By Lee Hyo-sik
Staff Reporter

The government and ruling Uri Party have agreed to allocate more budget to the social welfare and national defense-related projects over the next five years, while reducing its spending to boost the economy, according to the Ministry of Finance and Economy.

They have decided to increase the social welfare budget by 9.3 percent on average through 2010 as the government needs to deal with a number of social issues, mainly stemming from the rapidly aging population and falling birth rate, at a budget consultation meeting in the National Assembly over the past three days.

It said they will set aside more money to bolster Korea’s defense capability as the geopolitical and military environment in Northeast Asia is rapidly changing, due to intense competition in an arms build-up between China and Japan, and North Korea’s controversial nuclear development program.

The government and the Uri Party will cut a proportion of fiscal budget financing a wide array of public construction and other social overhead projects aimed at boosting the domestic economy and thus raising the growth rate.

The proportion will fall to about 1.6 percent of the total fiscal budget by 2010 from the current rate of 12.6 percent, raising concern that the reduction may weaken the nation’s economic growth potential.

They have also decided to raise the budget by an annual average of 6.6 percent over the next five years, along with a rise of 0.6 percentage point in tax burden to 20.1 percent of the total income in 2010.

Rep. Kang Bong-kyun of the Uri Party, who heads the National Assembly’s special committee on Accounts and Budget, said that the government and the party have decided to expand budgets for social welfare and defense-related projects in the future, while cutting public spending on economy-related issues.

``The government has been playing a major role in carrying out the nation’s infrastructure and development-related projects, but we think that it would be more efficient and beneficial as a whole if the private sector takes over such roles,’’ Kang told a local daily in a telephone interview yesterday.

It will sharply reduce spending on economic development projects and attract more private investments by promoting the build-transfer-leases (BTL) schemes.

Under the BTL scheme, private companies and investors are awarded contracts to build schools, social welfare and public facilities at their own expense and use them before leasing them back to the government.

``The ruling party would like to see more of an increase in the social welfare and defense budgets than the amount proposed by the government,’’ Kang said.

He added that he will further consult with relevant government officials to allocate more money to such areas and is to come out with more detailed budget plan.

leehs@koreatimes.co.kr