KOREA

The Sixth Republic of Korea is a unitary republican state. The President, elected by a national popular vote for a single five-year term, is both head of state and head of government. The Prime Minister is appointed by the President with the consent of the National Assembly, and is responsible for assisting the President and directing the Executive Ministries. The country has a unicameral parliament, the National Assembly (Kuk Hoe), which is elected for a four-year term. Most of the assembly’s seats are filled by election from geographical constituencies, with the remainder distributed proportionally among the various parties.

Local autonomy has been established in the constitution since Korea’s First Republic, although it has been strengthened since 1995. All subnational governments have the same governing structure made up of an executive body (governor for province, mayor for metropolitan city, municipal city, county and autonomous district government) and a local council as a legislative body. Governors and mayors are elected by direct popular vote for a four-year term. The latest local elections were held in 2018. City or county governments appoint officials at lower levels (eup and dong). Local magistrates and assemblies are elected in every province, metropolitan or special city, county, and autonomous district. As far as council members are concerned, ten out of eleven are elected by popular vote and the remaining seat is occupied by a proportional representative.

The decentralisation process in Korea started in 1987 with the “Declaration for Democratisation” and gained momentum in 1988 with the Local Autonomy Act and the Local Finance Act. Subnational elections were introduced in 1991 and 1995 (respectively for executive and legislative authorities), when substantial fiscal resources started being transferred to subnational governments. In 1999, a large reform of the public sector was launched including a comprehensive decentralisation programme, monitored by a Special Committee on the Devolution of Government Affairs. In 2004, the Special Act on Decentralisation (changed into the Special Act on the Promotion of Decentralisation in 2008) clarified principles and methods for decentralisation, transferred new functions to local governments and abolished special administrative agencies. It was followed by a fiscal reform in 2005 which established the “Special Account Balanced National Development”, and the Special Act on Decentralisation and Restructuring of Local Administrative Systems in 2013.

In 2017, the administration of president Moon Jae-in included decentralisation as one of the Top 100 national tasks. The “100 national tasks” programme included measures to transfer functions of the central government to local governments and increase budgets allocated to local governments. In 2018, a new Presidential Committee on Autonomy and Decentralisation was set up, and the “Special Act on Decentralisation and Restructuring of Local Administrative Systems” was amended. It included several changes for multi-level governance, such as the devolution of central administrative powers to local governments (some to the regional level and some to municipalities) in January 2021.

In January 2022, the Local Autonomy Act was revised for the first time in 32 years. The revised Act enhance citizens’ participation in local governance and enhanced the roles of local councils. It also enacted the creation of Central Local Cooperation Councils, where the president, provincial governors and local councils will be able to meet regularly to discuss policies related to local autonomy and balanced development.

Addressing the regional imbalance between Seoul and surrounding regions is at the core of Korea’s regional development strategy, with the aim to develop Mega Regional Corporations to improve the attractiveness of regions outside of Seoul, through three main axes: 1) establishing the legal and financial basis for regional corporations ; 2) municipal integration for the stable implementation of large projects, 3) focusing on infrastructure, transport, services and workforce to increase mobility.

Several local government associations (LGAs) represent the interests of local governments to the central government, such as the National Association of Governors, the National Association of Mayors, the Association of Metropolitan and Provincial Council Chairs and, since 2020, the Korean Local Governments’ Action Alliance for Carbon-Neutrality.

TERRITORIAL ORGANISATION
Municipal Level [1]	INTERMEDIATE LEVEL	REGIONAL LEVEL	TOTAL NUMBER OF SNGs (2021)
226 municipalities		17 regional entities
Average municipal size: 229 118 inhabitants
226		17	243

[1] Name and number of sub-municipal entities: 3 501 sub-municipal localities.

OVERALL DESCRIPTION: Korea has a two-tier local government system – regional and municipal – with no hierarchical link, and a very diverse and complex structure within each level. The local government sector also comprises 17 educational local authorities (ELA) at the regional level and 188 lower-levels of ELA, which are independent elected entities according to the Local Education Autonomy Act.

REGIONAL LEVEL: The regional level consists of eight provinces (do), one special self-governing province (Jeju), six metropolitan cities (gwangyeoksi), one special city (Seoul Metropolitan City) and, since 2012, Sejong special self-governing city, which both have a special status. Sejong was founded as Korea's de facto new multifunctional administrative city, with achieving a more balanced national development by moving administrative functions out of the capital-city (Seoul) as its goal. Metropolitan cities combine the functions of regional and local government.

MUNICIPAL LEVEL: The lower level of local government includes cities (si), counties (gun mostly rural) and autonomous districts (gu), which reflects the “municipal annexation” process that took place in 1995. The municipal level is further divided into 3 501 sub-municipal localities: 232 eup (urban division of counties), 1 180 myeon (rural division of counties), and 2 089 dong (within cities and districts) as of 31 December 2020.

There are very large differences in the sizes of area and population of subnational governments even among similar types of local governments. While the average size of municipalities in Korea (229 118 inhabitants) is the highest among OECD countries, the size of sub-municipal entities ranges from 10 000 to 50 000 inhabitants. The implementation of the Local Autonomy Act in 2022 introduced the status of “Special Cities” to municipalities with a population of more than 1 million inhabitants but without “metropolitan city” status, in order to better take into account their administrative needs (applied to the cities of Suwon, Goyang, Yongin, and Changwon, Gyeongsangnam-do).

HORIZONTAL COOPERATION: Local governments may establish intergovernmental corporate authorities, but this form of cooperation is rarely used.

The functions of subnational governments are not clearly defined by law. Art. 117 of the Constitution stipulates that local governments can handle “matters pertaining to the well-being of local residents, manage properties and may establish their own rules and regulations regarding local autonomy as delegated by national laws and decrees”. The Local Autonomy Act (Art. 9) distinguishes between subnational government functions by those delegated to them by the central government and those which are local by nature. The Act identifies six categories of subnational government functions: 1) 11 territorial, administrative and management functions; 2) 10 functions related to the welfare of local residents; 3) 14 functions to foster growth in agricultural, trade and industrial sector; 4) 15 functions related to regional development and environmental protection; 5) 5 functions to promote education (however, this falls under the responsibility of independent educational offices), sport activities, culture and art; and 6) 2 civil defence and safety functions.

Both subnational government levels have the same functions at different scales, and regions are responsible for vertical coordination between the national government and lower level of government. Independent national agencies manage specific areas, including fire protection and education. As a result, there is a large degree of overlap in the division of responsibilities across levels of government. In addition, a conditional clause to Article 9 stipulates that the “central government may exercise its own power and control over any function, if other laws define them as the functions of the central government”. Therefore, local governments have limited policy-making authority, and are usually limited to the implementation of national policies.

Recently, new functions have been devolved to local governments as part of the new decentralisation programmes. Police forces have been decentralised to the regional level in 2020 through the creation of 18 city and provincial police committees. Administrative functions were also devolved to the subnational level at the beginning of 2021, and discussions are on-going to review the “Special Act on Decentralisation” further towards decentralising responsibilities to special cities for the management of port authorities.

Main responsibility sectors and sub-sectors
SECTORS AND SUB-SECTORS	Regional level	Municipal level
1. General public services (administration)	General public administrationManagement of public properties and facilities	General public administrationManagement of public properties and facilities
2. Public order and safety	Police forces	Firefighting and rescue services
3. Economic affairs / transports		Local public transport; Trade (licences)
4. Environment protection	Environment	Environmental protection including refuse collection and recycling
5. Housing and community amenities	Housing	Land-use; Planning and development control; Local housing plans
6. Health
7. Culture & Recreation	Culture	Leisure services; Sport; Libraries
8. Education	Education	Education
9. Social Welfare	Social welfare	Welfare services and social care

Scope of fiscal data: The municipal level comprises cities, counties (mostly rural) and autonomous districts. The regional level consists in nine provinces, six metropolitan cities, Sejong Self-governing City and Seoul Capital City.

SNA 2008

Availability of fiscal data: High

Quality/reliability of fiscal data: High

GENERAL INTRODUCTION: Subnational government financing in Korea is determined by the Local Finance Act, the Local Autonomy Act, the Framework Act on Local Taxes and the Local Subsidy Act. The degree of fiscal decentralisation is high in Korea on spending, and regions and municipalities play a significant role in public expenditure, particularly in investment. This is not true, however, on the revenue side, despite several waves of fiscal reforms aimed to increase fiscal decentralisation and reform the tax and grants systems to accompany the transfer of powers and spending responsibilities to local government, including the latest one in 2011. In 2022, the lack of fiscal independence at the local level, coupled with important fiscal disparities between the various types of local governments, still significantly undermines the efficacy of political and administrative decentralisation in Korea.

Subnational government expenditure by economic classification
2020	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total expenditure	7 450	17.2%	45.8%	100%
Inc. current expenditure	5 661	13.1%	42.7%	76.0%
Compensation of employees	1 812	4.2%	58.2%	24.3%
Intermediate consumption	779	1.8%	47.1%	10.5%
Social expenditure	1 402	3.2%	27.2%	18.8%
Subsidies and current transfers	1 652	3.8%	58.1%	22.2%
Financial charges	16	0.0%	3.2%	0.2%
Others	0	0.0%	19.3%	0.0%
Incl. capital expenditure	1 790	4.1%	59.4%	24.0%
Capital transfers	388	0.9%	61.1%	5.2%
Direct investment (or GFCF)	1 402	3.2%	59.0%	18.8%

EXPENDITURE: Subnational governments play a significant role in public spending in Korea, with figures above the OECD average for unitary countries, both as a share of GDP (12.7% for OECD unitary countries on average in 2020) and as a share of total public expenditure (27.5% on average). SNG expenditure in Korea has increased by 3.4 percentage points between 2016 and 2020 as a percentage of GDP, and by 3.6 percentage points as a share of total public spending. Subnational governments account for more than half of public staff spending which results partly from the payment of teacher salaries (educational offices). SNG public servants accounted for 27% of total public employment in 2020.

The high level of expenditure also reflects the importance of social benefits that are disbursed by subnational governments. Subnational social spending represents a significant share of total public social spending, higher than in the OECD on average (14.9%). Korea is among the few OECD countries to use subnational expenditure limits; the country has become more inclined to rely on limits since fiscal consolidation started in 2010. This trend has slowed growth in current expenditure.

DIRECT INVESTMENT: In 2020, Korea had the highest share of general government spending devoted to investment among all OECD countries (15% vs 8% on average in the OECD). Subnational government investment was also the highest among OECD unitary countries as a share of GDP (3.2% vs 1.9% on average in the OECD), and their share in overall public investment was also higher than the OECD average (59% vs 54.6% on average in the OECD), reflecting an active role of subnational governments in public investment. Most subnational investment is directed towards economic affairs/transport (29%), housing and community amenities (22%) and education (16%).

The 2013 Special Act on Urban Regeneration provided a framework encompassing national guidance, a strategic plan and an urban regeneration plan, that call for more collaboration between local and national governments. The new 2017 administration strengthened the Act through a five-year Urban Regeneration New Deal which aims to finance 100 projects through an investment of KRW 1 trillion.

The Public and Private Infrastructure Investment Management Centre (PIMAC) has a Public-Private Partnership Unit that provides technical assistance to subnational governments. In 2020, the Korean government amended the regulations related to PPPs to increase transparency, requiring all procuring authorities to disclose the agreements of PPP projects.

In addition, the Korean government has been developing a contract system, called Regional Development Investment Agreements, where local governments can establish comprehensive multi-year regional development plans and obtain multi-year financial support from the central government based on the central-regional agreement. 11 pilot projects were launched in this framework in 2019. In its 2021-2025 Fiscal Management Plan, the Korean government plans to keep allocating funding to local government fiscal support and local infrastructure development, in particular in the framework of the Korean New Deal, climate change response and to overcome rural depopulation.

Subnational government expenditure by functional classification
2019	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total expenditure by economic function	6 507	15.2%	-	100%
1. General public services	936	2.2%	32.1%	14.4%
2. Defence	7	0.0%	0.7%	0.1%
3. Security and public order	117	0.3%	19.5%	1.8%
4. Economic affairs/transports	942	2.2%	40.4%	14,5%
5. Environmental protection	341	0.8%	62.6%	5.2%
6. Housing and community amenities	438	1.0%	77.2%	6.7%
7. Health	253	0.6%	11.2%	3.9%
8. Recreation, culture and religion	273	0.6%	58.8%	4.2%
9. Education	1 791	4.2%	49.4%	27.5%
10. Social protection	1 409	3.3%	33.9%	21.7%

The top category of subnational government spending is education (by the intermediary educational offices), representing 27.5% of subnational government expenditure, followed by social protection (21.7%), general public services (14.4%) and economic affairs and transport (14.5%). The share of subnational expenditure dedicated to social protection has increased by 5 percentage points since 2016, and social and health expenditure are expected to keep rising because of Korea’s aging population.

Subnational governments are particularly active, as a percentage of total public spending, in the areas of housing and community amenities, culture and recreation and environmental protection, three sectors in which their share in total public expenditure has slightly increased since 2016. The share of subnational spending in total public spending has also increased in the social protection sector.

The 2021-25 Fiscal Management Plan focuses on recovery-boosting measures following the COVID-19 pandemic, including the transition towards a digital and low-carbon economy (green mobility, forest development, business restructuring support).

Subnational government revenue by category
2020	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total revenue	7 229	16.7%	47.3%	100%
Tax revenue	2 143	5.0%	24.9%	29.7%
Grants and subsidies	4 604	10.6%	-	63.7%
Tariffs and fees	364	0.8%	-	5.0%
Income from assets	54	0.1%	-	0.7%
Other revenues	64	0.2%	-	0.9%

OVERALL DESCRIPTION: In 2020, subnational governments still depended heavily on central government transfers whose share in total subnational government revenue is well above the OECD average (41.2% in 2020). The share of grants in subnational revenues increased by 6 points between 2016 and 2020, to the detriment of the share represented by tax revenues and user charges and fees.

As part of the fiscal decentralisation programme (first phase 2019-2020 and second phase, on-going), the Ministry of the Interior and Safety (MOIS) is progressively decreasing the ratio of national taxes to local taxes, and increasing the rate of the local consumption tax, among other initiatives to broaden the local tax base. The national:local tax ratio was amended progressively from 8:2 prior to the reform, to 76:23,3 in 2017, and to 75,5:24,5 in 2021 (missing the objective of reaching a 7:3 ratio by 2021). New estimates plan to adjust this ratio to 72,6:27,4 by 2023.

TAX REVENUE: The tax system was reformed in 2011, in order to simplify the tax mix. The number of taxes allocated to local authorities declined from 16 to 11, and most tax rates are determined by the central government. Provincial taxes comprise ordinary taxes (acquisition, registration and license, leisure, and local consumption taxes) and earmarked taxes (community resource and facility and local education taxes). City and county taxes comprise ordinary taxes including property, automobile, local income, and tobacco consumption taxes. Metropolitan cities can levy both provincial and municipal own taxes.

The most important local tax for regional entities is the acquisition tax, levied on persons acquiring real estate, motor vehicles, heavy equipment, boats, etc. either through purchase or inheritance (25% of all SNG tax revenue). The most important tax for municipalities is the recurrent property tax, which is charged on the statutory value of land, buildings, houses, vessels and aircrafts. Tax rates range between 0.15% and 0.5%. In 2020, it accounted for 16.5% of SNG tax revenue, 4.9% of total SNG revenue, and 0.8% of GDP (below the OECD average of 1.0% in 2019). In Korea, the local property tax is to be distinguished from the national property tax (comprehensive real estate tax, CRET), levied upon those who own property with a market price over KRW 1.6 billion, or those who own multiple homes with each being worth more than KRW 600 million (the CRET’s rates were increased in 2021).

SNGs at both levels also receive the local income surtax on households and companies (whose receipts account for respectively 8.3% and 9.7% of SNG tax revenue), the automobile tax and the tobacco consumption tax.

Part of the second phase of the decentralisation programme, the Korean government plans to expand the range of local taxes. It plans to transfer an additional part of the national VAT into a local consumption tax, along with new tools for equalisation that will ensure that revenues from the new tax will be redistributed with different regional weights (Seoul Metropolitan Area, metropolitan cities and provinces weighting each 1; 2 and 3).

GRANTS AND SUBSIDIES: Transfers from the central government to local authorities mostly include transfers from revenue sharing between levels of government, categorical (or earmarked) grants and fiscal equalisation payments. 90% of transfers to subnational governments were current transfers in 2020, and 10% were capital transfers.

Revenue sharing is divided between Regular Revenue Sharing (RRS) and Revenue Sharing for Decentralisation (RSD). The RRS consists of 18.3% of national tax revenue. 96% of receipts are non-earmarked to SNGs according to an equalising formula based on assessment of standard fiscal needs and revenues. The remaining 4% is earmarked (natural disaster recovery, construction of public facilities, national project, etc.). The RSD system, financed through a decentralisation tax, was introduced in 2006 in order to finance the decentralisation of administrative functions, in particular in social welfare.

Categorical (earmarked) grants are very diverse and are aimed at helping local governments to: 1) provide services that would otherwise be too financially onerous; 2) finance delegated tasks and policy projects; and 3) provide financial assistance and compensation, among others.

The current Local Finance Equalization Scheme also comprises transfers between metropolitan cities and lower-level local governments to alleviate internal fiscal disparities. Metropolitan cities give away a certain percentage of the ordinary taxes they collect to lower-level local governments based on formulas and special spending needs. Apart from metropolitan cities, provinces also award unconditional grants to lower levels of local government, which are distributed based on population, tax amount collected in a jurisdiction, and the fiscal capacity of local governments. Part of the second phase of the decentralisation programme, it is planned that 35% of the taxes collected in the Seoul Metropolitan Area will be transferred to Local Mutual Development Funds over the next 10 years to support a more balanced development.

Following the Special Act on Balanced National Development in 2004, a Special Account for Balanced National Development was created to redress imbalance between regions and enhance regional competitiveness.

OTHER REVENUE: Other revenues include mainly user charges and fees (5% of revenue in 2020). Revenue from property (sales of assets, leasing, dividends, etc.) accounted for less than 1% of subnational government revenue in 2020.

Subnational government fiscal rules and debt
2019	Dollars PPP / inh.	% GDP	% general government debt	% SNG debt	% SNG financial debt
Total outstanding debt (consolidated?)	1 222	2.9%	6.8%	100%	-
Financial debt	872	2.0%	5.3%	71.3%	100%
Currency and deposits	0	-	-	0.0%	0.0%
Bonds / debt securities	436	-	-	35.7%	50.1%
Loans	435	-	-	35.6%	49.9%
Insurance pensions	0	-	-	0.0%	-
Other accounts payable	350	-	-	28.7%	-

FISCAL RULES: According to the Local Autonomy Act, subnational governments must maintain a balanced budget. Performance- based budgeting was also introduced for local governments in 2016. A Local Fiscal Crisis Alert System was introduced in 2012 to prevent local governments from being in fiscal insolvency or moratorium, which monitors seven local fiscal status that may be connected directly to fiscal crisis. Subnational governments must establish medium-term local financial plans, including fiscal goals, fiscal outlook and an investment plan. They are also required to draw local fiscal investment and loan review of major investment projects to ensure the alignment of investment and avoid overlapping across jurisdictions.

The Korean Government plans to introduce rules at the national level to ensure fiscal soundness in 2025 to adapt to a context of slowing growth and an aging population. Under the rules, the government plans to keep the nation's debt-to-GDP ratio to 60% and its consolidated fiscal balance at -3% in 2025. However, such rules will be exempted in a time of crisis, such as the COVID-19 pandemic.

DEBT: Subnational governments are free to borrow to fund investment projects (“Golden Rule”). They mostly borrow from the central government’s public loan funds, and recently from “regional development funds”, operated by the upper level of local governments. Since 2006, they have been able to issue bonds without prior approval from the central government if their debt levels are less than the maximum debt ratios set by the authorities (Local Bound Ceiling System). If not, the approval of the Minister of Government Administration and Home Affairs is required.

Subnational government debt in Korea is low, well below the OECD average for unitary countries (14.5% of GDP and 10.5% of public debt in 2020). In 2019, 71% of subnational government debt consisted of financial debt, whereas “other accounts payable” i.e. commercial debt and arrears, only represented 29% of subnational government debt, against 62% in 2013. The share of local bonds in subnational government debt has been increasing markedly in the recent years, climbing to 36% of subnational government debt in 2019 (compared to 9% in 2013 and 29% in 2016). This share is expected to increase in 2020 and 2021 due to a surge in local bonds to respond to the COVID-19 pandemic. Domestic bonds include public bonds, also known as flotation bonds, compulsory bonds, and compensation bonds. Among these, compulsory bonds such as the Metro Railroad Bond, Regional Development Bond, and Urban Development Bond are unique to Korean subnational finance.

TERRITORIAL MANAGEMENT OF THE CRISIS: An active coordinating role of the central government facilitated an effective management of the COVID-19 crisis in Korea. The Korean Government set up a Central Crisis Management Committee by adopting a “whole-of-government” approach: the Committee is chaired by the Prime Minister and includes representatives of all central government ministries, the seventeen provinces and major municipalities. The “whole-of-government” approach means that, at the national level, the Central Disaster Management Headquarters (part of the Ministry of Health and Welfare) worked alongside the Central Disease Control Headquarters (a delegated disease control agency). The central government also took the lead in cooperating and communicating with the private sector to develop digital tools, such as apps for quarantine/isolation management, for use at local levels.

Local governments have been in charge of implementing activities for both agencies on the ground, through Local Disaster and Safety Management Headquarters. This system was set up to promote coordination between the central and local governments. In addition, Infectious Disease Control Centers were established in the cities and districts where outbreaks occur, which allowed for an effective testing and tracing strategy. More specifically, local governments are responsible for infection monitoring, epidemiological investigation, and community management. Metropolitan and provincial governments are in charge of managing a larger community area, along with providing intensive-care rooms for infected patients. Sub-municipal governments are responsible for disclosing infection routes within their area, conducting diagnosis, quarantine, and vaccination tasks.

Regarding vaccination, the central government has ordered local governments to secure their own manpower and infrastructure to roll out vaccinations since the start of the campaign in February 2021. In order to facilitate the implementation of the strategy, 250 vaccination centres have been installed across regions. People register through a nationwide system and local governments are responsible for getting their populations vaccinated.

EMERGENCY MEASURES TO COPE WITH THE CRISIS AT THE DIFFERENT LEVELS OF GOVERNMENT: The Korean government implemented several financial packages to stimulate the economy, including measures to support local governments. The First Financial Stimulus Package of KRW 4 trillion included a policy support related to internal and local tax. Several Supplementary Budgets followed in 2020 and 2021, including support to the most severely hit areas of Daegu City and North Kyeongsang Province.

Local governments were hit differently by the crisis, depending on their industrial fabrics and labour markets, which exacerbated regional disparities. At the regional and metropolitan level, several subnational governments enacted measures to support households and businesses within their jurisdictions, such as special support grants for local unemployed people, small business stabilization funds, and support grants for revitalisation of traditional markets, among others. Several subnational governments designed welfare support grants to the most vulnerable households impacted by the crisis (e.g. Gyeonggi province), in parallel to the “national emergency support” set up by the central government. In the case of the Seoul Metropolitan Government, for instance, the “Seoul emergency welfare” support grant was extended over 2022, whereas the national support scheme had ended.

IMPACTS OF THE CRISIS ON SUBNATIONAL GOVERNMENT FINANCE: Korean subnational government expenditure has risen by 12% in Korea between 2019 and 2020, mainly driven by the increase in subsidies and current transfers in the social protection sector (including pensions), whereas capital expenditure has remained relatively stable over the same period. On the revenue side, the slight increase in subnational government tax revenue (mainly from the increase in the local consumption tax rates) and grants compensated for the decrease in user charges and income from assets of subnational governments. Tariffs and fees have decreased by 23% between 2019 and 2020 for subnational governments, whereas transfers from the central governments (mostly current grants) have increased by 7%.

As a result of the tight fiscal rules and the requirement to keep a balanced budget, subnational governments in Korea tended to accumulate reserve funds throughout the crisis, following the cancellation or postponement of planned local infrastructure and other expenditure. However, in order to be able to support local businesses and households, subnational governments increased the issuance of local bonds, as fiscal rules and pre-requisites were relaxed temporarily. The issuance of local bonds in 2020 stood at KRW 9 trillion, an increase from KRW 6.5 trillion in 2019 and KRW 4.1 trillion in 2018. For instance, the Seoul Metropolitan Government plans to issue a total of KRW 200 billion bonds in 2022 to finance its KRW 770 billion “Corona Survival Fund” (the remaining amount to be raised from reserve funds). Overall, the COVID-19 crisis has reduced the impact of the Korean governments’ planned reform to enhance local governments’ finance, due to the degradation of economic activities at the local level.

ECONOMIC AND SOCIAL STIMULUS PLANS: While the primary focus of fiscal stimulus in response to the COVID-19 crisis has been to address health emergencies and to provide support to vulnerable households and businesses, the South Korean government also aimed to use COVID-19 recovery policies to address climate and environmental challenges; notably, to increase renewable energy in its energy mix. In July 2020, the South Korean government announced fiscal stimulus packages for 2020-21 amounting to KRW 277 trillion (USD 238 billion, corresponding to around 14% of the GDP). These packages are structured around a South Korean New Deal (KND) equalling KRW 160 trillion (USD 137 billion), for the period 2021-25, with contributions from national and local governments as well as the private sector. It is expected to create 1.9 million jobs.

The New Deal includes more specifically a Green New Deal (GND) component, of KRW 73 trillion. The Green New Deal should be implemented at a regional scale and aim to guarantee that the future economic development will be balanced regionally, by investing half of the total budget outside of the Greater Seoul area. To reach this objective, provincial governments have been preparing Regional Green New Deals. Subnational governments will be key stakeholders in the implementation of this Green New Deal. They were included in the Climate Crisis Response and Energy Transition Local Government Council and in the phase of project selection and implementation. SNGs have been divided into three groups based on their degree of progress towards achieving the GND objectives.