their research objectives. With the objectives set, the researchers then begin to analyse the core issues and possible solutions and alternatives. They analyse any major contentious issues, the demand and need for the programme, technologies and costs, and cost-​ effectiveness. After discussing their preliminary findings at a preliminary internal meeting, they receive feedback from the MOEF and the ministry in charge at the first MOEF meeting. There are some programmes that require a non-​standard approach or method of analysis. These are usually programmes believed to have significant non-​use value, such as culture-​or tourism-​related value. The researchers then augment and expand their analysis based on what they have discussed in the first meeting, and finally analyse the programme’s cost-​ effectiveness, policy value and likely ripple effects on the local economy. After holding their second internal meeting, the researchers hold a second meeting with officials from the MOEF and the ministry. They then implement the analytic hierarchy process (AHP) and finish drawing up their conclusion and recommendations, which are reported to the MOEF. Where significant delays in the PFS process are unavoidable due to major differences in opinion between the stakeholders involved and the difficulty of reaching agreement despite continued discussions, the MOEF may convene the PFS Practical Coordination Committee (PCC). Chaired by the head of the MOEF’s Bureau of Fiscal Management, the PCC consists of officials from the ministry in charge, officials of the agency conducting the PFS, researchers and ex-​officio (non-​government) experts, and is responsible for reviewing and deliberating on the differences of opinion. After the final review, the researchers publish a manuscript that is submitted for review by internal and external experts as well as officials from the MOEF and the competent ministry before final publication. The MOEF decides whether to allow the programme to proceed based on the PFS’ findings, and notifies the ministry and the MOEF’s own budget divisions accordingly.

Pursuit of evidence-​based policy analysis The standard PFS process and method is designed to pursue evidence-​based policy analysis, and it can be described as follows. First, researchers determine the outline of the programme and analyse basic data to identify and highlight the core issues. Second, they estimate the demand for the programme and perform a cost-​benefit analysis to determine the programme’s economic and financial value. Third, researchers analyse the policy value of the programme by assessing the arguments in favour of undertaking it, likely policy effects and other specific policy implications (optional). Fourth, they analyse the ripple 44

Policy analysis and government capacity

Figure 4.2: PFS process flow Program outline and basic data analysis • Background, purpose, anticipated benefits/effects • Local conditions (demographic, geographic, economic, etc) • Similar cases • Engineering data survey and analysis • Core issues identified and alternatives

Economic analysis • • • • •

Estimated demand Estimated benefits Estimated costs Cost-benefit analysis Sensitivity analysis

Policy analysis • Conditions in favour: Policy match and other internal conditions, Local and other external conditions

Local development analysis • Regional inequality • Diffusion effects on local economy

• Policy effect: Jobs, Standard of living, Environment, Safety • Specific policy implications (optional)

Multi-standard analysis (AHP) • Feasibility or lack thereof • Policy recommendation * Essential private capital programs deemed to be feasible are approved or rejected as private investment programs after additional review of the appropriateness of private capital and financing Source: MOEF, Guidelines for PFS, 2019

effects that the programme could have on the local economy by assessing its capability to mitigate regional inequalities and promote regional development. Fifth, researchers conduct multi-​criteria (AHP) analyses to derive an overarching conclusion from their economic, policy and local development analyses (KDI, 2019) (see Figure 4.2). Economic analysis Economic analysis2 involves researching the ripple effects that the proposed programme could have on the national economy as a whole. Cost-​benefit analysis is the method of choice for such analysis (KDI, 2008), which involves examining historical precedent and similar cases to estimate demand. The costs to be analysed include the direct costs of building the proposed facilities (construction, land compensation) as well as the costs of managing them (maintenance, repairs and 45

Policy Analysis in South Korea

improvements). Although not expressly stated in the PFS Guidelines, cost-​benefit analysis for research facilities also requires an estimation of the costs of the R&D activities to be conducted in those facilities. There are a range of methods for analysing the economic implications of a programme. As each has its pros and cons, it is important to use a variety of methods. Whichever method is used, the aim is to produce a benefit-​ cost (BC) ratio, which must be greater than one for the programme to be economically viable. Researchers are also required to estimate the net present value (NPV) of the programme based on the B/​C ratio they have produced. The NPV is obtained by discounting all the benefits and costs expected from the programme in terms of the present value of the year in which the analysis is conducted and then subtracting the net benefits from the total benefits. Where the NPV is greater than zero, the programme is regarded as economically viable. Another estimate commonly performed is the internal rate of return (IRR). Estimating the IRR involves finding the discount rate at which the costs and benefits of the programme become equal when converted into the present value. In other words, the IRR is the discount rate that would make the NPV of the programme equal to zero. Where the IRR is greater than the social discount rate, the programme is regarded as economically viable. One important criterion that should be considered in economic analysis is the magnitude of the social discount rate used to determine the NPV. Currently, no specific discount rate is applied to the assessment of R&D programmes. The 4.5 per cent discount rate applied to general social overhead capital (SOC) programmes is also applied to R&D programmes. The time frame used to analyse costs and benefits is 30 years for both R&D programmes and transportation programmes (roads and railroads).3 Policy and local ripple effect analyses Policy analysis involves reviewing a wide range of factors that are not strictly included in economic analysis but must be weighed in order to determine the overall feasibility of the programme. Whereas economic analysis is quantitative, policy value analysis cannot be easily quantified, and it does not fit so neatly into the cost-​benefit analytical framework (KDI, 2020). Policy analysis evaluates the impact of the programme in terms of policy consistency and the risk factors associated with the programme. Policy consistency analyses the willingness and readiness of business owners and local residents to promote the programme, while risk factor analysis includes potential risks related to legal or budgetary issues, as well as environmental risks after the completion of the programme (KDI, 2019). In the balanced regional development analysis, programmes are evaluated in terms of their impact on regional development, and analysis of ripple effects on the local economy is conducted using the multi-​ regional input-​output model (MRIO) (KDI, 2012). 46

Policy analysis and government capacity

The PFS Guidelines provide a list of common factors to be considered in policy value analysis for all types of programmes, as well as lists of factors specific to certain types of programmes. The common factors include ripple effects on the local economy, the need for development in the given region (in the interest of greater regional equality), alignment with given policy objectives and commitment to policy implementation, risk factors associated with execution and the appropriateness of national treasury support. For the analysis of ripple effects on the local economy, the PFS Guidelines also require the use of the KDI MRIO to quantify the possible effects that the given programme could have on major indicators related to local economy performance, such as production, added value, employment and wages. The lists of programme-​specific factors remain fluid and open so as to accommodate the use of different indicators that reflect the characteristics of the given programmes. Analytic hierarchy process analysis The final stage of the PFS involves merging the findings and conclusions of the economic and policy value analyses with additional input and opinions from the researchers to determine whether the given programme is feasible. Here, the researchers use the AHP, a multi-​criteria analysis method,4 to rank the factors considered in both analyses in a hierarchy from major to minor, and match and compare the factors in each stratum in order to measure preferences and their alternatives so as to produce quantitative results. This additional step is crucial because, while economic analysis always produces quantitative results (such as a B/​C ratio), policy value analysis mostly produces qualitative outcomes that do not match with the outcomes of economic analysis in a straightforward way. This final analysis therefore allows the researchers to consider multiple quantitative and qualitative factors at once and thus identify the most viable programme in economic and policy terms. The AHP is conducted based on the results of the economic, policy and balanced regional development analyses. It involves creating a hierarchy of complex problems, dividing them into major factors and specific factors, and conducting a pair comparison to determine their degrees of importance (KDI, 2012). In 2020, the MOEF announced a plan to reform the PFS system for public institutions and also amended the PFS Guidelines to ensure that PFSs better reflect the evolving economic and social conditions in Korea (KDI, 2019).

Conclusion Initially introduced to ensure efficiency in public construction programmes, PSFs are generally viewed as having played a significant role in making decisions on fiscal investment more systematised and transparent. As the first step in the standard procedure for deciding on and undertaking public construction programmes, PFSs have been praised for helping minimise the number of unnecessary programmes 47

Policy Analysis in South Korea

and maximise the effectiveness of individual programmes. From 1994 through 1998, prior to the introduction of the current PFS system, nearly 97 per cent of all public investment programmes passed the muster of ‘feasibility’ analysis. According to the KDI (2018), PFSs have helped save a total of ₩141.0 trillion in fiscal resources from 1999 to 2017, which represents 42.2 per cent of the ₩334.3 trillion spent across 767 programmes during those years. PFSs have served as a cost-​effective tool for ensuring fiscal integrity in public programmes, having generated benefits far greater than the additional costs incurred from the administration of PFSs and PFS-​related extensions to programme preparations. The KDI argues that PFSs have helped to significantly reduce biases in programmes in the field of transportation, thereby enhancing the reliability and efficiency of road construction programmes (KDI, 2012). Nevertheless, there is still debate over the effectiveness of PFSs. The results of a PFS have no legal binding or effect. The MOEF, which has authority over formulating budgets for programmes under the national government and its agencies, can exercise discretion as to whether, and to what extent, the recommendations made in PFSs are taken into account in determining whether a proposed programme should be undertaken. Hence, there is a concern that too many resources are being poured into the PFS process, given the limited reflection of the PFS on the budget formulation by the policy decision makers. As all government and public programmes are funded from taxpayer money, it is critical to estimate and analyse the feasibility of the budgets proposed for such programmes before they actually begin, particularly when those programmes are large in scale. Public programmes of such a scale cannot be easily stopped once they have commenced. Accordingly, few taxpayers would doubt the fundamental necessity of PFSs. Given the resounding importance of PFSs, policy support should be more effectively directed toward reducing the costs and burdens on departments and officials involved in PFSs. Notes 1 2 3

4

Detailed information on PIMAC can be found at https://​pimac.kdi.re.kr/​main/​main.jsp This section is based on ‘Improving General Guidelines for PFS, 2008’ by the KDI. In some cases, the time frame of the analysis varies depending on the types of facilities proposed (for example, it is 50 years for dam construction). There is, however, no exception for R&D and R&D facility programs. A multi-​criteria analysis is a method for making optimal decisions by taking multiple attributes of the given object into consideration, with the goal of finding the best possible alternative that satisfies multiple objectives.

References Asian Development Bank (ADB) (2011) Public–​Private Partnership Infrastructure Projects: Case Studies from the Republic of Korea –​Volume 1: Institutional Arrangements and Performance. Mandaluyong City, Philippines: Asian Development Bank. KDI (2008) Improving General Guidelines for PFS (in Korean). KDI: Seoul.

48

Policy analysis and government capacity

KDI (2012) Public Investment Management Reform in Korea: Efforts to Enhance the Efficiency and Sustainability of Public Expenditure (in Korean). KDI: Seoul. KDI (2018) Knowledge Sharing Program with Indonesia (III), Ministry of Economy and Finance (MOEF), Republic of Korea (in Korean). KDI: Seoul. KDI (2020) 2019 PIMAC Annual Report (in Korean). KDI: Seoul. Ministry of Economy and Finance (MOEF) (2019) Guidelines for Preliminary-​ Feasibility Study (PFS) (in Korean). Ministry of Strategy and Finance (2013) ‘Korea’s Performance Management System for Fiscal Programs’ (in Korean).

49

FIVE

Regulatory impact analysis: The experience of policy analysis in the Korean central government Song June Kim and Sun Gwon Ha

Introduction Policy analysis plays a crucial role in the policymaking process, contributing to rational decision making that makes public policy more efficient from policy formation all the way through to evaluation. The central government of Korea has been conscious of the importance of policy analysis since the 1960s, and first adopted policy analysis in 1967 alongside the Second Five-​Year Economic Development Plan (1967–​71). The Economic Development Plan (EDP) was initially proposed based on the need for professional and systematic plans to tackle global economic challenges. The EDP was taken a step further through analysis and forecasts by participating foreign experts, ministries, financial institutions and other professionals under the supervision of the Economic Planning Board. However, the government-​driven EDP ended in the late 1990s with the Asian financial crisis. Since then, a large chunk of analysis in the central government has given way to government-​funded research institutes (Jung, 2002). Korea has adopted numerous key policy analysis systems since the late 1970s. The Environmental Impact Assessment, which began in 1977, was aimed at achieving balance between development and conservation, pursuing eco-​friendly sustainable development, and creating a healthy and pleasant environment (Ministry of Environment, 2016). The Traffic Impact Assessment of 1987 was brought in to analyse and predict the effects of traffic volume, flow and safety in order to minimise traffic problems.1 The regulatory impact analysis (RIA) was introduced in 1998 to improve regulatory quality and curb the creation of unreasonable regulations (The Office for Government Policy Coordination, OGPC et al, 2005). The preliminary feasibility study was initiated in 1999 to review the economic and technological feasibility of large-​scale government projects, to ensure the objectivity of feasibility studies and improve the efficiency of financial investment. Since the 2000s, the Gender Impact Assessment in 2002 was introduced to evaluate the socio-​e conomic disparities between men and women in the process of establishing and implementing major policies in order to promote gender equality (Ministry of Gender Equality and Family, 2018). 50

Regulatory impact analysis

The Corruption Impact Assessment in 2005 was designed as an anti-​ corruption policy by eliminating unclear laws and unrealistic regulations, promoting appropriate standards in the process of drafting and enacting laws, bringing greater transparency to administrative procedures and rationally analysing the causes of corruption (Anti-​Corruption and Civil Rights Commission, 2017). Korean regulatory impact analysis (KoRIA) is a notable tool for policy analysis in the central government. It is used to help guide regulators when releasing regulations. The Framework Act on Administrative Regulations (FAAR) requires the central government to conduct impact analysis when submitting new or strengthened regulations (Kim and Kim, 2017). In the following chapter, KoRIA will be explored as part of the experience of policy analysis in the central government. This will be followed by a discussion of the evolutionary process of KoRIA and a number of related issues and policy implications.

The evolution of Korean regulatory impact analysis Introduction RIA is a decision-​making tool that delivers information to governments through systematic and consistent analysis of the social effects (positive/​negative) resulting from regulatory policies (Jacobs, 1997; Kim and Kim, 2017). Through RIA, regulators are able to explore the best policy options. This includes addressing not only direct regulations but also non-​regulatory alternatives to solve social problems, in consideration of the costs, benefits and other social effects. RIA is now seen as a crucial policy tool for regulatory improvement in the OECD (OECD, 2005). The central government of Korea had similar systems prior to RIA, including the Monopoly Regulation and Fair-​Trade Act in 1980, Act on Special Measures for Deregulation of Corporate Activities in 1993, Administrative Regulation and the Framework Act on Civil Affairs in 1994. These laws required deliberation or pre-​consultation before regulations were introduced. KoRIA was enacted in 1997 under the FAAR. The FAAR required the heads of central agencies to consider relevant information and perform impact analysis. Central agencies were required to conduct their own internal reviews by collecting expert opinions on the subject, scope, method and validity of regulations based on analysis. Evolution KoRIA has changed and evolved since its initial adoption. The central government has made a number of efforts to remedy the system’s shortcomings and improve regulatory quality. 51

Policy Analysis in South Korea

Above all, cost-​benefit analysis (CBA) is required for all regulations to ensure the objectivity of analysis. Such analysis must include administration and enforcement costs, as well as a comparison with overseas cases. In particular, if regulatory costs exceed ₩10 billion per year or in the case of major regulatory regimes, regulatory costs exceed ₩10 billion per year or the regulatee goes beyond more than one million per year, a task force (TF) should be set up to assist in the examination and the Regulatory Research Centres in both the Korea Development Institute (KDI) and Korea Institute of Public Administration (KIPA) are required to participate. A system for automatically calculating regulatory costs on the web was developed to make the items of KoRIA, and reports must be disclosed in advance. Furthermore, guidelines and best practices for KoRIA must be revisited at least twice a year in order to monitor the consulting functions used when the regulatory impact on each department is analysed. Second, the RIA’s evaluation criteria have been improved in more concrete and systematic ways. The number of criteria in the analysis has grown from 6 in 1999 to 14 in 2018 (see Table 5.1). The evaluation elements of a regulation was changed from 19 items of 8 elements to 9 items of 3 elements. Grouping of items with similar objectives made it easier for evaluators to understand the evaluation factors. The objective of the reforms was to improve the RIA’s quality and reduce the burden on regulatory officials. Third, the pre-​evaluation of specialised agencies in the field was conducted before the pre-​analysis stage to enhance the expertise of RIA. To this end, the government performs the Competitive Impact Assessment (CIA) to address competition, the SME Impact Assessment to examine the impact of regulations on small and medium enterprises (SMEs), and the Technology RIA to review the impact of technical regulations and consistency with global standards for technical regulations (Regulatory Reform Committee, 2018). Finally, the government launched the Regulatory Cost Management System (RCMS) in 2014 to promote effective regulatory reform. This has been implemented fully since 2016 under the Prime Ministerial Directive. The RCMS requires the abolition of existing regulations to the extent as the direct cost of the new regulations to be established. This helps to maintain the regulatory burden at a consistent level by keeping total net direct costs constant (OECD, 2017). However, the government allows each department to deposit regulatory costs into its account to reduce the operational burden of RCMS. This measure was implemented in recognition of the difficulty each department faces in submitting new and strengthened regulations along with the abolition/​mitigation the existing regulations (RRC, 2018). Preparation for Korean regulatory impact analysis Scope of application and procedures The FAAR requires all central administrative agencies to conduct RIA when they intend to establish new regulations or strengthen existing regulations. The head 52

newgenrtpdf

Table 5.1: Changes in guidance on evaluation of regulatory impact 1999 Element

Overview

2018 Item

Contains regulatory office name, classification of regulations, personnel information from relevant departments, number of regulations and the laws they are based on, the separation of impact analysis, previous regulations and new regulations The need to establish or reinforce regulations

• Definition of problem, content and cause of occurrence • The need for regulation to solve problems • Setting the goal of regulation

Achievement of regulatory objectives

• Opposition to regulation and social constraints • Feasibility in view of technology level and administrative environment

Presence of alternative non-​ regulatory alternative means or overlap with existing regulation

• Replacement of existing regulations • Whether the goal can be achieved by other means of regulation • Similar existing regulations and overlap • Expansion of regulation • Possibility of reproduction

Evaluation Comparative analysis of the cost element and benefits of regulation

• Cost analysis of regulation • Analysis of benefits of regulation • Comparison and review of costs and benefits • Whether a factor that restricts market competition is included • Whether a factor that inhibits business activity is included

Objectivity and clarity of regulatory content

• Clarity of regulatory standards and procedures • Legal basis of regulation and validity of the term of existence

Administrative mechanism, personnel and budget

• Determination of organisations, personnel and budget for implementation • May be replaced by existing organisations, personnel or funding

Appropriateness of documents and procedures for civil affairs

• Appropriateness of documents and treatment period • Appropriateness of treatment facility and treatment procedure

53

Conclusion Provide standards for post-​performance evaluation and other notes

Item

Regulatory secretariat name, regulatory clause, delegated act, type, legislative notice, need for government intervention, regulatory content, regulatory group and stakeholders, regulatory objective, CBA, impact assessment, sunset status, principal application and exclusion prohibition, Regulatory Cost Management System Necessity of regulation and alternatives

• Background and necessity of government intervention • Review and selection of regulatory alternatives • Goal of regulation

Appropriateness of regulation

• Proportional feasibility between purpose and means • Considerations such as the need for impact assessment • Examples of similar legislation in Korea and overseas • Cost and benefit analysis

Effectiveness of regulation

• Regulatory compliance • Regulatory enforceability

Progress, future evaluation plan, overall conclusion

Note: The items are classified as similarly as possible, but the criteria for 1999 and 2018 are not exactly the same. Source: RRO, 1999; OGPC, 2018a. Reorganisation.

Regulatory impact analysis

Inclusion of competition limiting elements

Element

Policy Analysis in South Korea

of the agency determines the purpose, scope and method of regulation based on analysis in accordance with the FAAR. They also use feedback from experts on the validity of the regulation. Quantitative analysis is carried out according to the KoRIA guidelines proposed by the RRC. KoRIA is carried out in the process of enacting regulatory legislation and consists of the following basic steps (see Figure 5.1):2 First, the regulatory review officer of the Regulatory Reform Office (RRO) is asked to determine whether the legislation to be established is subject to regulatory review. The RRO then makes this determination, and if the legislation is subject to review, the department is informed of the type of RIA required (standard or simplified).3 Second, the ministry in charge writes a pre-​RIA report and submits this to the RRO. In this process, if the regulation is subject to SME Impact Assessment, the provincial government must carry out a preliminary RIA analysis. In this case, the OGPC requests the SME department to assess the appropriateness of the preliminary analysis. Third, once the ministry’s analysis is complete, the RRO will determine whether regulatory examination and/​or regulatory cost management are required, and how the analysis will be conducted. Fourth, the ministry in charge proceeds with legislative notice and release of the RIA report. Fifth, the RIA written by the ministry is verified by the KDI and KIPA. Depending on the result of the verification, CBA items may have to be revised or changed, and the applicability of the RCMS, standards or simple procedures should be established. In the event that an SME Impact Assessment is carried out, the Ministry of SMEs and Startups sends the result of the assessment to each ministry. Sixth, regulations that fall under standard procedures or are deemed to be cost-​ important regulations are reviewed by the Cost Analysis Committee (CAC). The relevant ministry must then revise and amend the report by incorporating the results of the CAC review before the preliminary examination by the Regulatory Research Centre (RRC). Seventh, the regulator sends the RRC’s review and other opinions to the relevant department. The ministry then revises or amends the report based on feedback from the RRO, Regulatory Research Center, stakeholders, related ministries, and impact evaluation before submitting it for examination by the RRC. Finally, the RRC performs the regulatory review based on the updated report. The review of consists of two stages: a preliminary review and the main review. If the preliminary review determines that the legislation is an important regulation,4 it is reviewed again, but if it is ruled to be non-​significant regulation, the examination concludes (OGPC, 2018a; OGPC, 2018b). The RRC reviews the feasibility of the regulation based on the RIA submitted by the relevant ministry, and may recommend ministries to withdraw new regulations if necessary. It is required to attach the review opinion of the Regulatory Reform Committee when deliberating the legislative bill and presenting it to the State Council, so that regulations cannot be newly 54

Regulatory impact analysis

established or strengthened without being reviewed by the Regulatory Reform Committee. For regulations that require in-​depth analysis, such as regulations that impact competition, SMEs or technology, the RRO asks each sector’s regulatory reform task force (RRTC) to perform RIA, and the results thereof are incorporated into the assessment of outcomes in the regulatory review. For example, when a technical RIA (TRIA) is submitted to the RRO, the OGPC checks whether any TRIA subjects are included or not, and requests a review by the technical RRTC if an in-​depth review is required, including an opinion on the redundancy or adequacy of the regulation. Upon receiving a request for review, the technical RRTC must submit a reply to the RRO after conducting the review and collating expert opinions (OGPC, 2013). Under Article 4 of the Regulations for Regulatory Reforms for Field-​Based Regulatory Reform,5 the report must be submitted within ten days of receiving a request from the OGPC. The RCMS is intended only for regulations that place a cost burden on the business activities of individuals.6 The RCMS shall be reviewed by the Regulatory Research Center and, if determined as subject to application, cost-​ benefit analysis shall be implemented through the department’s specialised TF. While the economics ministries’ regulatory cost benefit analysis will be requested to KDI, that of administrative and social ministries will be requested to KIPA for the first verification. If a correction is required based on these opinions, the departments must revise and amend the regulatory cost management analysis report for reverification. Once the verification process is completed, the ministry will submit it to the Regulatory Reform Committee along with a regulatory impact analysis report and undergo a review of the new and strengthened regulations. Regulatory cost management analysis is divided into the standard procedure and simplified procedure (the simplified procedure is applied if the annual net cost is less than ₩1 billion). Where the standard procedure applies, the first verification of the Regulatory Research Center will be followed by a second verification from the Cost Analysis Committee (OGPC, 2017b). KoRIA is made up of five major items: Regulatory overview; Necessity of the regulation and its alternatives; Appropriateness of the regulation; Effectiveness of regulation, and Implementation plan and overall conclusion. Each item is divided into subcriteria. Regulatory overview The regulatory overview is a summary of the regulation subject to analysis and consists of the regulatory office name, regulatory guide, the statute that serves as the legal basis, type, legislative report, verification phase, regulatory content, regulatory targets and stakeholders, regulatory objective, CBA, impact assessment status, sunset status and whether or not RCMS applies (see Table 5.2). 55

Policy Analysis in South Korea

Figure 5.1: Basic RIA procedure Procedure Policy proposal

Agency in charge

Key content

Relevant department

• Initial review of enactment and amendment, discussion between stakeholders and related departments • Pre-​review of relevant legislation (offline) • Determination of regulatory review and type of analysis

Relevant department

• Preparation and submission of RIA report for legislation subject to regulatory review • Written based on the type agreed upon during the preliminary review • ‘Differential treatment for small businesses’ manual used to analyse impact on small businesses • The impact of the Act on SMEs is reflected in the RIA through the ‘Pre-​Analysis of Regulatory Differentiation’ • The OGPC requests a SME Impact Assessment, including an opinion on the adequacy of preliminary analyses, from the Ministry of Small and Medium Businesses

RRO (Regulatory Inspector)

• Determination of the type of regulatory review/​RIA (standard/​ simplified)/​pre-​examination of whether RCMS applies) • Regulations for exclusion of review (Article 3, Clause 2): Finalising the review

Relevant department

• RIA released when the initiated legislation of the related legislation is announced

Regulatory Research Centre SME and venture business department

• Verification of appropriate regulatory costs and submission of verification report • Modification and amendment of CBA (Ministry of Subministerial Affairs) • Based on the results of the Regulatory Research Centre’s verification, decision on whether the standard or simplified cost control system applies and whether the cost is deemed important • Abolition and mitigation regulations: Proceedings only cost analysis, verification and banking • The small and medium-​sized venture business department responds to the SME Impact Assessment by collecting opinions from industry and experts

▼

Preparation of a RIA

▼

Determination of whether regulatory review is required ▼

Pre-​announcement of legislation ▼

Verification of RIA

▼

Review by Cost Analysis Committee

▼

56

Cost Analysis Committee

• Review by Cost Analysis Committee for standard procedures (excluding indirect procedures) or important cost regulations (those with direct costs over ₩10 billion or affecting more than 1 million persons) • Review and augment the opinion of the committee before the preliminary review

Regulatory impact analysis

Figure 5.1: Basic RIA procedure (continued) Procedure Verification opinions aggregated

Agency in charge

Key content

Regulatory Inspector (RRO)

• Combining the opinions of the Regulatory Research Centre and other reviews • Delivering the combined reports to the responsible department

Relevant department

Revision and augmentation of RIA by considering the opinions of OGPC and the Regulatory Research Centre, stakeholders and related departments, and impact assessments (including the SME Impact Assessment) Review by the RRC of subordinate ministries

▼

Internal review

▼

Regulatory review

RRC

• Review of new or strengthened regulations (RIA attached) • Committee preliminary review • If the preliminary review determines the regulation is non-​significant, the main review is excluded

Note: Under the Regulations for Appointment and Management of Orders, Regulations, and Notices, the issue must be reviewed by the legislature a preliminary review of the regulation is requested. Source: OGPC, 2018a; OGPC, 2018b. Reorganisation.

Necessity of the regulation and its alternatives The necessity of the regulation and its alternatives consists of ‘Background of and necessity for government intervention’, ‘Review of possible regulatory alternatives’ and ‘Object of the proposed regulation’. Each step requires comparison between multiple regulatory options. Stakeholder feedback is presented for multiple alternatives, as well as the outcome of the action, the content of the choice and the rationale behind it. This step also involves identifying the future state (regulatory goals) that is intended to be achieved through the chosen alternative. For example, the Ministry of Food and Drug Safety (MFDS) conducted the following analysis when revising regulations on ‘limiting the size of foreign text displayed on livestock products’.7 The underlying rationale behind this regulation is to prevent consumers from confusing foreign products because foreign languages are larger than Korean, even though it requires the size of foreign language to be smaller than Korean. Therefore the government intervenes to prevent misunderstandings and confusion among consumers in selecting products and to secure regulatory equity with food. The proposed regulatory alternatives suggested by the government were maintaining the current policy to give companies autonomy or applying the same standards as for food. The advantages and disadvantages of the two alternatives were compared, as shown in Table 5.3. Opinions were gathered from interested industries and consumer groups. Based on this process, the MFDS concluded that the regulatory option was the most appropriate for preventing misidentification and confusion among consumers. Accordingly, the MFDS decided to provide accurate information to

57

Policy Analysis in South Korea

Table 5.2: Regulatory overview

Basic information

1. Title

Including scattered dust from painting and construction in project reports

2. Statute that serves as legal basis

Enforcement Decree of the Clean Air Conservation Act Article 44 para 5

3. Legal mandate

Article 43 para 1 of the Clean Air Conservation Act

4. Type

Reinforcement

6. Verification phase

RIA

7. Background of and necessity for government intervention

• Painting work carried out in apartment buildings is excluded from reporting even when there is a large amount of dust scattered • Need to report and oversee painting work in projects where the scattering of dust occurs

8. Regulatory content

• (Current) - No regulations on painting work carried out in apartment buildings • (Reinforced) • Including exterior painting work carried out in apartment buildings that have established long-​term repair plans pursuant to the Joint Housing Management Act -​ Compliance with the facility’s measures to prevent the spraying of dust through measures such as roller painting

Necessity of the regulation

5.Pre-​announcement of legislation

Type 9. Regulatory targets and stakeholders

Scale

Targets

Painting work

1,709 cases per year

Stakeholders

Residents of the Apartment Housing Project

–​

Central departments

Ministry of Land, Infrastructure and Transport

–​

10. Regulatory goals

Improving air quality and protecting public health by having paint work included in the project report and performed in compliance with facilities measures to prevent the generation of dust during painting work Cost

Benefit

Net cost

11. CBA (Unit: million)

Targets

55,311.61

0

55,311.61

Excluded

0

1,060,018

Appropriateness of the regulation 12. Impact evaluation status

Technology Impact Assessment

RIA of SMEs

Not applicable

Not applicable

Not applicable

Applied

14. Negative regulation Other 15. OIOO (Unit: million)

Not applicable Application status Applied

Source: Ministry of Environment, 2018

1,060,018 Competitive Impact Assessment

13. Sunset rule

58

Not yet announced

Cost

Benefit

Annual equivalence net cost

55,311.61

0

7,338.06

Regulatory impact analysis

Table 5.3: Regulatory alternatives (example) Advantage

Disadvantage

Current maintenance plan

• Minimise packaging costs by granting operators autonomy regarding labels

• If the foreign language label is larger and more conspicuous than the Korean one, consumers may continue to mistake the product for a foreign product

Regulatory alternative

• Enables consumers to easily view accurate information about products • Maintains balance between food and livestock products

• Items marked with foreign text that is larger than the Korean text need to be replaced

Source: MFDS, 2018

consumers by marking foreign languages equal to or smaller than Korean and expand their options (MFDS, 2018). Appropriateness of the regulation The adequacy of regulation is checked in the following areas: ‘Proportional validity between purpose and means ‘, ‘Necessity of impact evaluation and consideration etc’. ‘Similarity of legislation in other countries’ and ‘cost-​ benefit analysis’. ‘Proportional validity between purpose and means considers whether the proposed regulatory measure applies the minimum amount of constraints necessary to achieve the regulatory objective. Necessity of impact evaluation and consideration etc reviews whether regulations are subject to a CIA, SME Impact Assessment or TRIA that requires professional assessment. It also examines the relevancy of market regulation, international standards, and sunset clauses. Examination of similar legislative cases looks at examples in Korea or overseas as comparative data to determine the level and quality of new regulations. The cost and benefit analysis is prepared for the results of the calculation of costs and benefits for the selected alternative to the new regulation, and the details of the analysis are attached. For example, the Ministry of Trade, Industry and Energy (MOTIE) evaluated the adequacy of regulations in terms of technical standards for the approval of DC electric power meters. The government noted that the regulation had proportional validity between the regulatory objective and means employed because it had a positive effect on the public interest by revising technical standards to ensure the reliability and accuracy of the legal instruments. TRIA and SME Impact Assessment were performed on the regulations. TRIA states that the regulatory proposals are consistent with the Korean Standards (KS) and International Standards (IEC), stating that there is no change in the testing procedures for type approval and that the current international standards for technology are being revised.8 The SME Impact Assessment (IA) makes the regulatory alternatives through the opinions from the public hearings. MOTIE determined that the regulations did 59

Policy Analysis in South Korea

not fall into the category of regulations that restrict market entry or competition, negative regulations or sunset regulations. The ministry also proved the validity of the regulations by presenting a case where JEMIC designated and managed legal meters and another where the Swiss Federal Institute of Metrology completed standardisation and test certification (MOTIE, 2018). Effectiveness of the regulation Effectiveness of the regulation looks at Consideration of regulatory compliance and Consideration of feasibility. Consideration of regulatory compliance means the degree of compliance with the regulation and describes alternative measures to mitigate the regulatory burden on socially disadvantaged groups, while also considering the impact on those targeted by the regulation. Consideration of feasibility examines both administrative and financial feasibility . Administrative feasibility means the organisations and personnel required to enforce and monitor regulations, while financial feasibility refers to whether there is sufficient funding to implement the regulation. One example is when the Ministry of Health and Welfare (MHW) evaluated the effectiveness of regulations on the mandatory installation of day-​care centres in the workplace. First, regulatory compliance would be improved due to greater interest from employers, a change in the social atmosphere towards work–​family compatibility and the government’s enforcement measures. To ease the burden on SMEs, the government worked on revising other related laws to exempt companies from the requirement to set up a day-​care centre if they met certain legal standards. In the aspect of the effectiveness of regulation, the administrative burden of the relevant ministry will not increase because the establishment of workplace day-​care centres was monitored since 2012 by the Ministry of Employment and Labor (MEL), the Ministry of Education and provincial government. Financial feasibility came from the employment insurance fund set up by the MEL, which could be used to help fund the installation of daycare centres (MHW, 2018). Implementation plan and overall conclusion The action plan and conclusion consist of ‘ implementation progress’, ‘future evaluation plan’ and ‘general conclusion’. Implementation progress describes the internal reviews and stakeholder feedback gathered during the process of adopting the regulation. The future evaluation plan presents policy indicators, the compliance rate and a follow-​up plan. The general conclusion is reached by compiling the contents of the RIA. An example is when the Ministry of Culture, Sports and Tourism (MCST) established new regulations on disaster prevention measures. Prior to the introduction of the new regulations, the implementation progress was carried out via a period of consultation with relevant departments (2016), revision (2017) 60

Regulatory impact analysis

and collection of expert opinions (2018).9 In the future evaluation plan section, it was determined that local governments would be able to check regulatory compliance. The general conclusion was that the new regulations could be integrated with analysis, thereby making the system effective and reducing the regulatory burden. Korean regulatory impact analysis criteria and regulatory costs While the role of KoRIA is to evaluate the overall impact of a regulation on society, RCMS looks at the direct costs and benefits of the regulation. The analysis begins with an inquiry as to whether the regulation is subject to the RCMS and what the direct costs and benefits are. First, RCMS is aimed at regulating individuals, corporations and non-​ profit corporations who engage in continual or repeated activities for the purpose of profits. However, there are some exceptions, including national crises, the implementation of international agreements, issues related to people’s lives and safety, environmental crisis, rules to promote competition, regulatory costs such as fees and administrative orders, and regulations whose duration is one year or less (RRC, 2017). Direct costs refer to costs directly paid by regulatory targets. Accordingly, the ultimate goals of the regulation and secondary effects are excluded. Similar to direct costs, direct benefits are only those that regulatory targets directly receive from the regulation (OGPC, 2017b). As an example, the Ministry of Land, Infrastructure, and Transport (MLIT) revised the details of job training for automobile salespeople in the Motor Vehicle Management Act Enforcement Regulations (see Table 5.4). To analyse the direct costs of the regulation on automobile dealers, the MLIT set 2018 as the price base year and present value base year with an analysis period of ten years and a discount rate at 5.5 per cent. While only new education expenses were considered in the first year, MLIT formulated a scheme that included the costs of both new and renewing expenses from the second year. Direct costs and annualised net costs10 were derived using the data from each formula. As a result, the direct costs to automobile dealers were calculated to be approximately ₩3.96 billion over the ten-​year period (MLIT, 2018).

Current situation and limitations KoRIA has been required for all regulations submitted by the central government since the FAAR came into effect. For SME Impact Assessment, TRIA and CIA, the opinions of each Regulatory Reform Task Force (RRTF) must be incorporated into the RRO request before it is examined by the RRC (OGPC, 2018a). The review and evaluation of RRC and RRTF are based on regulatory impact analysis prepared by each ministry/​department. All regulations are subject to the RRC’s KoRIA reviews. 61

Policy Analysis in South Korea

Table 5.4: Regulatory cost analysis (example) Contents

Title

Regulations for training of car dealers

Description

The revised Motor Vehicle Management Act (2017.12.26) defines the targets of the education, educational subjects, educational content, education hours and other matters.

Class

Car salespersons

Activity title

Car salespeople participate in education conducted by the Trade Association

Cost type

Education and training

Cost

₩3,968,712,460

Activity cost characteristics

Repeated/​unequal

Formula

• 1st year costs =​₩50,000 for education of new salespeople * 3,133 new employees =​₩156,650,000 for annual sales • 2nd to 10th year costs =​Total new salesperson training expenses +​total renewing employee education costs =​₩50,000 (new education costs) * 3,136 new sales personnel (annual new employees) +​₩25000 (renewal training expenses) * 15,667 (annual renewed employee) =​₩548,325,000

Evidence

• Education expenses for new employees =​Training expenses for sales employees (days) =​₩50,000 • Renewal education costs =​Renewal training hours (four hours) half of new person education costs =​₩25,000 • Annual new persons =​Annual sales force as estimated by the Trade Association (10%) =​3,133 persons • Annual renewals =​Half of the current sales force (31,334) =​15,667, as employee identification needs to be renewed every two years

Source: MLIT, 2018

The number of regulatory reviews increased between 1999 and 2005. There have been a total of 21,972 regulatory reviews since 1999, an annual average of 1,156.4 (see Table 5.5). During the same period, there were 8,712 statutes that contained regulations, and the average number of regulatory reviews per act was 2.5. As of 2017, an average of about 30 regulatory reviews per department had been received by 38 central administrative agencies. KoRIA has kept the number of regulations subject to review per statute between two and four. This shows that a certain level of analysis has been maintained irrespective of any increase or decrease in the number of laws. KoRIA has played a significant role in regulatory management systems. However, KoRIA may have operated in a more perfunctory manner since the ‘non-​critical regulation’ item was added in 2008. This is because the proportion of non-​critical regulations grew from 76.6 per cent to 96.9 per cent in 2017. Non-​critical regulations are only subject to a preliminary RRC examination, without a major review, and regulatory costs vary depending on the scope of the regulation’s direct and indirect effects. Accordingly, departments are incentivised to narrow the scope of perceived regulatory influence to reduce the burden of KoRIA regulatory work they have to perform. 62

Regulatory impact analysis

Table 5.5: Annual reviews of RRC legislation (unit: cases, %) Results of examination Non-​critical regulations

Year

Number of statutes

Regulations subject to evaluation

Regulations per statute

1999

357

1,325

3.7

288

167

870

2000

406

1,102

2.7

94

306

702

2001

287

1,209

4.2

308

89

812

2002

289

797

2.8

155

49

593

2003

261

947

3.6

39

246

662

2004

342

1,054

3.1

29

278

747

2005

459

1,423

3.1

57

367

999

2006

373

1,076

2.9

32

213

831

2007

520

1,259

2.4

25

218

1,016

2008

444

974

2.2

746

76.6

108

17

106

2009

450

968

2.2

793

81.9

91

22

62

2010

464

1,039

2.2

714

68.7

105

53

881

2011

523

1,248

2.4

997

79.9

105

22

1,121

2012

647

1,598

2.5

1,368

85.6

84

27

1,487

2013

563

1,200

2.1

1,037

86.4

95

6

62

2014

508

1,146

2.3

1,008

88.0

76

8

54

case

%

Improvement recommended

Withdrawal recommended

Original accepted

2015

541

1,022

1.9

926

90.6

48

4

44

2016

689

1,491

2.2

1,434

96.2

40

4

13

2017

589

1,094

1.9

1,060

96.9

14

7

13

Sum

8,712

21,972

2.5

–​

–​

1,793

2,103

11,075

Notes: 1999 was judged from June 1998 to December 1999; 2010–12 combines non-critical and important regulations to aggregate the results of regulations where improvement was recommended, regulations where withdrawal was recommended and regulations where the original draft was accepted; in 2017, ‘improvement recommended’ is the sum of nine improvements and five supplementary recommendations. Source: RRC, 1999–​2017

An examination of KoRIA by sector shows that the rate of opinions to reviews differs between task forces (see Table 5.6). The figures were 3.6 per cent for CIA RRTFs, 6 per cent for SME Impact Assessment RRTFs and 23.6 per cent for TRIA RRTFs. Compared with the number of reviews, the number of opinions is small. It seems that the RRTFs terminated the in-​depth review process and returned the requested regulation to the RRO because the regulation did not meet the scope of the analysis. However, the opinions and suggestions from the RRTFs had sufficient quality to have a positive impact on policy decision making. Some opinions (58.1 per cent of CIA, 57.2 per cent of SME Impact Assessments and 67.1 per cent of TRIA) were incorporated into the regulation review process and cited as the final version of the regulation. This seems to be due to the professional expertise and different review criteria of RRTFs. 63

Policy Analysis in South Korea

Table 5.6: RIA by sector (unit: cases) Number of requests

Competitive Impact Assessment

SME Impact Assessment

Technical RIA

Opinions

Regulatory review incorporated

Year

Act

Regulation

Reviews

2013

272

590

585

24

8/​15

2014

246

614

614

18

9/​15

2015

–​

571

571

18

11/​16

2016

–​

197

197

6

3/​6

2017

–​

360

360

17

7/​12

2013

308

667

667

39

19/​28

2014

240

627

627

42

21/​35

2015

245

550

550

15

8/​15

2016

84

211

211

11

3/​6

2017

147

359

359

34

17/​31

2013

160

291

285

55

37/​42

2014

170

409

409

126

83/​126

2015

275

602

602

102

53/​102

2016

133

329

329

77

47/​77

2017

173

368

368

101

69/​101

Note: CIA for 2013 was reviewed in only 585 cases, and the total number of requests for the remainder is reviewed. Having the regulatory review incorporated means the opinions in the review were included in the RRC review. The reason for the denominator (opinions per RIA) differing from the actual number in the comments in is that the regulatory plan is still under review or has no significant impact on competition, SMEs or technology. Source: RRC, 2013–​17.

Many of the regulatory RRTF examiners worked in the central government or related agencies where they dealt with regulations, and they have more in-​depth knowledge than general officials. The review criteria of RRTF are different with KoRIA so RRTF can review specific subjects more deeply and specifically. The Regulatory Cost Analysis Report launched pilot projects in eight ministries in 2014, and this was expanded to 15 ministries in 2015. Ministries requested reports on 1,388 regulations from June 2016 to October 2017. RCMS applied to 241 cases (17.3 per cent), and the remaining 1,147 cases (82.6 per cent) were exempt. Nineteen of the regulations received were dealt with in accordance with the standard procedure and the other 222 were handled using the simplified procedure (Choi, 2017). Each department’s record of the report of regulatory cost analysis was used in some of the first verification results from 2015 to 2017 due to the differences in aggregation criteria between KDI and KIPA (see Table 5.7). The results showed that the MLIT (70 cases, 14.5 per cent) submitted the most regulatory cost analyses, followed by the Ministry of Environment (62 cases, 12.9 per 64

Regulatory impact analysis

Table 5.7: Regulatory cost analysis by department (unit: cases) Department

Number of cases

Department

Ministry of Employment and Labor

30

Korea Communications Commission

Fair Trade Commission

11

Ministry of Health and Welfare

34

Ministry of Science and Technology Information and Communication

17

Korea Forest Service

14

6

Ministry of Trade, Industry and Energy

38

7

National Fire Agency

Customs Service Ministry of Education

Number of cases

8

6

Ministry of Public Safety

10

Ministry of Food and Drug Safety

26

Ministry of Land, Infrastructure and Transport

70

Ministry of Gender Equality and Family

6

Financial Supervisory Service

7

Financial Services Commission

24

Ministry of Strategy and Finance Ministry of Food, Agriculture, Forestry and Fisheries

7 15

Ministry of SMEs

12

Korean Intellectual Property Office

17

Ministry of Maritime Affairs and Fisheries

33

Ministry of Public Administration and Security

Cultural Heritage Administration

6

Ministry of Environment

Ministry of Culture, Sports and Tourism

8

Total

8 62 482

Note: Total analyses submitted by ministries from 2015 to November 2017. Source: Choi et al, 2017

cent), and MOTIE (38 cases, 7.9 per cent) (Choi, 2017). However, the number of submissions from certain agencies such as the Korea Customs Service, the Ministry of Education, the Ministry of Strategy and Finance, and the Ministry of Forestry, was relatively small, and the opposite was true for the Fair Trade Commission, the Ministry of Agriculture, Forestry and Livestock, and the Korea Communications Commission. These differences appear to reflect the regulatory characteristics of each department. Where the Regulatory Cost Management System applies, the regulatory body considers only the direct costs and benefits. Accordingly, regulations submitted by the ministries with active participation have a direct effect on the regulated. However, it is natural that there will be some regulations that have a relatively indirect impact on the regulatory targets. A general look at the advantages and disadvantages of policy analysis in the central government can help to shed light on KoRIA issues. Above all, policy analysis is likely to generate more demand and maintenance as the government introduces new policies or new agendas. To create quality policies, the government must develop quality analysis techniques and systems. On the other hand, analysis output can sometimes be viewed as less reliable due to the incompetence of regulatory officials. Even though such officials are required to have an understanding of the overall policymaking process and expertise in a specific filed, it is practically impossible for them to possess all the relevant information and knowledge. In 65

Policy Analysis in South Korea

addition, the strict analysis requirements could lead to a superficial and formulaic process with a fair amount of red tape (Ha and Kim, 2016). Since KoRIA was introduced, the central government has utilised a range of tools to promote rational decision making by exploring policy alternatives and the costs and benefits of regulation before regulations are created or strengthened. The analysis criteria have been improved via sophisticated measures to remedy the weakest links. Nevertheless, KoRIA still has its limitations in terms of resources, operational procedures and government support. First, human capital is crucial for the operation of KoRIA, especially economists and expert in specific fields. Most central agencies suffer from a lack of trained professionals, and reports are prepared by regulatory officials alone or with the help of affiliated research institutes at best. Complementarity systems such as RIA or RCMS only increase the burden on regulatory officials. Second, in terms of operational procedures, impact analysis is carried out by each agency, along with filing notice of legislative proposals and posting the legislation online. After being reviewed by the Regulatory Research Centre and Regulatory Reform Task Force, the report is further augmented and screened by the RRC. However, there is a time constraint on this report, because the analysis is a prerequisite for drafting legislation. Therefore, it is tempting for governments to focus on simply passing laws rather than pursuing the original purpose of the analysis. A considerable amount of RRC reviews are based on ‘non-​critical regulations’ or ‘acceptance of the first draft’ (RRC, 2018). Governments face a number of challenges in ensuring the quality of RIA if other factors have a greater impact on the review process than KoRIA. Finally, OGPC is supposed to train regulatory officials using a highly specialised curriculum and support from the Regulatory Research Center. However, it is difficult to create a meaningful educational environment that includes a range of training classes and special facilities due to the limited budget.11 In addition, it is hard for the RIA guidelines to provide specific details for CBA since they are mostly attuned to the fundamental requirement of using RIA techniques and best practices. In addition, job rotation which is the characteristic of bureaucratic system serves as an impediment to accumulating knowledge on RIA preparation. While officials with excessive burdens may take on other positions by job rotation, government has no support/​incentive programmes to prevent job rotation (Lee and Kim, 2015).12

Conclusion Government regulations are a significant factor that curtail the freedom of individuals, firms and other social actors. The performance of economies varies widely from country to country depending on how and to what extent economic activity is limited. Regulatory reform is aimed at helping governments improve regulatory quality. The central role of regulatory reform is to remove 66

Regulatory impact analysis

unnecessary obstacles to competition, innovation and growth, while ensuring that government regulations efficiently serve important social objectives (Kim and Kim, 2017). In this chapter, we reviewed the evolutionary process of KoRIA, a systematic, analytical tool for regulatory reform. KoRIA is supposed to put forward the purpose of regulations, review policy alternatives and examine the impact of regulations on society through elaborate CBA. This contributes to maximising the net social benefits of government regulations. The central government of Korea has recognised the importance of regulatory impact analysis and enacted laws stipulating that all central government agencies must perform KoRIA when establishing new regulations or strengthening existing ones. We also explored some ways to improve analysis and briefly discussed policy implications. High-​quality analysis is crucial for KoRIA to achieve its intended purpose. Impact analysis is just one piece of the puzzle toward improving regulatory quality, and its problems should not be understated. It is important that we identify the key factors underscoring these problems and appreciate the limitations of analysis. Notes 1 2

3

4

5 6

Traffic Impact Assessment DB System, ‘Evaluation System Introduction’: https://​tia.molit. go.kr/​bsnsin​fo01​Dtlv​iew.do (Accessed: 27 October 2018). However, if urgent regulation is required, it is possible to request a review by the RRC without preparing a RIA, and the RRC will review the validity of the new regulation within 20 days. Regulatory agencies must submit a RIA to the RRC within 60 days if validity is confirmed, otherwise the commission may request the regulatory departments to follow the original regulatory/​amendment procedures (Article 13 of FAAR). RIA is divided into standard and simplified procedures, which apply to all regulations except for simple regulations such as a suspension of operations, minor matters under the delegation of higher laws, details of mandatory documents, and procedures of profitable administrative disposition. The standard RIA analyses all RIA items, while the simplified RIA presents a single alternative, with a qualitative assessment available for cost analysis (OGPC, 2018a). The FAAR stipulates that important regulations are: (1) Regulations that are required by the regulatory group and the people who are subject to the regulations are over ₩10 billion a year; (2) Regulations that apply to more than one million persons a year; (3) Regulations of a nature that restrict competition or market entry; (4) Regulations that are excessive or unreasonable in light of international standards; (5) Regulations that are already in force or are scheduled to be implemented by another administrative agency, regulations that cause serious inconsistencies or interference; (6) Regulations that involve a conflict between interests or that are feared to have significant adverse social or economic consequences; (7) Regulations that need to be improved as a result of the SME Impact Assessment, Competitive Impact Assessment or Technology Impact Assessment and (8) Regulations that require in-​depth discussion by the commission due to significant injustice pertaining to the level or extent of the regulations. Regulatory information portal, ‘New and Strengthening Regulatory Review’: https://​www. bet​ter.go.kr/​fz/​intro/​RrcOrg​n02.jsp (Accessed: 21 August 2018). This includes (1) A need to urgently respond to a national crisis, (2) Implementation of a treaty or other international agreement; (3) Maintenance of national public order relating to the lives and safety of the people; (4) Regulations that prevent a financial or foreign exchange system crisis, respond to an environmental crisis or promote competition; (5) Where the management of regulatory costs such as fees, administrative penalties or disposition of administrative sanctions

67

Policy Analysis in South Korea

7 8 9

10

11

12

is not appropriate. The RCMS does not apply to regulations that have a sunset period of less than one year (RRC, 2018). Marking standards for livestock products under Article 6 of the Korean Livestock Manages Act. IEC CD 6205341. The specific dates were as follows: Consultation with relevant ministries to improve the safety of concert halls (mandatory provision of evacuation information before concerts) (December 2016); Mandatory evacuation of concert halls by amending the law on performances (November, 2017); Collection of expert opinions to review the details of evacuation guides (January, April 2018). Annual equivalence net cost refers to the annual net cost arising from regulations, and net cost present value is obtained by dividing this by the annual payment rate. Net cost present value refers to the value of net benefits (direct costs–​direct benefits) arising during the lifetime of the regulations and converted to present value by applying a constant discount rate (a social discount rate of 5.5 per cent). The annual payment rate is derived in accordance with OGPC et al (2017a). ‘Regulatory’ lectures by the National Human Resources Development Institute are supposed to be held twice every three days for 30 people during the education of government officials below the level of the department head. However, it is difficult for them to acquire specialised knowledge as the lectures are conducted of 24 hours of lectures and 19 hours of practice for job creation and regulation reform of the five-​level new managers (about 350 people). Although there is compensation for civil servants and an exemption system for exceptional cases of regulatory reform, this is not considered to be a benefit enjoyed by the average regulatory official.

References Ahn, H. (2014) A Study on the Improvement of the Effectiveness of the Regulatory Impact Analysis System, Seoul: Korea Institute of Public Administration (KIPA). Anti-​Corruption and Civil Rights Commission (ACCRC) (2017) The Corruption Impact Assessment Case Study, Sejong: ACCRC. Choi, M. (2017) Comprehensive Evaluation of Regulatory Cost Management System, Seoul: Korea Institute of Public Administration. Ha, S.G. and Kim, S.J. (2016) ‘Keyword network analysis for grasping the research trends in regulatory studies: the case of South Korea’, Social Science Review, 47(1), 79–​103. Jacobs, S. (1997) ‘An overview of regulatory impact analysis in OECD countries’, in Regulatory Impact Analysis: Best Practices in OCED Countries, edited by R. Deighton-​Smith and S. Jacobs, Paris: OECD, pp 13–​30. Jung, I. (2002) The Economic Brain of the Hongneung Forest, Seoul: Korea Development Institute. Kim, T. and Byun, S. (2010) Focusing on the Question of Overestimation of Benefits and Measurement of Benefits in the RIA, a paper published by the Korean Association of Public Administration. Kim, T.Y. and Kim, S.J. (2017) ‘South Korea’, in Handbook of Regulatory Impact Assessment, edited by Claire A. Dunlop and Claudio M. Radaelli, Cheltenham: Edward Elgar Publishing, pp 362–​80. Kim, T., Jung, J. and Hur, G. (2008) ‘A study on the quality of the regulatory impact analysis in Korea: applying the general evaluation framework’, Journal of Regulation Studies, 17(2), 133–​70. 68

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Lee, H. and Kim, J. (2015) ‘Spears of the regulatory reform –​maintenance of the implement system’, Journal of Regulation Studies, 24 (special issue; Korea Society for Regulatory Studies). Ministry of Environment (ME) (2016) Environmental Impact Assessment System, Sejong: ME. Ministry of Environment (ME) (2018) Enforcement Decree of the Clean Air Conservation Act (Contained in the List of Projects Reporting on Scattering Dust Generation in Painting Construction), Regulatory Impact Analysis Report, Sejong: ME. Ministry of Food and Drug Safety (2018) Livestock Products Sanitary Control Act (Regulation of Foreign Language Type Size Restriction in Livestock Products), Regulatory Impact Analysis Report, MFDS. Ministry of Gender Equality and Family (MGEF) (2018) Gender Impact Analysis Evaluation Guideline, MGEF. Ministry of Health and Welfare (2018) Infant Care Act (Exceptionally Allowed Child Care at Work), Regulatory Impact Analysis Report, MHW. Ministry of Land, Infrastructure and Transport (2018) Enforcement Rules of the Motor Vehicle Management Act (Regulations on Job Training Details of Automobile Dealers), Regulatory Impact Analysis Report. Ministry of Trade, Industry and Energy (2018) Power Meter Technical Standards (Direct Electronic Power Meter Type Approval Technology Standard), Regulatory Impact Analysis Report, MTIE. Noh, H. (2010) ‘The logic and strategies of the policy analysis and evaluation capacity building for the Korean government organizations’, Korean Journal of Policy Analysis and Evaluation, 20(2), 13–​49. OECD (2005) Regulatory Impact Analysis in OECD Countries Challenges for Developing Countries, Paris: OECD. OECD (2017) Korea’s Regulatory Policy: Endless Journey Toward Better Regulation, Paris: OECD. Office for Government Policy Coordination (OGPC) (2013) Guidelines for Technology Regulatory Impact Assessment, Sejong: OGPC. OGPC (2015) Regulatory Impact Analysis, Sejong: OGPC. OGPC (2018a) Guideline for Preparing Regulatory Impact Analysis, Sejong: OGPC. OGPC (2018b) The Manual for Small and Medium Business Regulations, Sejong: OGPC. OGPC (2018c) Results of the 2018 OECD Regulatory Policy Assessment, press release from the OGPC. OGPC, Fair Trade Commission, Financial Supervisory Commission, Ministry of Education Human Resources Development and Korea Customs Service (2005) Manual for Preparation of the Regulatory Impact Analysis, Seoul: Forum on Regulatory Innovation. OGPC, Korea Institute of Public Administration (KIPA) and Korea Development Institute (KDI) (2017a) Guidelines for Preparation of Regulatory Impact Analysis, Seoul: OGPC. 69

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OGPC, KIPA and KDI (2017b) The Manual for Regulatory Cost Management, Seoul: OGPC. Park, S. (2018) ‘Regulatory impact analysis (RIA) in Korea’, Regulatory Reform and Regulatory Impact Analysis in Korea, Seoul: Korea Institute of Public Administration. Regulatory Reform Committee (RRC) (1999–​2018), The 1998–​2017 White Paper, Seoul: RRC. Regulatory Reform Office (RRO) (1999) Regulatory Impact Analysis Guide, Preparation Case, Seoul: RRO. Yeo, C. (2010) the Government’s Regulatory Impact Analysis Status and System Improvement Task, Seoul: National Assembly Budget Office.

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SIX

Policy analysis in quasi-​governmental institutions in Korea Hyung Jun Park, Jiye Ju and Hyung Gun Park

Introduction In 2020, the total expenditure of the Korean government was ₩547 trillion, and a substantial share of this public funding (18.3 per cent) was transferred to 360 agencies outside the government in the form or grants or subsidies. These agencies are public institutions, which are typically responsible for providing certain public goods and services on behalf of governments at different levels but in a more specialised manner. Public institutions are not strictly central or local subordinate agencies of the government but are subject to government oversight and control. It is because they are partially funded by the government and the policy outcomes they (semi-​) monopolistically provide are crucial for the public (KIDF, 2011; Choi and Hong, 2017). The unique nature of public institutions raises the issue of how they can be held accountable in terms of whether their outputs and outcomes efficiently utilise public resources, meet social expectations (which are often at odds with organisational efficiency) and fulfil the policy agenda of the government that funds them. The primary role of public institutions is to uphold the public benefit by providing crucial services to the public. For example, the services provided by public enterprises include utilities (electricity, water, gas, transportation) and broadcasting services. These services are capital-​intensive and entail high initial set-​up costs, which function as barriers to entry for alternative service providers. These services are likely to become monopolies if provided by the private sector. On the other hand, public enterprises promote benefits for the public by limiting their own organisational profits. Public institutions are also responsible for services with a public nature and marginal profits that the private sector seldom performs. For example, the private market is not suited to services related to cultural heritage, research and development (R&D), or pension management, which are associated with non-​profit values and should be managed in the long run. The purpose of this chapter is to provide a brief overview of the performance evaluation system for public institutions. The following sections discuss a typology that classifies public institutions and their responsibilities with regard to service type, as well as a detailed examination of the components of the performance evaluation system. 71

Policy Analysis in South Korea

Types of public institutions in Korea Public institutions can be largely categorised into three groups based on number of employees, scale of assets, own-​source revenue ratio, and the types determine the scope of management and oversight from external organisations. These groups are public enterprises (or public corporates), quasi-​government institutions and unclassified public institutions. Both public enterprises and quasi-​government institutions are subject to statutes and presidential decrees that stipulate composition and operations of the board of directors, executive officers, budget and accounting standards, and performance evaluation. Public enterprises are entities funded by direct government investment and run by the state, local government or other public agencies for the benefit of the public. The minimum requirements for being a public enterprise include 50 employees and an own-​source revenue ratio of at least 50 per cent. Among those that fulfil the minimum requirements, public enterprises with an own-​ source revenue ratio of at least 85 per cent and asset value of at least ₩2 trillion are categorised as ‘market type’ public enterprises (Research Center for State-​ Owned Entities, 2019). Public enterprises that do not fit in this category are called ‘quasi-​market type’ public enterprises. Quasi-​governmental institutions are defined as public institutions with more than 50 employees but less than 50 per cent own-​source revenue. These institutions are also classified into two groups. The first is ‘fund management quasi-​governmental institutions’, which are commissioned to manage public funds including pensions, credit, tariffs, loans and insurance. The second type is ‘commissioned-​service type quasi-​governmental institutions’, which perform services not related to public fund management. The final category is unclassified public institutions. Institutions in this category do not meet the requirements of either public enterprise and quasi-​governmental institutions but are responsible for providing public services in many areas. These institutions include foundations, R&D institutes, hospitals, policy think tanks, public facility maintenance and development organisations, museums and committees for memorial projects. Since the designation of public institutions is first nominated by the ministry in charge, different public institutions are under the oversight of different ministries. Table 6.1 shows the number of public institutions in each category and some of the leading institutions as of 2020 based on information from All Public Information In-​One (ALIO).

Performance management of public institutions Institutional foundation Performance management of public institutions was first officially proposed in the Act on the Management of Government-​Invested Institution of 1973 (AMGII). 72

Quasi-governmental institutions

Table 6.1: Number of public institutions by category Category

Institution Type

Number

Market type enterprise

16

Incheon International Airport, Korea Gas Corporation, Korea South-​East Power Corporation

Quasi-​market type enterprise

20

Korea Expressway Corporation, Korea Land & Housing Corporation, Korea Water Resources Development Corporation

Commissioned-​service quasi-​governmental institution

13

National Research Foundation, Korea Tourism Organization, The Independence Hall of Korea

Fund management quasi-​governmental institution

86

Korea Credit Guarantee Fund, National Pension Service, Korea Asset Management Corporation

Unclassified public institution

225

Institute for Basic Science, National Medical Center, The Export-​Import Bank of Korea, Korea Polytechnics

Public enterprise

Quasi-​governmental institution

Other

Examples

The Act specifies basic guidelines, such as the designation of operational objectives, performance reports and performance evaluations. The evaluations are based on social value, objective achievement and economic efficiency, but the evaluation methods are subject to the discretion of the Ministry of Economy and Finance. In addition, the statute delegates managerial responsibility for the performance of public institutions to performance evaluation committees. These committees are primarily composed of the heads of relevant departments and bureaus of the institutions, where the Minister of Economy and Finance is the chair of each individual committee. Formal performance evaluation is conducted on an ad hoc basis when the minister determines that it is necessary. The committees are involved in formulating and adjusting the objectives of institutions, budgeting and performance but without any detailed guidelines. The primary external evaluator is the Board of Audit and Inspection of Korea, the central agency for budgetary audits and public personnel management. A revision to the Act in 1998 discarded the guidelines but retained the basic instructions on committee composition and the appointment of directors of suborganisations. The act also covers the appointment of chief executive officers of individual public institutions from the non-​government sector. In this respect, the legislation made public institutions administrative arms of government in terms of structure but balanced the government-​centric management by limiting the ability of incumbent public officials to take leadership positions in such institutions. However, there were still some problems with the legal bases for the performance evaluation of public institutions, such as an absence of standards for public institution services, a lack of accountability and moral hazard, and overwhelming governmental regulations that impede autonomous management (Yoon et al, 2010, p 29). The adoption of the OECD Guidelines for Corporate Governance of State-​Owned Enterprises in the Act on the Management of Public Institutions (AMPI) attempted to address these issues by laying out substantial guidelines for the performance management of public institutions. The AMPI 73

Policy Analysis in South Korea

has been amended 19 times over the past 13 years, although the core concepts were proposed in the first three years after the statute’s creation. The following is a summary of the Act’s notable provisions. First, the AMPI articulated formal requirements for public institutions with regards to financial and administrative capacity, budget and asset bases. When a new public institution is created, it should avoid taking on service functions that overlap with existing institutions and provide a five-​year plan for operations and financing. The steering committee that determines the level, scope and type of public services must consist of a mix of incumbent career officials and professionals from the private sector specialising in law, accounting and public affairs. The committee can also demand performance evaluations and audits of the human resources of public institutions. Second, the institutions must write plans associated with external uncertainties. The AMPI requires a mid-​ to long-​term financial plan that considers environmental uncertainties and fiscal conditions, with a particular focus on outstanding debt. Public institutions that run public programmes worth more than ₩100 billion or funded by a certain share of government financing also have to provide a feasibility report. Third, the AMPI mandated public institutions to disclose the budgets of implemented projects and managerial performance over the most recent five-​year period. The Minister of Economy and Finance must produce a handbook outlining public institution performance before the new fiscal year starts. Finally, the AMPI prohibited fraudulent performance reporting and wasteful spending, which are punishable by penalties in terms of tenure and salary. Performance evaluation procedures The performance evaluation of public institutions largely consists of two steps; the evaluation committee’s assessment and a final grading by the Ministry of Economy and Finance. First, the Ministry of Economy and Finance assigns an evaluation committee comprising professors and accountants to each public institution. The committee members individually assess performance over the previous fiscal year, both through field investigations and evaluation of performance reports submitted by March each year. The committee chairs may request additional information and interview the directors of public institutions if needed. Each member submits a tentative score and suggestions on performance strengths and weaknesses. The members then prepare an interim performance evaluation report based on discussions of the individual reports. The committee may incorporate findings from further investigations into the interim report and determines the final score within two months. Second, the final evaluation report and score from the evaluation committee are assessed by the Ministry of Economy and Finance. In this stage, scores are assigned to the grade intervals determined by the steering committee, which is a superior committee over those assigned to individual institutions. By the end 74

Quasi-governmental institutions

of June, the steering committee finalises the grade for each public institution and executes incentives based on the final grade. Evaluation metrics As of 2020, the evaluation indices for performance management of public institutions under AMPI consist of two broad areas. Administrative management focuses on the common attributes that apply to all public institutions regardless of service area, organisational features and governance structure. The primary project evaluation section assesses the unique aspects associated with organisational function that vary across institutions. The subcriteria in each category are as shown in Table 6.2. Indices for individual subjects largely vary with two components: definition of indices, which identifies purpose and scope of evaluation, and evaluation measures in detail. Different types of public institutions can choose different weights on the score of evaluation subject as planned. Subjects of evaluation The first broad category for the evaluation is administrative strategy and leadership. Under this heading, the components evaluated include the public institution’s organisational vision, objectives, balance between efficiency and social values, relevance to the national policy agenda, modifications made to deteriorating programmes, removal of red tape, and the performance of the board of directors and chief executive officer. The second area is achievement of social values, which focuses on public job creation, preserving equal opportunity for underprivileged groups, environmental protection and social security, public partnership with small and medium-​sized enterprises (SMEs), and moral responsibility. The third category of work efficiency only applies to public enterprises, and measures both labour and capital productivity by dividing the total value produced by number of staff and total assets, respectively. Fourth, the performance items for organisation, personnel and financial management investigate an institution’s efforts and outcomes associated with restructuring, maintaining an appropriately sized workforce, expertise of skilled employees, debt-​asset ratio and solvency. Fifth, the payroll and employee welfare category review several aspects associated with labour management. For example, the extent to which contract workers are converted

Table 6.2: Areas of evaluation in performance management of public institutions Evaluation area

Subjects of evaluation

Administrative management

Administrative strategy and leadership; achievement of social values; work efficiency; organisation; HR; financial management; payroll and employee welfare; innovation and communication

Primary projects

Comprehensive assessment of plans, activities and outcomes 75

Policy Analysis in South Korea

to full-​time employees, implementation of the salary peak system (a system that gradually reduces the salary of older employees over time instead of making them redundant), labour cost management and constructive labour-​ management relations. Finally, innovation and communication stresses incentives for innovative solutions, institutional channels that link organisations and constituents for joint and co-​p roduction, and public disclosure of performance management. The evaluation subjects in the primary project area examine the specialised service area and unique circumstances of each individual public institutions. Up to 60 per cent of the total evaluation weights is granted for these measures specific to service area and institution’s function, whereas the administrative management criteria are fixed to investigate. The quantitative evaluation is an assessment of an institution’s real output compared to the plan written in the previous handbook on public institution performance. Qualitative evaluation is broadly composed of three areas. The first is appropriateness of projects, which examines the extent to which the performance measures established by each public institution fully represent policy priorities, output, long-​term plans, the reliability of data for evaluation and the difficulty of projects. The difficulty of projects is adjusted based on the previous years’ performance thresholds and the domestic and international policy environment. Second, appropriateness of performance management evaluates projects across the multiple stages of the policy process, from policy design and policy implementation to outcome verification and policy feedback. The assessment is based on both viable outcomes and efforts to uphold social values such as employee safety and public welfare. The final category is an institution’s performance and efforts related to innovative growth, although this is given a lower weighting. This area looks at innovative growth with regard to creating demand, sustainable growth, the application of innovative technology in the public sector, big data and establishment of infrastructure for innovation. Weighting of evaluation measures Given the customised nature of the evaluation for unique service areas and the capacity of individual public institutions, evaluations are based on the general guideline that areas can be weighted differently for different institutions. The measures are assessed on either a qualitative or quantitative basis, or both. Additional points beyond the scope of the guidelines may be given to institutions that have demonstrated excellence in practising public collaboration, innovation, civic participation and COVID-​19 containment, and public institutions are allowed to establish their own weightings for some measures. The aggregate weighted score falls into one of six overall grades in ten percentage point intervals, from excellent (90 per cent and above) to very poor (50 per cent and below). Table 6.3 shows the detailed measures and weighting of evaluation items for each institution type. 76

Quasi-governmental institutions

Table 6.3: Evaluation indices and weighted scores Category

Subject

Administrative strategy and leadership

Achievement of social values

Administrative management

Measure

Qualitative weight (%)

Quantitative weight (%)

Strategic planning

2/​2/​2

–​/​–​/​–​

Management improvement

2/​2/​2

–​/​–​/​–​

Leadership

2/​2/​2

–​/​–​/​–​

Job creation

4/​3/​3

3/​3/​3

Equal opportunity and social integration

3/​2/​2

1/​1/​1

Social security and environment

5/​5/​5

–​/​–​/​–​

Collaboration and local development

2/​2/​2

3/​3/​3

Ethical management

3/​3/​3

–​/​–​/​–​

Work efficiency Organisation, HR, financial management

Payroll and employee welfare

Innovation and communication

–​/​–​/​–​

5

Organisational and human resource management

2/​2/​2

–​/​–​/​–​

Financial management

2/​1/​1

3(1)*/​1/​1

Fund management

–​/​–​/​–​

–​/​–​/​5

Payroll and welfare

3.5/​3.5/​3.5

–​/​–​/​–​

Labour cost management

–​/​–​/​–​

3/​3/​3

Labour-​management relations

2/​2/​2

–​/​–​/​–​

Efforts and outcomes in innovation

3/​3/​3

–​/​–​/​–​

Public communication

–​/​–​/​–​

1.5/​1.5/​1.5

Subtotal 35.5/​32.5/​32.5 Primary project area

Comprehensive assessment of plans, activities, and outcomes

21/​24/​24

Subtotal 21/​24/​24

19.5/​12.5/​17.5 24/​31/​26 24/​31/​26

Total 100 Note: The weighted figures in qualitative and quantitative evaluations are in order of: public enterprises/​ commissioned-​service quasi-​governmental institutions/​fund management quasi-​governmental institutions. * Additional weight (one percentage point) granted for long-​term financial plan.

Evaluation methods Quantitative measures Five evaluation methods are utilised to quantify the performance of public institutions (Ministry of Economy and Finance, 2020). First, objective-​versus-​ performance reviews whether the institution achieved the target outcomes proposed in the previous year’s handbook on public institution performance. This method is used for new institutions that do not yet have five-​year performance 77

Policy Analysis in South Korea

measures. Second, trend analysis utilises regression analysis. An institution’s standardised performance score is compared to others, and this method assesses the probability that the institution deviated from the mean. This method is widely used for institutions with reliable performance measures over more than ten years. Third, beta-​distribution assesses the institution’s standardised performance based on best, worst and previous year’s performance. Beta-​distribution is mostly used for institutions with performance measures of less than ten years. Fourth, goal assignment generates an index that displays the difference between the highest and lowest performance divided by predetermined intervals. This method is employed for institutions that either have performance measures of less than five years or have an unreliable performance history no longer than ten years. Finally, the goal assignment method is applied separately to evaluate institutions’ performance at the supra-​national level (in other words, global performance) and for long-​term plans. Weighted scores for the primary project area vary across institutions, but the evaluation methods and measures applied are the same as those established for each institution in the prior fiscal year’s handbook of public institution performance (Ministry of Economy and Finance, 2020). This section provides examples of different institutions’ performance evaluation practices for the primary project area, with three of the commonly used evaluation methods: goal assignment, objective-​versus-​performance and beta distribution. Figure 6.1 demonstrates some examples of performance evaluation practices. Qualitative measures Although each method addresses some aspects of performance that are overlooked by other methods, quantitative methods are not commonly applied to public institutions as a whole. For example, trend analysis is utilised less since 2010, and beta-​distribution is adopted only for quasi-​governmental institutions. Qualitative assessments that grant nine grades at ten-​point intervals have been suggested to address the shortcomings of the quantitative methods. The dimensions of the qualitative approach are management methods, implementation and learning, and the evaluation focuses on the extent to which an institution adopts systematic and effective management, and adopts appropriate policy tools to achieve organisational goals. Evaluation of social values The central government of Korea has stressed the role of public institutions in achieving social equity, growth and collaborative governance. Some performance evaluation measures associated with social values reflect such concerns, and public institutions have put effort into improving the measures since 2010. Table 6.4 shows the historical changes in evaluation indices related to social values. 78

newgenrtpdf

Figure 6.1: Examples of performance evaluation practices Case 1. Korea Expressway Corporation (goal assignment method) Subject: Efficiency in construction projects (four percentage points in total) Definition: Evaluation of achievement and effort in efficient construction and utilisation Measure: Highest performance in the last three years ± two standard deviations from the last five years’ performance (upper and lower bounds)     1. Project efficiency: Construction investment efficiency (50%) +​use of express highways (50%)         a. Construction investment efficiency =​total driving distance ÷ total roads extended             i. Total driving distance is equivalent to the aggregate driving distance of all vehicles on express highways in millions of kilometres             ii. Total roads extended means the length of extensions to express highways multiplied by the number of lanes in millions of kilometres Use of express highways =​total number of users ÷ total number of automobiles registered Case 2. Korea Transportation Safety Authority (objective-​versus-​performance method) Subject: Decrease in accident rate of automobile inspections (four percentage points in total) Definition: Evaluation of reduction in accident rates of private transit companies Measure: Decrease in target fatality rate from automobile accidents

       

2018

2019

2020

2021

Target fatality rate

0.907

0.800

0.699

0.595

1. Accident rate =​(deaths × 115 +​serious injuries×16 +​other injuries × 1) ÷ total number of automobiles owned by the transportation company     a. The weighting for each casualty type is based on the estimated cost level of each accident type 2. Private transit companies refer to those that passed special inspection from the Korea Transportation Safety Authority in the previous year     a. A special inspection is required if an accident from a company is associated with a death or three serious injuries at minimum

79

Case 3. Korea Tourism Organization (beta distribution method) Subject: Improvement in high value-​added tourism marketing (six percentage points in total) Definition: Evaluation of attracting foreign tourists to MICE* via global marketing, revenue-​generating efforts and economic development Measure: [(The best performance +​4 × performance in the last fiscal year +​the worst performance) ÷ 6] ± 1.965 × standard deviation (upper and lower bounds)     1. Performance in attracting foreign tourists at a) international meetings and b) incentive tours         a. Number of foreign tourists participating in international meetings sponsored by the Korea Tourism Organization (KTO)             i. A meeting means an event with at least 100 participants or lasting at least three days         b. Number of foreign tourists applying to incentive tours sponsored by KTO             i. Tourists means those registered in the Group Tour Management System (groups with at least ten members or for at least two days) Note: Weighting can be adjusted by public institutions; * MICE refers to Meetings, Incentive tours, Conventions and Exhibitions

Quasi-governmental institutions

       

Year

Policy Analysis in South Korea

Table 6.4: Social value indices in the Korea public institution performance evaluation system Year

Category

Performance index

Index (weight)

2020

Mgt performance

Mgt efficiency

Government recommended policy (2)

2011–​14

Leadership responsible mgt

Social responsibility

2015–​16

Business mgt

Business strategies and social contribution

Strategic planning and social responsibility (2)

Business mgt

Business strategies and social contribution

Strategic planning and social responsibility (5)

Additional point

Additional point

Employment index (10)

2018

Business mgt

Social values

Social values (22)

2019–​20

Business mgt

Social values

Social values (24)

2017

Social contribution (2) Government recommended policy (5) Government recommended policy (5) Government recommended policy (6)

As social values lie at the heart of the Moon Jae-​in administration, the government has changed from an efficiency-​oriented management evaluation system to a social value-​oriented management evaluation system to instil social values as core values across public institutions. The management evaluation system of public institutions was revamped to align with the pursuit of social values, as shown in Table 6.4, while maintaining the framework of the evaluation system. It is now divided into the two categories of business management and main programmes. In the main programme division, the indicators and their points were changed to instil a greater focus on social values in the process of performing the institution’s work. This section provides four measures of performance evaluation, focusing on the weighted scores with detailed criteria for the achievement of social values. For each measure, one evaluation method that applies to the quantitative measure is discussed. Job creation The two focal points of the job creation evaluation, as illustrated in Table 6.5, are the quantity and quality of newly created jobs for the public. The primary concerns in terms of quantity are the extent of full-​time contracts offered to both contracted and temporary employees and the recruitment of young people, whereas efforts by the institution to introduce alternative work schedules, flexible working arrangements and other measures are the central criteria for qualitative performance evaluation. Using the goal assignment method for the quantitative measure, an institution’s number of young people employed in the fiscal year is compared with both the maximum and minimum objectives proposed a priori. To calculate the maximum and minimum objectives, the highest figure in the last three years is multiplied by 120 per cent and 80 per cent, respectively, and these weights may vary. 80

Quasi-governmental institutions

Table 6.5: Criteria for job creation evaluation Public institutions covered (weights in percentage points)

Detailed measures

• Conversion of contracted employees and temporary employees to full-​time employees

Public enterprises, quasi-​governmental institutions (quantitative: 3) • Youth employment (1.4–​1.8)* • Performance on flexible work schedules (0.2–​0.6)*

• Labour management on tenure, new hiring, retirement plans, and flexible work schedules • Private sector job creation based on procurement and outsourcing • Technical innovation via partnerships, public project development, collaboration with non-​governmental organisations

Public enterprises (qualitative: 4), quasi-​governmental institutions (qualitative: 3)

Note: * Weighting can be adjusted by public institutions.

Another approach is based on the standard deviation of the previous five years’ performance. For example, the maximum objective is calculated as the highest annual youth employment figure from the last three years plus one standard deviation, whereas the minimum objective is the highest performance minus two standard deviations. Second, the difference between actual performance and the minimum objective is divided by the difference between the maximum and minimum objectives. Finally, the figure is multiplied by 80 added to a baseline score of 20, as demonstrated in the formula below. Complete scores using this method range from 20 to 100, and a weighted score is given in proportion to the calculated score. 20 + 80 ×

actual performance − minimum objective maximum objective − miinimum objective

Equal opportunity and social integration Equal opportunity and social integration stresses employing people from underprivileged groups with regards to the quantitative evaluation, and social equity and preservation of equal opportunity for the qualitative assessment. Table 6.6 demonstrates detailed measures and weights for evaluation. To use the objective-​versus-​performance method for the quantitative measure, two components are required: actual performance and the objective. For employment of disabled persons, the extent to which actual performance meets the objective is the actual number of people hired divided by the objective proposed at the end of the previous fiscal year. This figure is subject to the overall performance of an institution as demonstrated in the formulas below. The figure is used without transformation for an institution with high performance, while the inverse figure applies to institutions with lower performance. Similar to the evaluation method described previously, the quantitative score for this method 81

Policy Analysis in South Korea

Table 6.6: Criteria for equal opportunity and social integration evaluation Detailed measures

Public institutions covered (weighting in percentage points)

• Employing persons with a disability, of distinguished service to the state (veterans) and contract workers

Public enterprises and quasi-​governmental institutions (quantitative: 1) • Mandatory employment for the disabled (0.3–​0.5) • Priorities for persons of distinguished service to the state (0.3–​0.5) • Protecting contract workers (0.2–0.4)

• Enhancing transparency via blind reviews and job performance evaluation • Employing persons from low-​income and multi-​ cultural families • Promotions and hiring of women (to manager and director positions)

Public enterprises (qualitative: 3), quasi-​governmental institutions (qualitative: 2)

ranges from 20 to 100, and a weighted score between 0.3 and 0.5 is given in proportion to the calculated score. high-performing institution : 20 + 80 ×

actual performance objective

low -performing institution: 20 + 80 ×

objective actual performance

Social security and environment The primary quantitative concern for the social security and environment measurement is outcomes associated with the institution’s efforts to preserve the environment, including ecosystems, conservation zoning, energy conversation and the use of low-​carbon products. On the qualitative side, maintaining a work environment that is free from risks, hazards and disasters is the main concern. As Table 6.7 demonstrated, trend analysis to evaluate environment preservation is based on the score and standard deviation from the ordinary least square estimation. The result provides a point estimation of performance in the year of evaluation, and the figure becomes a standardised score (z-​score) to identify the interval in which performance is located. The performance score falls in one of ten predetermined intervals associated with standard z-​ scores, as shown in Table 6.8. The performance measure for this method is a sum of z-​score of actual environmental preservation activities plus standard z-​scores weighted by the interval gap with each lower bound. For example, a z-​score of 1.5 would fall into the B+​range, and the institution’s final score would be as follows: 82

Quasi-governmental institutions

Table 6.7: Criteria for social security and environment evaluation Public institutions covered (weighting in percentage points)

Detailed measures

• Efforts and outcomes on environmental sustainability

Public enterprises and quasi-​governmental institutions (qualitative: 1) • Greenhouse gas reduction and energy conservation (0.2–0.4)* • Purchase of low-​carbon and environment friendly products (0.2~0.4)* • Resource allocation and outcomes associated with other environment preservation activities (0.5)

• Establishment of disaster preparedness plan • Protecting the public from severe outbreaks • Improvement in hazardous work environments for contract workers • Promoting security in public projects • Establishment of cybersecurity measures for public and personal information

Public enterprises, quasi-​governmental institutions (qualitative: 4)

Note: * Weighting can be adjusted by public institutions.

Final score of institution with 1.5 z-​score: 66.672 + 11.112 ×

1.5 − 1.179 1.179 − 0.707

.

Collaboration and local development The collaboration and local development measure focus on the evaluation of revitalising the local economy, cooperative governance, technology innovation and reciprocal development led by SMEs (see Table 6.9). The beta-​distribution method provides a simpler estimation of performance score. To evaluate the use of products from social enterprises, a raw score and standard deviation is calculated as follows: Raw score =

Ya + 4Ym + Yb 6

(Yb − Ya )

2

Standard deviation =

36

(where Ya and Yb are the highest and the lowest levels of the use of such products in the past, respectively, and Ym is the performance in the year prior to the evaluation.)

Table 6.8: Cumulative probability and standard z-​scores for trend analysis Grade interval

E0

E+​

D0

D+​

C0

C+​

B0

B+​

A0

A+​

z-​score

–​0.965

–​1.650

–​1.179

–​0.707

–​0.236

0.236

0.707

1.179

1.650

1.965 83

Policy Analysis in South Korea

Table 6.9: Criteria for collaboration and local development evaluation Detailed measures

Public institutions covered (weighting in percentage points)

• Use of goods and services from social enterprises and businesses

Public enterprises, quasi-​governmental institutions (quantitative: 3) • Use of products from small businesses, businesses with innovative technology, and social enterprises (0.6–1.6)* • Use of gift cards for traditional markets (0.3–0.5)* • Use of products from women-​owned businesses and corporates for rehabilitation function (0.8–1.6)* • Budget front-​loading (0.3–0.5)*

• Taking part and leading local projects and international events, prioritising consumption of local products • Timely funding for partnerships (for example, standard contracts, advance payments, direct payment orders) • Performance sharing system, technology protections

Public enterprises, quasi-​governmental institutions (qualitative: 2)

Note: * Weighting can be adjusted by public institutions.

Conclusion Public institutions play a major role in performing public services that serve the public and companies, such as building national infrastructure and managing the supply and delivery of essential public services. The performance evaluation system was introduced to establish an autonomous and responsible oversight system for public institutions, improve management efficiency and ultimately promote better public services. The goals of this system were to objectively evaluate management performance and incorporate the results thereof into personnel performance evaluations and performance-​based incentives. Since the system was first introduced in 1984 to evaluate government-​ invested institutions, it has undergone many changes in terms of evaluation targets, methods and criteria. The changing functions and roles performed by public institutions have been reflected in the evaluation system to accommodate the differing policy stances and priorities of each administration. Performance management of public institutions involves the disclosure of private information from public institutions to the public, thereby improving public accountability and performance. It is reported that this system has helped institutions maintain a consistent level of output while reducing their organisational size. However, the system still has issues that need to be resolved (Lah, 2015). Due to the qualitative evaluation of some immeasurable aspects of performance, certain assessment metrics are highly subjective. As the grades finalised by the steering committee only rank public institutions on a relative scale, the evaluation does not fully capture the different characteristics and nature of services provided. Evaluations are also associated with substantial financial incentives, which makes public institutions prioritise measured policy outcomes rather than the actual roles expected of quasi-​governmental organisations, leading to inconsistent performance in the long run. Most importantly, public institutions 84

Quasi-governmental institutions

may suffer from reduced flexibility and autonomy due to performance objectives and political controls. References Choi, Hang-​soo and Hong, Woo-​hyeong (2017). An Empirical Study on the Public Institution Performance Evaluation System. Sejong: KIPF. Korea Institute of Public Finance (KIPF) (2011) Understanding Korean Public Institution. Sejong: KIPF. Lah, Y. (2015). Performance Evaluation of Public Institutions: Characteristics of Institutions and Suggestions. Sejong: KIPF. http://​210.218.195.36/​han​dle/​201​ 201/​6411. Ministry of Economy and Finance (2020). Handbook of Performance Evaluation of Public Institutions. Seoul: Ministry of Economy and Finance. https://​www.moef. go.kr/​com/​bbs/​detai​lCom​tPol​bbsV​iew.do?menu ​ No=5​ 0202​ 00&search ​ NttI​ d1=​ MOSF_​0000​0000​0052​070&searc​hBbs​Id1=​MOSFB​BS_​0​0000​0000​039 Research Center for State-​O wned Entities (2019). Public Institutions in Korea. Sejong: KIPF. https://​www.kipf.re.kr/​soe​eng/​Publ​icat​ion/​publ​icat​ ion_​SOE_​Repo​rts/​kiPubl​ish/​CB7/​Cen​ter/​view.do Yoon, T., Kim, H. and Yoo, H. (2010). History of Performance Evaluation of Public Institutions. Sejong: KIPF. https://​www.kipf.re.kr/​cmm/​fms/​FileD​own.do?atc​ hFil​eId=​FILE_​0000​0000​0011​482&fil​eSn=​0

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SEVEN

Policy analysis in Korean local governments Hyunsang Ha

Introduction The starting point for official and mandatory policy analysis conducted by local governments in Korea can be found in the ‘Local Financial Investment Project Review System’ introduced in 1992 under the Local Finance Act. Under this statute, Korean local governments are required to examine the necessity of the project and the feasibility of the project plan when setting the budget for large-​ scale financial investment projects (Ministry of the Interior and Security, 2017). From this point onward, most local governments in Korea have conducted some kind of policy analysis to determine whether or not to provide financial support for projects. However, it is necessary to first briefly explain the background to the introduction of the local government system in order to explain policy analysis in Korean local governments.1 The Korean government began electing local government heads and introduced the local autonomy system in July 1995 (Hong, 2005). Unfortunately, because of the tradition of top-​down and uniform policy decisions by the central government prior to the introduction of the local autonomy system, policy analysis was rarely conducted by local governments.2 Local governments simply played the role of carrying out policies that had already been built by the central government. Although this is still the case today, the introduction of the local autonomy system served as an important turning point for the gradual expansion of local government policy analysis. As the problems caused by Korea’s rapid urbanisation and hollowing out of rural areas have come to the fore, social problems are now occurring across many sectors of society in education, housing, welfare, the environment, and law and order. Accordingly, Korean local governments are developing policies to resolve these problems either in partnership with or independently from the central government. However, as local governments tried to solve these policy problems with limited staff and funding, it became necessary to employ policy analysis to pursue efficient policy execution, feasibility studies and performance-​oriented measures. As a result, policy analysis that considers the whole policy planning and execution process has been carried out in many local governments (Kim, 2010). Because all policies require a budget, a feasibility study is required under the Local Finance Act unless the project is legally designated as exempt from a financial investment review or is a non-​investment project that costs less than 86

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the minimum required for a fiscal investment review. This chapter explains how policy analysis is conducted for financial investment projects under Korean local governments. However, in order to do so, it is first necessary to explain the authority and role of local government in terms of policy analysis. Accordingly, after first examining the nature of policy analysis in Korean local governments, this chapter will then explain how policy analysis is actually carried out, the limitations of this approach and possible ways to improve it.

The nature of policy analysis in Korean local governments Policy decision makers try to choose the best policy to solve a given problem based on a value judgement, a factual judgement and the relationship between the two. Policy analysis entails rational calculations and information analysis to maximise economic efficiency and organisational effectiveness in order to solve complex and ambiguous social problems (Dunn, 1994). Therefore, policy analysis helps policy decision makers to choose the best option among several policy alternatives by defining the purpose of the policy and clarifying the relationship between cause and result. The general procedure for policy analysis consists of identifying policy problems and clarifying the purpose, searching for alternative options, predicting the outcomes of such alternatives, comparing and evaluating the options, and selecting the best one. However, policy analysis performed by Korean local governments has sometimes fallen short of these standards. Therefore, it is necessary to look at the reasons why such problems keep occurring. The dominant role of the central government in policymaking Korea traditionally had a policymaking structure that was highly dependent on the central government. The central government first formulates and delivers a uniform policy to local governments, and local governments simply implement the policy before the central government evaluates their performance (Kim, 2002). As a result, policy analysis was mainly carried out by the central government, and local governments did not have much of an opportunity to confirm the validity of the policy’s purpose or the rationality of policy instruments employed, even though each local government has different conditions and capabilities. Korean local governments were not in a position to take the initiative in performing policy analysis. Policy analysis involves reviewing the rationality of policy instruments and the validity of policy objectives in a scientific way before a policy is carried out. To achieve this, local governments must have the budget, structure and personnel required for successful policy execution and performance, as well as the authority to mobilise these policy tools. However, Korean local governments have struggled to come up with the financial resources to plan and execute their own policies due to a low level of financial independence (Park et al, 2016). This made local 87

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governments dependent on subsidies from the central government, hindering their ability to conduct policy analysis and establish policies independently. Local governments are constantly making efforts to expand the local tax base in order to improve their financial independence. Since the introduction of the local autonomy system in 1996, there have been greater opportunities for policy analysis in line with financial decentralisation and the higher level of autonomy granted. Some scholars also point out that local government officials lack expertise in policy analysis (Keum et al, 2005). Although high-​ranking local public officials do not directly conduct policy analysis, they need to identify the policy agenda and have the capacity to request and put forward objectives for policy analysis in the policy planning process. Being able to request policy analysis from specialised research institutes is a basic competency for local government officials. In order to plan the policies that citizens need, they must have the ability to listen to the public and analyse the problems of local residents, as well as the administrative competence to analyse and utilise resources and information within the local government. However, local government officials have often been criticised for not possessing these capabilities. At the same time, many policies independently promoted by local governments tend to be led by the political decisions of local government heads or politicians. Because local councils are unable to check the rationale of policy decisions through policy analysis, each council member tends to come to their own conclusion on policy decisions. In addition, local government heads were likely to push ahead with policies in order to carry out their election promises even if these promises are lacking in rationality. Policy analysis was also not previously required for many local government policies, which meant local government officials were less exposed to the policy analysis process even if they did have competency in this area.

The policy analysis system in Korean local governments As mentioned in the introduction, policy analysis by Korean local governments began with feasibility studies for locally financed investment projects, and these studies account for a major part of local government policy analysis. As seen in Table 7.1, over the past seven years Korean local governments have conducted feasibility studies for 333 investment projects with a total cost of ₩50 billion or higher. While feasibility studies were performed on 86 projects in 2019, only 27 projects received such a study in 2016. Gyeonggi Province and Seoul performed feasibility studies for 78 and 49 projects, respectively, and the figures for Sejong, Jeju and Incheon were only six, seven and seven projects, respectively. Accordingly, the following analysis is based on feasibility studies performed on local fiscal investment projects.3 Under Article 37 of the Local Finance Act, investment projects worth ₩50 billion or more and public building construction projects of ₩50 billion worth 88

Policy analysis in Korean local governments

Table 7.1: Statistics on projects where Korean local governments performed feasibility studies City/​region

2013

2014

2015

2016

2017

2018

2019

Total

Seoul

3

3

7

3

5

5

23

49

Busan

1

4

4

3

1

3

6

22

Daegu

2

2

1

3

1

4

5

18

Incheon

1

2

0

0

0

2

2

7

Gwangju

2

1

4

0

2

2

1

12

Daejeon

1

3

1

0

9

2

5

21

Ulsan

4

2

2

0

1

0

0

9

Sejong

3

2

0

0

0

0

1

6

Gyeonggi

10

18

11

5

11

6

17

78

Kangwon

2

2

3

0

2

1

1

11

Chungbuk

2

3

1

1

2

2

4

15

Chungnam

3

2

0

2

3

0

5

15

Jeonbuk

3

0

2

2

2

1

3

13

Jeonnam

3

2

2

2

0

2

2

13

Gyeongbuk

3

0

1

2

4

4

1

15

Gyeongnam

1

5

2

4

2

0

8

22

Jeju

0

1

0

0

0

4

2

7

Total

44

52

41

27

45

38

86

333

Source: The Ministry of the Interior and Security (2021). Summary of Local Finance 365: Statistics on large-​scale investment projects (https://​lofin.mois.go.kr) (10 February)

more have to undergo a feasibility study by a research institute designated by the Ministry of the Interior and Security. Under Article 41, Paragraph 2 of the Enforcement Decree of the Local Finance Act, in the event that the cost of a new financial investment project exceeds ₩50 billion, the head of the local government shall request a feasibility study from a designated research institute before carrying out an investment review. When the cost of a construction project for a public building, such as a government building or civic centre, exceeds ₩10 billion (excluding incidental expenses such as the cost of purchasing land and design services), the project must also undergo a feasibility study from a research institute designated by the Minister of the Interior and Security. To be eligible to conduct a feasibility study, institutes must meet a number of conditions including having been established by a local government, or be part of a national university. Research institutes performing feasibility studies for public buildings of local governments must meet the qualifications shown in Table 7.2. The research institutes at national universities must be approved by the president of the university and employ at least three professors (including associate professors, assistant professors and full-​time instructors) and two or more PhD 89

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Table 7.2: Requirements for research institutes performing feasibility studies Public Administration Research Institute

Science and Engineering Research Institute

Economic and Commerce Research Institute

Qualifying condition

PhD

Master’s degree or higher

Master’s degree or higher

Specialisation

Public administration

Science and Engineering (Civil Engineering, Architecture or Urban Engineering)

Economy and Commerce (Statistics, Economics or Business Administration)

Number of members

One

One or more

One with a PhD, three or more with a master’s degree

Experience

–​

A qualified industrial engineer with three or more years of experience in construction costing

A person with three or more years of experience in construction costing

Main work

Management and operation plan

Analysis of the adequacy of the planned construction site and the cost of civil engineering and construction

Case studies and investment, financing analysis

Division

Source: Kim and Jo, 2012, p 20

researchers. In addition, the institute’s basic assets (real capital or funds, except for university research institutes) must be worth at least ₩300 million, where real capital refers to total assets minus total liabilities. Research institutes designated by the Ministry of the Interior and Security conduct feasibility studies and reviews, and related tasks such as investigations and performance evaluations necessary for post-​evaluations of investment reviews. Research institutes designated to perform a feasibility study must not be involved in projects (including system improvements, building project plans or detailed designs) related to the feasibility study so as not to jeopardise their independence. Feasibility studies are performed under established procedure after the basic plan for a project has been created. When requesting a feasibility study, documents including the basic project plan must be submitted. There are three opportunities for regular applications per year, and the submission periods for lower level and higher level governments are about 15 days apart, as shown in Table 7.3. Local governments must submit a feasibility study request form before the deadline. However, in special circumstances an application may be submitted later after consulting with the Ministry of the Interior and Security. The procedure for feasibility studies can be divided into five stages. In the first stage, the department planning the project requests a feasibility study, and the Central Investment Review Committee (CIRC) reviews whether a study will be carried out in the second stage. The third stage is signing a contract with the research institute in charge of the study. In the fourth stage, an interim report is submitted to the CIRC after three to four months when the contract is completed, and in the fifth stage the final reporting and notification of results 90

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Table 7.3: Regular applications Procedure

1st

2nd

3rd

Si, Gun, Gu governments → Gwangyeogsi, Do governments

January 15

April 15

August 15

Gwangyeogsi, Do governments → Ministry of the Interior and Security

January 31

April 30

August 31

Source: The Ministry of the Interior and Security, 2017. Quoted from the Local Fiscal Investment Project Review and Feasibility Study Manual, p 52.

are carried out within one to two weeks of the end of the contract. This process is illustrated in Table 7.4. Upon receipt of an application, the Ministry of the Interior and Security sends a request to the designated research institute and signs a contract with the local government. However, if it is determined that the feasibility study cannot be carried out due to problems with the basic project plan, the feasibility study may be rejected. If the feasibility study is accepted, the designated research institute specifies the criteria for the fee depending on the type and size of the project, obtains an opinion from the local government and make a decision after consulting with the Ministry of the Interior and Security. In principle, the feasibility study should be conducted within at least six months from the date of the contract. However, the period may be shortened in the following circumstances. • If a feasibility study is stipulated by another law, and evidence related to demand for the project and the benefits thereof is submitted by a publicly trusted agency such as the Korea Appraisal Board and the costs have been estimated by that agency. • If a project has been negotiated between ministries in accordance with a law or evidence is provided that can substitute for the feasibility study. • In other cases where the Minister of the Interior and Security deems that it is necessary to shorten the feasibility study period. After the start of each investigation, there is an interim report before the final report. The internal advisory committee of the research institute for feasibility study provides the interim report after three to four months. After the final report is written, the local government has one week period to submit an opinion, and the study is complete once any objections have been reviewed. Once the feasibility study is complete, the research institute informs the Minister of the Interior and Security, and the minister then notifies the head of the local government within seven days of receiving notice. When submitting a feasibility study request, there are three important matters to be covered. First, the local government needs to include the basic project plan and operational plan. This includes the purpose of the project, the proposed site, entity to carry out the project, project period, cost, scale of facilities, ability to finance the project and its expected impact. In addition, the local government must clearly present the information used as the basis for calculating the project 91

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Table 7.4: Feasibility study procedure Stage

Department or institute

Roles

• Request for feasibility study

• Department in charge of project and department in charge of investment review

• Project plan establishment • Preliminary procedures such as impact assessment • Writing the basic project plan in the feasibility study request form

↓↓↓

↓↓↓

• Review whether or not to conduct a feasibility study

↓↓↓

• Contract (determination of investigation period and fee)

• Central Investment Review Committee (or internal advisory committee, Ministry of Public Administration and Security, Local investment project management centre, or department in charge of projects in the local government) ↓↓↓ • Local investment project management centre • Department in charge of projects in the local government

↓↓↓ • Preliminary review of investment review request form and basic plan (local investment project management centre) • Holding of project briefing session (committees, centres, Ministry of the Interior and Security and local governments) in order to reject substandard basic project plans ↓↓↓ • Collecting additional data after reviewing the feasibility study request form, • Investigation period and fees are determined in consultation with the centre and local government • In principle, studies should be completed within of month of the initial request

↓↓↓

↓↓↓

• Interim report (3–​4 months after contract)

• Central Investment Review Committee (or internal advisory committee) • Ministry of the Interior and Security • Local investment project management centre • Department in charge of projects in the local government

↓↓↓

↓↓↓

↓↓↓

• Central investment review committee (internal advisory committee) • Ministry of the Interior and Security • Local investment project management centre • Department in charge of projects in the local government

• Report on the results of the feasibility study • Handling any objections to results and review by the designated research institute

↓↓↓

↓↓↓

• Ministry of the Interior and Security • Local investment project management centre

• Local investment project management centre notifies the Ministry of the Interior and Security of the results, and the ministry notifies the local government

• Final report (1–​2 weeks before contract completion)

↓↓↓ • Notification of results

↓↓↓

• Reviewing the objectives of the feasibility study

Source: The Ministry of the Interior and Security, 2017. Quoted from the Local Fiscal Investment Project Review and Feasibility Study Manual, p 51.

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cost, demand for the project and financing. Next, the local governments reasonably need to present a reasonable operational plan for the facilities. This must clearly state whether the government will operate the facilities directly or entrust operations to an external organisation, and present reasonable estimates of operating costs and operating income. In addition, the local government should submit supporting evidence such as a drawing of the location, detailed building plans, photos and maps. Implementation of feasibility studies for policy analysis The designated research institute nominates a project manager from among its internal researchers in order to efficiently conduct the feasibility study. The team of researchers comprises experts from academia, research institutes and private engineering companies. When hiring external researchers, the research institute must create a set of ‘external researcher selection and management procedures’ and deal with external researchers in accordance with these regulations in order to guarantee their expertise, independence and fairness. The research institute may form a separate advisory committee to ensure the expertise and objectivity of the feasibility study. The research institute prepares general and field-​specific guidelines that stipulate the basic principles of the investigation, such as analysis standards and methods, and the researchers must follow these guidelines. The research institute must also create a set of ethical guidelines to be followed by researchers, such as prohibiting data leaks during the feasibility study, and internal review procedures for quality control of investigation reports. Institutes are required to disclose on their website whenever such guidelines are established, added to or revised. The feasibility study examines the basic project plan prepared by the local government, and analyses alternatives and other considerations related to the project. The feasibility study consists of a project plan review, economic feasibility analysis, financial feasibility analysis, policy feasibility analysis and overall evaluation. Based on the project plan submitted by the agency, the researchers check whether the project is in fact supposed to be subject to a feasibility study and whether it is compatible with related laws and plans. They also analyse the concreteness and rationality of the project plan, and review any procedural issues. Cost-​benefit analysis is a basic methodology that analyses the nationwide economic ripple effects and investment suitability of the project. Cost-​benefit analysis measures the costs and economic benefits of public works from a social standpoint, and then analyses economic feasibility. Measures utilised include benefit and cost analysis (BC), net present value (NPV) and internal rate of return (IRR). Financial feasibility analysis is performed to estimate the financial costs and income (cash flow) from the standpoint of individual business entities rather than society as a whole, and is aimed at calculating the financial profitability of the 93

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project. Policy feasibility analysis looks at balanced regional development and ripple effects on the regional economy. In addition, this involves examining the impact and risks of the investment project that cannot be measured monetarily or were excluded from the economic feasibility analysis because they cannot be considered direct cost/​benefits (or income/​expenditure). Lastly, the overall evaluation presents a comprehensive opinion on the project’s feasibility based on the results of the economic feasibility analysis, financial feasibility analysis and policy feasibility analysis (Ministry of the Interior and Security, 2017).

Limitations and potential improvements to policy analysis by Korean local governments Public policy is oriented toward analytical policymaking, but it is inevitable that there will be contradictions and limitations. The basic policy analysis procedures involves specifying policy problems and objectives, searching for or developing policy alternatives, predicting the outcome of such alternatives, and comparing and evaluating them to pick the best one. The lack of rationally in policy analysis is often due to complexity, uncertainty and ambiguity in policies. Local governments must follow the guidelines and procedures stipulated in the Local Finance Act, but the complexity and uncertainty of policies causes errors in analysis. Moreover, policy analysis can sometimes be inaccurate to unexpected real world conditions when the policy is actually implemented (Ryu, 2014). The feasibility studies conducted by local governments also have a number of problems. These problems can lead to poor policy design and implementation. Incorrect policy analysis can also place those in charge of implementing policies in a dilemma, and the services may differ from those that were originally intended (Han, 2010). The first problem can be found in the system for implementing feasibility studies. Although the department promoting the project has to establish a basic project plan, there are cases in which the research institute in charge of the study is simply asked to write the basic project plan. This arises due to ambiguity in the provisions on feasibility studies in the Local Finance Act. While the central government clearly distinguishes between feasibility studies and Preliminary Feasibility Studies, there is some ambiguity between the two in the Local Finance Act. Furthermore, the central government only reviews whether or not local governments conduct feasibility studies in the investigatory stage. Accordingly, there is a need for legislation that ensures independence between the research institute conducting the feasibility study and the local government. In addition, the purpose and nature of feasibility studies needs to be clearly defined in the Act, and as seen in the feasibility study system for central government projects, a distinction must be made between institutes that carry out feasibility studies and those that conduct preliminary feasibility studies (Yun et al, 2017). In order to overcome the dependent relationship between institutes and local governments, public investment finance or other funding must be secured 94

Policy analysis in Korean local governments

so that the institutes conducting feasibility studies can be financial independent. Furthermore, in contracts for feasibilities it would be desirable to integrate the contracting entity into the budget department rather than the project department. The project department in each local government usually approaches affiliated research institutes to request feasibility studies. Since the institute that conducts the feasibility study usually has a relationship with the local government, it is rare for a project to receive a negative evaluation (Yun et al, 2017). Even if preliminary analysis shows that the project is likely to be judged as inadequate, in the end it is usually given the green light because the local government intentionally delays the requisite inspections for political purpose. As such, feasibility studies are sometimes regarded as a mere formality in which local governments only need to comply with the letter of the law. Another problem is that although feasibility studies are supposed to be entrusted to research institutes that meet the requirements in the operational guidelines, some local governments instead commission studies to private consulting institutes. This can cause serious problem because there is no oversight as to whether such institutes meet the legal requirements. In addition, while there are various projects that need to be investigated for feasibility, the enforcement ordinance of the Local Finance Act stipulates that only research institute related to the construction of public buildings should undergo a feasibility study. However, other research institutes that can conduct feasibility studies for projects other than public buildings need to be included in the ordinance of the Act. Therefore, it is necessary to designate and operate a research institutes for a feasibility study based on the natures of the feasibility study and consistent qualifying criteria. Economic feasibility analysis is often likely to be poor due to a lack of scientific rigor and specificity in the feasibility study methods. For example, there are many cases where demand is likely to be overestimated, while project costs are underestimated, facility investments are inflated or social discount rates are applied inappropriately (Kim et al, 2019). In some cases, the institute performing the study and the details of the investigation are not even included in the request form submitted to the Investment Review Committee. Accordingly, it is important that more scientific feasibility study methods are developed, and the requirements for request forms should be made more detailed and systematic. In order for the results of a feasibility study to be reasonable and accurate, it is necessary to be able to hold the institutes performing such studies accountable. At present, it is practically impossible to hold the institutes accountable, even if the results of a study lead to huge financial losses due to incorrect demand forecasting. Accordingly, punishment or sanctions are not being properly implemented. Measures should be implemented to ensure greater oversight and ex-​post control of institutes that perform feasibility studies. The results of feasibility studies for projects tend to be positive in most cases, but even if the study reaches the conclusion that the project is not valid, local governments tend to push ahead with it anyway, especially if it is related to an election pledge. When projects are 95

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implemented, there are cases where the project is delayed or interrupted due to problems with the essential conditions for carrying it out, resulting in a waste of government funds. Even after the feasibility study is completed, it should be possible to punish the feasibility study institute. A proper ex-​post management system of the institutes would help to ensure that projects go ahead as planned once they have passed the feasibility study and actually commenced. Most local governments do not apply feasibility studies to projects that are not included in mid-​term local financial plans. However, granting such exemptions to a large number of regional development projects has led to indiscreet budgetary waste due to overlap or similarities between projects. As such, there are many cases in which policy analysis cannot be effective due to governments carrying out projects in this legal ‘blind spot’. The Local Finance Act should contain clear provisions to ensure all projects that need to undergo a feasibility study actually receive such a study, even if they are not included in the mid-​term fiscal plan. If a feasibility study is intentionally avoided or a project does not comply with legal procedures, severe sanctions should be imposed. Finally, another serious problem with feasibility studies is that the standards used are inconsistent or the analytical criteria are arbitrarily selected and applied (Kim et al, 2019). In many cases, consistent investigations cannot be conducted due to the absence of standardised investigation criteria. In addition, the analytical items, methods, and criteria are different for each feasibility study, which leads to poor quality investigations. In some cases, key indicators are either intentionally excluded or arbitrarily applied. The criteria for analysis should be standardised (Kim et al, 2019) and strictly applied, even though exceptions will need to be made for certain projects. However, to receive an exception the local government should have to submit specific evidence for review.

Conclusion Korean local governments introduced the Local Financial Investment Project Review System based on the Local Finance Act in 1992. This led to greater awareness of local government policy analysis, although it wasn’t until 1995 that local government policy analysis began to gain traction with the introduction of the local autonomy system in 1995. However, local governments have struggled to implement effective policy analysis due to their low level of financial independence, lack of expertise in policy analysis, political influence in policy decision making and the structural limitations flowing from the central government’s traditional top-​down policymaking approach. Under Article 37 of the Local Finance Act, investment projects worth ₩50 billion or more and public building construction projects worth ₩10 billion or more are required to undergo a feasibility study. Feasibility studies can be conducted by institutes that meet the eligibility requirements and are carried out through a six-​step process that involves analysing economic feasibility, financial feasibility and policy feasibility, as well as the project plan. 96

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Despite the introduction of feasibility studies for policy analysis, there are a number of problems with the procedures. According to analysis by the Korea Audit Research Institute, the research institute in charge of the feasibility study is not independent from the local government in many cases, and studies are sometimes performed by institutes that are not qualified. Moreover, some research institutes arbitrarily select and apply the criteria for investigations. Feasibility studies also lack objectivity due to an absence of scientific rigour in analysis methods, making it difficult to trust the results. Finally, the lack of ex-​post oversight over research institutes makes it difficult to hold them accountable for the studies they produce. Despite these limitations, Korean local governments have been able to analyse policies more effectively through feasibility studies, and they have come to play a pivotal role in reviewing the validity and purpose of large-​scale projects carried out by local governments. Finally, the author briefly presented some suggestions for improving the aforementioned problems in order to enhance the validity and reliability of policy analysis by Korean local governments. First of all, it is necessary to ensure that research institutes are independent from the local government departments requesting the studies. Korean local governments must adhere to the eligibility requirements for institutes performing feasibility studies qualifications in order to prevent unqualified institutes from becoming involved. In addition, when conducting a feasibility study, the request form should be filled out clearly, and the analysis methods should be applied as accurately and objectively as possible alongside strict reviews to prevent distortions. Finally, stronger legal penalties are needed to eradicate the practice of having projects simply rubber stamped by feasibility studies, as well as prevent local governments from intentionally avoiding studies by granting exemptions to projects based on arbitrary criteria. This paper examined policy analysis in Korean local governments through the lens of feasibility studies of large-​scale financial investment projects. However, there are also other forms of policy analysis carried out for smaller financial policies or non-​financial projects. These aspects of local government policy analysis could be explored in follow-​up papers. Notes 1

2

3

Korean local governments are categorised into ‘Gwangyeogsi’, metropolitan governments, and ‘Do’, provincial governments, and there are the smaller level ‘Gu’ within the Gwangyeogsi and the smaller level ‘Gun’ or ‘Shi’ within the Do. Policy analysis is an activity that creates the knowledge necessary for policy decision making (Lasswell, 1971). Policy analysis can be divided into narrow policy analysis and broader policy analysis. Narrow policy analysis means to analyse the rationality of policy instruments and the validity of policy objective prior to policy execution, while the broader policy analysis involves promoting policy implementation and policy evaluation in a rational and efficient manner. Feasibility studies on locally financed investment projects are summarised based on the following references: the Ministry of the Interior and Security (2017); Local Fiscal Investment Project Review and Feasibility Study Manual; and Kim et al (2012) Local Financial Investment and Loan Business Review and Feasibility Study Analysis.

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References Dunn, William N. (1994) Public Policy Analysis: An Introduction, 2nd edn, Englewood Cliffs: Prentice-​Hall. Han, Donghyo (2010) A study on factors of the failure of policies taken by the local government: focusing on the Naubul stream covering project of Jinju city, The Korean Journal of Local Government Studies, 14(3): 315–​34. Hong, Woonki (2005) A critical study on the economic development policies of local governments in Korea, Korea Politics Study, 14(1): 195–​226. Keum, Changho, Booyoung Han, Ohchul Kwon (2005) Developing the Expertise of Local Public Officials. Seoul: Korea Research Institute for Local Administration. Kim, Chandong (2010) Urban policy decision process analysis of metropolitan city government. 2010 Spring Conference of the Korean Association for Policy Studies, 577–​96. Kim, Namjoo, Jihoon Park, Seongae Jeon (2019) A Study on the Standardization of the Survey Design of the Contingent Valuation Method for the Feasibility Study of Local Financial Investment Projects. Seoul: Korea Research Institute for Local Administration. Kim, Nanyoung and Hyungseok Jo (2012) Local Financial Investment and Loan Business Review and Feasibility Study Analysis. Seoul: Audit Research Institute. Kim, Youngsoo (2002) A study on the participation of local government in public policy making of central government. The Korean Journal of Local Government Studies, 6(1): 51–​75. Lasswell, Harlod D. (1971) A Preview of Policy Science. New York: American Elsevier Publishing Co. Local Financial Investment Project Review Rules (n.d.) https://​www.law.go.kr/​ Park, Jongcheol, Jaeduck Keum, and Hyunsang Ha (2016) An analysis of mitigating effects on financial disparity of adjustment grants in Seoul City. The Korea Local Administration Review, 30(3): 123–​54. Ryu, Chunho (2014) The pitfalls of local government’s public policy decision and feasibility study. 2014 Winter Conference of the Korean Association for Public Administration. The Ministry of the Interior and Security (2017) Local Financial Investment Project Review and Feasibility Study Manual. Seoul: The Ministry of the Interior and Security. The Ministry of the Interior and Security (2021) Local Finance 365: Statistics of Large-​scale Investment Projects, https://​lofin.mois.go.kr Yun, Taeseop and GeunSuk Hong (2017) Improvement of the feasibility study system in accordance with the Local Finance Act. Policy Issue Report. Korea Research Institute for Local Administration.

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EIGHT

The myth of local government incompetency Kilkon Ko and Ran Kim

Introduction

Compared to the central government, local governments have to allocate limited financial resources to different programmes under a high level of resource constraints. For instance, at the provincial government level, fiscal independence has remained below 40 per cent in Korea since 2008 (KOSIS, 2018). Due to the difficulties associated with these financial constraints, efficient management of public expenditure is critical to effective decision making, especially at the local government level. Cost-​benefit analysis has been commonly used as an analytical tool for decision making in the public sector, including both the central government and local governments (Fuguitt and Wolcox, 1999; Weimer, 2009). Analytical information obtained from cost-​benefit analysis is assumed to improve the fairness and efficiency of budget allocation. On the other hand, analytic information is costly, incomplete and usually fails to incorporate political factors and the multidimensional goals of public programmes (Wildavsky, 1966). This scepticism toward the analytical approach is amplified in light of the view that local governments lack policymaking capacity compared to the central government. The pessimistic view of local governments results in support for central government intervention in local government decision making (Warner, 2010), which reverses the trend of decentralisation. However, there are many definitions of local government ‘capacity’ (Rapp and Patitucci, 1976; Gargan, 1981) ranging from financial capacity (Warner, 2010, p 146) to managerial capacity of human and other administrative resources (Hou et al, 2003). In this chapter, we narrow our discussion on local government capacity to specifically refer to methods of systematic policy analysis for public investment. This chapter analyses a case that demonstrates how the systematic analysis of public investment triggers comprehensive behavioural changes in bureaucrats, policy analysts, politicians and citizens. The example we analysed is local government feasibility studies (LFS), which are a variant of the central government’s preliminary feasibility studies (PFS). PFS are recognised as an innovative form of policy analysis adopted by the central government in Korea in 1999. PFS refers to an ex-​ante evaluation of proposed investment projects that involve central government investment of greater than $50 million. Ever since the adoption of PFS, policymakers have debated the accuracy of the analysis and its utilisation in actual investment decisions, which are profoundly 99

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affected by political interests. Nevertheless, PFS are regarded as part of a successful analytical system. Accordingly, local governments have expressed a willingness to adopt PFS. Eventually, this system was adapted from the central government to local governments under the name LFS, and the Seoul Metropolitan government established a LFS system in 2012 in the hope that it would reduce inefficiencies and lead to more efficient budget allocation. Following on from the Seoul Metropolitan government, six other provincial governments have also established similar policy analysis units. While the relationship between policy analysis and its impact on effective public investment decisions has been widely discussed, at the local government level this is highly contextual given the multiple constraints that local governments face. Accordingly, rather than asking whether policy analysis produces a positive impact on the public investment decisions of local governments, it is more important to examine questions such as how the LFS integrates with the policymaking process and why it produces some expected or unintended outcomes. In this respect, this in-​depth case study is necessary for better understanding how the policy capacity of local governments improves when they adopt systematic policy analysis such as LFS. This chapter is structured as follows. First, we review the literature on local government incompetence in making public policy decisions and the role that policy analysis was expected to play. Second, we describe the political, administrative and institutional context surrounding the Seoul Metropolitan government’s LFS. This is followed by analysis of how the LFS is implemented and whether it has changed the quality of public investments. Finally, we discuss why the impact of institutionalised policy analysis should not be limited to analytical accuracy but rather expanded to include the individual behaviour of each actor in the policy community.

Debate over local governments’ inability to make rational decisions Embedded in the Tiebout hypothesis is the implicit assumption that local governments employ local public resources in a cost-​minimising way to serve local public interests (Afonso and Fernandes, 2003, p 5). This argument assumes that a rational approach both at the individual and government level will produce the socially desirable equilibrium. However, sceptics question whether such assumptions are realistic. First, policy analysis is insufficient to deal with the political nature of public investment decisions by local governments. Several authors have argued that public service at the local level depends on many factors outside of fiscal considerations (Schwab and Oates, 1991; Deller and Rudnicki, 1992; Davis and Hayes, 1993). As organised interest groups profoundly affect local elections and policy impacts are highly visible to residents, local government policymaking is very sensitive to political interests. Accordingly, information gleamed from analysis cannot be 100

The myth of local government incompetency

fully utilised without political consideration, and local governments may not prioritise rational and analytical information. Second, local government incompetence limits the production and utilisation of analytical information. Litvack et al (1998) stated that local governments are constrained by many factors, including financial resources, human capital and expertise. Reid (1984) observes that it is not typical for local government officials to hire trained professionals to allocate government resources efficiently. Faguet (2004) also argued that it is difficult to expect local government officials to design high-​quality local public services due to a lack of financial, human and technical resources. There has also been a tendency for local government officials to be generalists instead of specialists. The high level of job mobility and frequent rotation between short-​term positions hinders the ability of local officials to build analytical capacity. Howlett and Newman (2010) also indicated that officials’ level of expertise in policy analysis techniques tends to be underdeveloped at the local level due to a short-​term orientation and high level of job mobility. Moreover, smaller local governments have had difficulty attracting outside experts since most prominent analysts prefer to work for more well-​paid and prestigious jobs. This leads to a high level of managerial inefficiency in local governments (Deller and Rudnicki, 1992). Third, there is a high risk of corruption in local governments. Local officials may be given more discretion and face fewer obstacles due to the frequently blurred boundaries between politicians and bureaucrats (Tanzi and Davoodi, 1997; Balaguer-​Coll et al, 2010). Although fraudulent behaviour in local governments can be easily exposed, there is still a potential threat of local government corruption, and it is deeply ingrained in many local government institutions (Martinez-​Vazquez and McNab, 2003; Balaguer-​Coll et al, 2010). Against this background, Joumard and Kongsrud (2003) stressed that being closer to residents may lead to decisions that favour particular individuals or groups, and this could spill over into corrupt practices that, in turn, undermine the efficiency and legitimacy of policies. However, there is a strong call for local governments’ incapacity to be overcome by enhancing policy capacity. Policy capacity can be defined as ‘the ability to marshal the necessary resources to make intelligent collective choices, and in particular, to set a strategic direction, for the allocation of scarce resources to meet public ends’ (Painter and Pierre, 2005; Wu et al, 2015, p 166). Others have retained this relatively narrow focus but included additional skills and resources such as those involved in the acquisition and utilisation of policy-​ relevant knowledge, the ability to frame multiple options, the application of both qualitative and quantitative research methods to policy problems, the effective use of communication and stakeholder management strategies (Howlett, 2009; 2015, p 166). Wu et al (2015) asserted that the concept of policy capacity should include the nature and quality of resources available for reviewing, formulating and 101

Policy Analysis in South Korea

implementing policies, as well as the practices and procedures by which these resources are mobilised and used. This includes within public service, the non-​ governmental sector and society as a whole. In particular, analytical capacity is commonly viewed as a core aspect of policy capacity for devising and implementing policies efficiently (Nutley et al, 2003; Wu et al, 2015). This literature review presents a conundrum. While there is a consensus that analytical capacity is vital to local governments, many are sceptical about the ability of local governments to do so, and Korea is not an exception in this regard. Although this review acknowledges the growing necessity for decentralisation, the central government still tends to be suspicious of local governments’ public investment decision making.

Adoption of local government feasibility studies in Korea The inability of local governments to make rational decisions on public investment analysis was a significant concern to the Korean government. However, in 1999, it reviewed 16 major public investment projects. These results were influenced by the Ministry of Construction and Transportation’s interests in implementing the projects by inflating the benefits. This problem is far more severe among local governments. It was assumed that the self-​interest of line ministries was embedded in the overwhelmingly optimistic cost-​benefit analysis conducted by experts. Furthermore, according to the review by the central government, each cost-​benefit analysis performed at the line ministry level had adopted different assumptions for the discount rate, cost and benefit factors, and models for estimating demand. Accordingly, the government introduced PFS to increase the reliability of cost-​benefit analysis. The government asked the Korea Development Institute (KDI) to produce a manual for PFS, which were to be conducted on major public investment projects exceeding $50 million. The adoption of the PFS system was highly promising. As shown in Table 8.1, the KDI reviewed 654 public investment projects with total costs of around $301.9 billion between 1999 and 2016. Thirty-​six per cent of them were rejected, leading to savings of around $130 million government expenditure (KDI, 2016). The success of PFS has inspired many local governments in Korea. In 1999, the central government intervened in local government decision making on public investments by enacting the Enforcement Ordinance of the Budget and Accounting Act, which was aimed at improving the allocation of local government funds by utilising PFS. However the adoption of such studies did not produce satisfactory results. Due to a shortage of experts, the studies were performed by external experts who had close ties with the planning division of local governments. According to a study conducted by Cho et al (2012), the number of projects deemed infeasible was 0 out of 101. This made the central government cast doubt on the reliability and validity of feasibility studies conducted by local governments. 102

The myth of local government incompetency

Table 8.1: Project cost and number of PFS by sector from 1999 to 2016 (unit: $1 billion, projects) Preliminary feasibility studies Seaport

Culture /​ tourism

Water resources

2.0 (2)

0.1 (1)

0.3 (4)

0.6 (1)

0.7 (1)

18.7 (20)

4.6 (7)

0.8 (5)

1.5 (2)

0.0 (1)

0.5 (4)

12.4 (30)

6.1 (20)

12.1 (14)

0.1 (1)

1.4 (5)

–​

0.1 (1)

19.7 (41)

5.9 (9)

6.2 (8)

0.3 (2)

0.5 (2)

1.1 (5)

0.7 (4)

14.7 (30)

2003

5.3 (10)

5.4 (7)

1.9 (3)

1.0 (5)

1.3 (5)

0.8 (2)

15.7 (32)

2004

7.1 (24)

6.4 (13)

1.0 (1)

1.0 (2)

0.2 (3)

2.5 (12)

18.3 (55)

2005

3.5 (11)

4.6 (6)

0.4 (2)

1.4 (1)

0.4 (3)

1.7 (7)

12.1 (30)

2006

7.7 (27)

7.3 (10)

1.3 (5)

0.6 (5)

0.1 (1)

1.1 (4)

18.1 (52)

2007

6.8 (30)

4.2 (5)

2.0 (1)

0.2 (2)

0.1 (1)

7.6 (7)

20.9 (46)

2008

2.6 (12)

1.1 (2)

1.0 (4)

0.3 (3)

0.4 (2)

5.0 (15)

10.4 (38)

2009

13.1 (22)

7.7 (5)

0.4 (2)

0.3 (2)

3.4 (12)

9.5 (20)

34.4 (63)

2010

5.7 (7)

17.9 (14)

0.5 (2)

0.1 (1)

0.5 (2)

9.3 (22)

34 (48)

2011

1.3 (6)

6.1 (5)

0.6 (2)

1.9 (11)

2.0 (5)

3.7 (14)

15.6 (43)

2012

1.8 (7)

10.3 (7)

2.1 (5)

1.1 (6)

0.8 (5)

1.7 (5)

17.8 (35)

2013

1.9 (8)

0.1 (1)

0.1 (2)

0.4 (1)

1.3 (4)

3.8 (16)

2014

2.1 (6)

13.7 (4)

0.6 (2)

2.0 (12)

0.5 (2)

3.1 (8)

21.9 (34)

2015

2.3 (3)

1.3 (3)

0.5 (2)

1.3 (7)

–​

1.1 (3)

6.5 (18)

2016

1.1 (5)

4.0 (5)

0.3 (2)

0.3 (3)

0.6 (4)

0.6 (3)

6.9 (23)

Total

94.1 (229)

14.0 (43)

15.3 (75)

12.4 (53)

51.0 (136)

301.9 (654)

Year

Road

1999

14.9 (11)

2000

4.9 (11)

2001 2002

Railway

–​

114.9 (117)

Other

Total

Note: The number in parentheses is the number of projects. Source: KDI (2016) Annual PFS Report

Against this background, a few local governments have attempted to establish their own research centres specialising in feasibility studies for public investment (LFS). In 2012, the Seoul Metropolitan government was the first to establish a public investment management centre (PIMAC), and six other provincial governments founded similar centres in the following years. Before the adoption of LFS, feasibility studies were performed by private companies and university professors nominated by the local government’s planning department. Under the new system, LFS are performed by independent research units specialised in feasibility studies. Currently, the operations of the seven public investment centres vary in terms of size and main activities. These differences depend on whether LFS provisions are stipulated under an ordinance. Three were established under an ordinance, but the others were created at the discretion of the local government head. While the ordinances play a critical role in attracting qualified professionals by providing better working conditions with a definite budget, most PIMACs are 103

Policy Analysis in South Korea

small and struggle to recruit enough experts. As of 2017, around 20 researchers are employed in the Seoul PIMAC, while the other PIMACs have fewer than ten researchers. Given the maturity and scale of the LFS system, we choose Seoul as the subject of this case study, since the Seoul PIMAC is not only the leading local public investment centre but can also serve as a benchmarking example for other institutes in the future. The Seoul PIMAC has also attempted to develop a standardised manual for feasibility studies. Previous feasibility studies performed by local governments used different assumptions in cost-​benefit analysis. To resolve this issue, the Seoul PIMAC referred to the central government’s PFS manuals and modified them to be in line with the local government context. For example, public library users in Seoul are far more willing to pay for services than in other regions, and there are also differences in construction costs and travel costs between regions. Accordingly, each local government needs to develop its own manual for cost-​benefit analysis. Despite these signs of progress, many have expressed scepticism about the success of Seoul PIMAC’s LFS. The most significant concern was the co-​opting of PIMAC by public officials, construction companies and local representatives. Since PIMAC’s revenue comes from the local government, many experts predict that public officials will manipulate the LFS results to suit their interests. Moreover, as local council members are sensitive to their constituency’s interests, PIMAC’s rational analysis could be replaced by political interests. Against this background, the LFS policy pilot started amid a high level of cynicism, in particular from the central government. In the following sections, we try to examine whether these concerns are empirically valid. Data collection The authors examined the research question using the Seoul PIMAC as a case study. The Seoul PIMAC has expertise and ample experience in feasibility studies, feasibility verifications and feasibility reviews. Feasibility studies are conducted along with cost-​benefit analysis in order to verify whether government resources are being allocated efficiently. A quantitative research design was employed including a comparison of the benefit-​cost (BC) ratio of proposals estimated by the departments in local governments, the Seoul PIMAC and the approval rates of the proposals. It was necessary to compare BC ratios to see if there is any bias embedded in the feasibility studies. Infeasible projects could be deemed feasible due to such bias. Data for the study included all feasibility studies, feasibility verifications and feasibility reviews conducted by the Seoul PIMAC from 2012 to 2016. Projects with private investment were excluded. The data were made available by the Seoul Institute and retrieved from the Seoul Institute database. In addition, we used the results of a survey performed by the Seoul Institute to test the level of trust in LFS. This data was collected from a questionnaire distributed to public officials in Seoul, expert groups and the local council’s 104

The myth of local government incompetency

Investment Review Committee (IRC). The data includes responses from 171 public officials and 138 members of the expert group and the IRC. The respondents were invited to participate in a voluntary online survey with no incentives provided to artificially increase the response rate. Internalisation of rational analysis in the policymaking process The adoption of the LFS system has been far more comprehensive than expected. Table 8.2 shows the number of LFS and the size of the projects reviewed. Only 59 projects underwent an LFS in 2012, but this increased to 135 in 2016. The total cost of projects reviewed over the period is almost $14.5 billion. Moreover, the policy areas covered by LFS range from administration to civic development. The widespread adoption of LFS does not mean the studies have been used superficially. As shown in Figure 8.1, the Seoul Metropolitan government asks the Seoul PIMAC to perform policy analysis at different stages. For instance, the planning department commissions feasibility studies both to the PIMAC and external institutes such as universities and private companies. As the Seoul Metropolitan government trusts the analytical capacity of the Seoul PIMAC, it has asked the centre to verify a few selected feasibility reports submitted by external institutes. In the verification stage, the PIMAC is able to evaluate the quality of cost-​benefit and other analyses performed by external institutes.

Table 8.2: Seoul Public Investment Management Center’s feasibility review cases (unit: projects, $1 billion, %) Sector

2012

2013

2014

2015

2016

Sum (%)

Cost (%)

Administration

5

19

13

10

20

67 (13%)

1.5 (11%)

Public security

1

3

1

1

2

8 (2%)

0.5 (4%)

Education

–​

–​

2

1

1

4 (1%)

0.1 (1%)

Culture/​tourism

12

15

15

40

27

109 (22%)

2.6 (18%)

Environment

6

7

14

15

9

51 (10%)

1.7 (12%)

Social welfare

15

–​

10

16

17

58 (11%)

1.9 (13%)

Health

1

9

–​

2

7

19 (4%)

0.3 (2%)

Industry

1

2

2

1

5

11 (2%)

0.2 (2%)

Transportation

15

19

16

36

25

111 (22%)

3.4 (23%)

Civil development 3

10

21

11

22

67 (13%)

2.2 (15%)

Sum

84

94

133

135

505

–​

2.2

2.7

3.2

3.9

59

Total project cost 2.4

–​

14.5 (100%)

Source: The Seoul Institute, 2017

105

Policy Analysis in South Korea

Figure 8.1: The PIMAC feasibility study process Planning Stage

Review Stage

Project Planning Department

In-depth Feasibility Study PIMAC

Feasibility Study Other Institute or Feasibility Study PIMAC

Feasibility Verification PIMAC

Decision Investment Review Committee

After the feasibility verification, the budget office of the Seoul Metropolitan government finalises the list of projects for examination by the local council’s Investment Review Committee (IRC). Before submitting the projects to the local council, the budget office usually asks the PIMAC to perform the described review. The PIMAC prepares the feasibility review reports for the budget office, which are submitted to the local council as well. Finally, the PIMAC attends the IRC meeting and provides expert opinion upon request. These processes suggests that the LFS system is not limited to just feasibility studies but includes feasibility verifications and reviews. The PIMAC works with the local council as well as the planning department and the budget office, meaning that the LFS internalises all the decision-​making stages regarding public investment. Do LFS represent the interests of public officials and politicians? It is reasonable to be sceptical about the level of LFS independence due to political pressure from the local government. In fact, most projects submitted to the local council are supported by the planning and budget office. As such, if the PIMAC is co-​opted by public officials, the feasibility review will correspond to the interests of the planning department and emphasise the desirability of the proposed project. To test this hypothesis, we analysed whether the LFS provides an optimistic cost-​benefit analysis at the feasibility review stage to satisfy the local government. In this analysis, we used feasibility studies performed by external institutions as a control group. As shown in Figure 8.1, public officials can commission feasibility studies both to external institutes and the PIMAC. The external institutes tend to represent the interests of public officials and provide positive cost-​benefit results. Figure 8.2 shows the BC ratio for feasibility reviews performed by external institutions and the PIMAC. The findings show that the BC ratio of projects reviewed by external institutions is consistently higher than that of the PIMAC.

106

The myth of local government incompetency

Figure 8.2: BC ratio of proposals as estimated by the external institutions and PIMAC LFS 3.0 2.5

BC ratio

2.0 1.5 1.0 0.5 0.0 2012

2013 GROUP

2014

2015

Department

LFS

2016

This discrepancy suggests that the PIMAC does not endorse the optimistic BC ratios of external institutions. This tendency is portrayed in Figure 8.3, which compares the BC ratios of the PIMAC LFS and the local government for the same project. If the PIMAC does not deviate from the intentions of public officials to push ahead with the project, we should find evidence that the two BC ratios are aligned with the 45-​ degree line. However, Figure 8.3 shows that most projects are located below the 45-​degree line, which suggests an optimistic bias in the planning department’s BC analysis. The LFS are not necessarily aligned with the interests of politicians at the local council either. Table 8.3 shows how LFS differ from local council decisions. When the BC ratio for projects is less than one, around 62 per cent of projects are approved by the local council. This is evidence that the local council considers factors other than economic feasibility when approving public investment projects. At the same time, this suggests that the PIMAC does not provide favourable BC ratios despite knowing that the local council wants to accept more projects that are directly related to welfare and services for local constituents. Bendor et al (1987) argue that there are often differences in policy decisions and choices between politicians and bureaucrats due to the uncertainty they face. The LFS can play an essential role in providing balanced information in this regard. As shown in Table 8.3, 38 per cent of projects with a BC ratio of less than one were rejected. In other words, the local council’s IRC decided to carry out 62 107

Policy Analysis in South Korea

Figure 8.3: BC ratio of proposals as estimated by the local government department and PIMAC LFS 3.0 2.5

LFS BC

2.0 1.5 1.0 0.5 0.0 0.0

0.5

1.0 BC ratio

1.5 Department BC Regression line

2.0

2.5

3.0

45 degree line

Table 8.3: Rejection rate of LFS reviewed proposals by the local council (2012 to 2016) Rejection rate

2012

2013

2014

2015

2016

Total

Total

49

66

49

101

87

352

Reviewed/​rejected/​withdrawn

9

21

14

18

34

96

Rejection rate

18%

32%

29%

18%

39%

27%

BC