President Lee Jae-myung urged on November 12 that local governments be granted greater autonomy in managing their finances, allowing them to utilize budget savings for other projects. He emphasized the need for measures to support region-led growth, including expanding local consumption taxes and increasing national responsibility for fire service funding.
Chief Presidential Secretary Kang Yu-jeong reported during a written briefing on the 52nd presidential chief secretary meeting that President Lee received a report from the Political Affairs Office on 'measures to enhance local finance for region-led growth' during a closed-door meeting.
The Political Affairs Office diagnosed that the decline in the real estate market has resulted in local revenue growth rates lagging behind national tax revenues, while the expansion of social welfare budgets has intensified the rigidity of local finance management. It reported that local governments are increasingly relying on issuing bonds to cover insufficient funds, leading to a growing fiscal deficit.
In response, a plan was proposed to gradually expand local consumption taxes to secure local governments' authority and resources. Recommendations were also made to enhance accountability and transparency through innovations in government subsidy projects and increased pre-control over local finance management.
After receiving the report, President Lee noted, "The rigidity in local finance management is too high," stressing the need to allow resources saved through budget cuts to be used for other purposes. He called for an expansion of local governments' discretion and autonomy, stating, "If there are unreasonable or outdated aspects in rigid expenses, they need to be practically and realistically improved."
President Lee also pointed out that merely increasing financial support will not resolve local finance issues. He stated, "True innovation is not just about increasing financial support but actively attracting businesses and creating an environment where local governments can secure their own revenue," and called for the establishment of a competitive system among regions.
Regarding the allocation system for grants, he reviewed the transparency of selection criteria and the complexity of the general grant calculation method. President Lee emphasized that all budgets need to be rational and predictable, stating, "Reform is like a large construction project. It must be improved step by step."
Earlier, in his public remarks, President Lee stated that local areas should become the main players in national economic development, calling for the nurturing of strategic industries tailored to regional characteristics, along with financial and regulatory support. He directed that projects, including the three major mega-projects launched in the Chungcheong region, should be expedited in other areas as well.
On capital markets, he ordered reforms to enhance corporate value and increase shareholder returns, as well as measures to promote long-term investments, while accelerating the development of the KOSDAQ market and innovating the venture capital ecosystem.
He also stressed that as the transition to an AI-centered industrial structure accelerates, it is essential to strengthen the competitiveness of traditional manufacturing sectors such as automobiles, shipbuilding, steel, and petrochemicals. He directed the integration of AI and robotics into manufacturing sites and the establishment of a system to spread innovative outcomes to small and medium-sized enterprises, while swiftly devising bold measures to enhance the competitiveness of electric and autonomous vehicles.
* This article has been translated by AI.
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