Ahn Taejun of Democratic Party Proposes Amendment to Establish Standards and Regulations for Local Government Performance Improvement Reserves...Leads Framework Act on Infrastructure Management

"Laying the Groundwork for a Shift to a Preventive Investment System"

Specific accumulation criteria and funding regulations will be established regarding performance improvement reserves for local governments.

On August 3, Ahn Taejun, member of the Democratic Party of Korea and a member of the National Assembly’s Land, Infrastructure and Transport Committee, announced that he had sponsored an amendment to the “Framework Act on Sustainable Infrastructure Management.” The main points of the amendment are to specify a minimum accumulation amount for performance improvement reserves for local governments in law, and to greatly expand the sources of these reserves from the current management and operational income to include general and special accounting, fund transfers, sources determined by ordinances, and contributions.

Ahn Taejun, member of the Democratic Party of Korea.

The deterioration of Korea's infrastructure—specifically, social overhead capital (SOC) built intensively in the 1970s and 1980s—is accelerating. According to the National Land Safety Management Agency’s relevant system, out of a total of 476,000 registered infrastructure facilities, approximately 190,000 facilities (40.0%) are already more than 30 years old. This figure is expected to surge to around 304,000 facilities (63.9%) within the next decade.

The older the infrastructure, the more exponentially the costs for performance improvement increase. It is estimated that performance improvement costs for facilities over 30 years old total about 9.8 trillion won, accounting for 57.5% of the total estimated performance improvement costs for all facilities (17.1 trillion won). However, to date, only 2.7% of all facilities (13,000 facilities) have undergone any performance improvement work at all.

The “Framework Act on Sustainable Infrastructure Management,” which came into force in 2020, did not establish detailed accumulation criteria or funding regulations for performance improvement reserves managed by public authorities.

In particular, it has been pointed out that, with the financial independence ratio of non-metropolitan local governments remaining at 32.6%, it is difficult to expect sufficient reserves to be accumulated if only the obligation is imposed, without clear and specific criteria.

The proposed amendment was prepared after last year’s National Assembly audit and the policy forum on revitalizing the performance improvement reserve system held in April this year. The main changes are as follows: ▲ The minimum accumulation amount for local government performance improvement reserves is specified as 0.5% (5/1000) of the average general tax revenue settlement amount over the past three years as stipulated in the “Local Tax Act”; ▲ The funding sources for the reserves will be expanded from primarily management and operational income to also include general and special accounting, fund transfers, sources stipulated by ordinance, and contributions; ▲ The use of reserves will be clearly stipulated to be limited to activities meeting the performance improvement criteria, in order to prevent their diversion to other purposes.

Ahn Taejun stated, “Until now, management of Korea’s infrastructure has struggled to be effective due to inadequate legal provisions. This amendment lays the foundation for a shift from reactive, post-accident financial responses to a preventive investment system, in which stable reserves accumulated every year are systematically and strategically used to improve infrastructure performance.”

This content was produced with the assistance of AI translation services.