Analysis and Evaluation of the Korean Local Government Borrowing Decision Making System

Abstract

Local government borrowing is a part of budgeting in local government and borrowing is a useful resource to meet local finance demand. Local government borrowing is a process of policy making, it can be analyzed in viewpoint of the systems approach. For the analyzing local government borrowing decision making system, there were decided three factors (institutional structure, borrowing criteria, and personnel capability) and the three values (local democracy, economic efficiency, and financial security) in this research. Korean local government borrowing decision making system was analyzed and evaluated in terms of the three factors and three values. As for the findings, these indicate that the present Korean local government borrowing decision making system is not appropriate to obtain the three values because of problems such as the central government's strong but formal control; the use of impractical criteria; and the insufficient capabilities of policy makers. Under the above diverse problems of the present system, it is possible for a local authority to experience either extremes in local borrowing policy such as too little borrowing or too much borrowing and both can provoke the traps of the vicious circle and the dilemma. The problems of the system may continue in the future if there is not fundamental and comprehensive reform in Korea. Therefore, some of the reforms are needed for a more desirable system to increase the three values.