Chapter 4. Korea’s structure and systems
Authority, mandate and co-ordination
Korea is continuing work to centralise authority for its development co-operation under its Prime Minister’s control, with the Committee for International Development Cooperation acting as a central control tower for decision making and co-ordination. Since the DAC’s 2012 peer review, the committee’s mandate has expanded, providing for a stronger role in strategic policy direction and co-ordination across government. However, at the same time, a renewed focus on centralising project-level decision making in Seoul is increasing headquarters responsibility for operational activities, limiting the time available for strategic discussions and restricting flexibility in the field to respond to challenges as they arise.
Authority for development co-operation in Korea is clearly defined
Korea’s Framework Act (National Assembly, 2010), designates the Prime Minister as the ultimate authority for Korean development co-operation. This authority is exercised through the Committee for International Development Cooperation (CIDC), which has de facto authority to direct all ministries, as decreed by the President. The CIDC differs from similar mechanisms in other countries by being a particularly high-level body, chaired by the Prime Minister and comprising 25 members (15 ministers, 3 heads of agencies and 7 civil society experts). As illustrated in Figure 4.1, the CIDC is designed to act as a control tower for development activities across government, overseeing all ministries and agencies responsible for development co-operation (National Assembly, 2010; Article 7).
Source: GoK (2017a), “Memorandum of Korea”, OECD DAC Peer Review 2017, Government of Korea, Seoul, p.30.
In response to the DAC’s 2012 peer review, the CIDC’s mandate has been extended to strengthen its policy-making role
In practice, the CIDC (which was established in 2006) has not always played a strong role in defining policy priorities and arbitrating between different ministries’ interests. In its previous peer review of Korea’s development co-operation, the OECD Development Assistance Committee (DAC) urged Korea to make better use of the CIDC’s powers to ensure it became the “ultimate decision-making body in planning and budgeting processes” (OECD, 2012). In response, Korea amended the Framework Act in 2015 to expand the committee’s mandate beyond “co-ordinating and reviewing” development co-operation to making policy decisions. As a result, the CIDC is now starting to play a stronger role in policy formulation, including approving the mid-term strategy and country partnership strategies, and undertaking strategic evaluations. However, as noted in 2012, much of the CIDC’s time is spent on approving a highly detailed ODA implementation plan ahead of budget consultations with the Ministry for Strategy and Finance. For example, in 2017, the committee approved a final plan encompassing over 1 300 individual projects, limiting the time available for more strategic-level considerations.
The CIDC’s secretariat, based in the Office of the Prime Minister, screens all ODA project plans in an effort to avoid duplication and ensure links between projects. Meanwhile, the inter-agency grants committee (led by the Ministry for Foreign Affairs) and the inter-agency loans committee (led by the Ministry of Strategy and Finance) have strengthened processes for co-ordinating across ministries to prevent programme duplication, as well as conducting in-depth assessments of programme feasibility and effectiveness, reporting upwards to the CIDC.
The increasing number of agencies involved in Korean development co-operation presents co-ordination challenges
At country level, embassies are also taking on greater responsibility for co-ordinating information, including on project identification, implementation and evaluation. Meanwhile, increasing deployment of Korea EXIM Bank’s Economic Development Cooperation Fund (EDCF) staff to the field is helping to build new synergies at the country level. For example, in Cambodia, EDCF and Korean International Development Cooperation Agency (KOICA) staff are housed under one roof to strengthen co-ordination between grant and loan portfolios, and embassy-level knowledge-sharing and co-ordination has improved.
Despite these efforts, several challenges remain. Firstly, the number of entities involved in delivering Korea’s ODA has multiplied from 44 in 2013 to 64 in 2015 (BAI, 2017). As a 2017 national audit report noted, this has made co-ordination more complex than ever before and is derailing Korea’s commitment to work in an integrated and programmatic way.
Secondly, the CIDC’s project approval responsibilities appear to be at odds with Korea’s previous decentralisation strategy. In 2011, KOICA laid out a five-year decentralisation plan (2011-15) to become more field-oriented by delegating more authority to country offices to enable faster and more flexible decision making and to maximise collaboration with partner governments, non-government and civil society organisations (KOICA, 2011). The DAC’s 2012 peer review noted that this strategy was driving KOICA’s human resources policies and plans, with KOICA devolving authority for some 35% of issues to the field (52 out of 148 issues). It was also planning to bring the proportion of its staff in the field up to 41% of its total workforce (143 staff) by 2015 (OECD, 2012). At present, KOICA country office teams have authority to make all non-financial decisions once a project or programme budget has been approved in Seoul. EDCF teams in headquarters and in the field also have high levels of delegated authority once projects have been approved. The DAC’s 2012 review noted that further delegation of decision-making power to the field (including financial authority and management) would make Korea’s aid more effective. The review also noted that decentralisation could be reinforced by KOICA and EDCF assuming increased authority within approved country partnership strategies, leaving the Ministry of Strategy and Finance and Ministry of Foreign Affairs free to concentrate on strategic issues and co-ordination in headquarters. However, overall cuts to projected ODA growth and a reinforced role for the CIDC in project-level decision making have slowed decentralisation efforts and have limited the flexibility in the field to respond to challenges and opportunities as they arise.
Thirdly, budget cuts have meant that the co-ordination role of Korea’s ODA councils (set up to improve Korean co-ordination in priority partner countries) has not kept pace with plans set out in Korea’s decentralisation strategy (KOICA, 2014b). In essence, the 2012 peer review commended Korea for setting up ODA councils in all 26 of its partner countries. It found that the councils – chaired by the ambassador and comprising a range of representatives from government, private sector, implementing partners and civil society – fulfilled a useful knowledge-sharing function and could be extended further to become bodies for project approval. However, this current review finds that in Cambodia, for example, the council’s previous broad-based membership incorporating civil society representatives had been replaced by a narrower co-ordination structure limited to Korean government partners only, limiting broader consultation on aid issues (Annex C).
Systems
The Korean development co-operation system is very complex, hampering its efficiency and effectiveness. At headquarters, systems for project management and budget approval mechanisms are increasingly complex, leading to high transaction costs and delays in decision making. Meanwhile, the number of actors involved in delivering Korean aid continues to expand. A recent national audit found this growing fragmentation was posing new risks for aid quality and causing confusion for partners.
Korea’s aid system is based on two main pillars: grants and loans. The former are managed by the Ministry of Foreign Affairs and largely implemented through its agency KOICA, while the latter are entirely managed by the Ministry of Strategy and Finance through EDCF. Together, these two ministries manage approximately 88% of Korea’s bilateral official development assistance (ODA). While the proportion of total ODA managed by these two ministries has remained relatively stable since the last peer review, and all loans are managed through EDCF, the proportion of ODA grants managed by other ministries and agencies has increased from 13% in 2010 to 21% in 2015.
In response to the last peer review, the CIDC has taken a number of steps to break down barriers between the key institutions with responsibility for development co-operation. Positive examples include rotating some staff across ministries and agencies; piloting joint projects that mix loans, technical assistance and grants; and allowing KOICA to serve as a clearing house for all ODA grant projects across government (including local government), as outlined in Korea’s mid-term strategy for 2016-20.
Nevertheless, challenges remain for development effectiveness and efficiency, limiting Korea’s ability to respond quickly to challenges and opportunities as they arise. In headquarters, systems for project management and budget approval mechanisms are multi-layered, leading to extended timelines for decision-making. For example, on average it can take two years to approve a grant project, compared with the 12-month approval cycle adopted in many DAC member programmes. In addition, approval for individual projects needs to go through multiple decision-making layers before reaching the CIDC. Once the ODA implementation plan is approved by the committee, it must still be approved by the Ministry of Strategy and Finance Budget Office as a step in determining the budget allocation at national level based on available resources, even if the budget office generally makes only minor adjustments to the plan approved by the CIDC.
Long and complex approval processes derail Korea’s commitment to work in an integrated and programmatic way
In the field, the diversity of Korean actors and systems is confusing, leading to calls from external partners for a single window for grant aid. Furthermore, the two-year time lag between grant project proposal and implementation is hindering Korea’s ability to innovate or respond to opportunities in a joined-up, flexible and timely manner. This was evident in Cambodia, where partners from the national government, civil society, international organisations and other donor agencies all expressed frustration at Korea’s long timeline for project approval, which was hindering its efforts to join with other partners in multi-stakeholder programmes. Stakeholders consulted for this review were highly positive on Korea’s responsiveness to country demand and alignment with national priorities. However, they also underlined that loan financing was most successful when based on strong feasibility analysis.
A number of these issues have also come under scrutiny from Korea’s Board of Audit and Inspection in its first extensive audit of Korea’s ODA activities (BAI, 2017). The report examined some of the key risks for Korea’s aid in 45 agencies responsible for delivering it. In addition to financial risk, the audit examined whether Korea’s aid activities had achieved their intended results based on feasibility studies and project completion reports. It also looked at security, corruption and reputational risks, particularly in failed projects, highlighting key areas where risks need to be addressed as follows:
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Increased fragmentation1: the report noted that the number of organisations in charge of grants had increased rapidly (from 44 agencies in 2013 to 64 agencies in 2015), while the size of project budgets has diminished from KRW 1.1 billion in 2013 to KRW 1 billion in 2016, despite an overall increase in Korea’s ODA
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Sustainability: where loan projects had failed, there was often a lack of attention to sustainability and limited understanding of how recurrent costs would be financed at the national or local level.
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Project selection: stronger analytical support would help Korea to define the potential for its aid to add value and contribute to sustainable outcomes, as well as adopt more differentiated approach to risk when working in fragile states.
However, overall, the audit found that KOICA and KEXIM’s increasing local presence had helped to better monitor results and signal risks. The audit also found the transparency of Korean aid to be increasing, due in part to greater public information available on the CIDC’s ODA website. These findings are consistent with the review team’s findings in Cambodia (Annex C) and were also highlighted in a risk assessment undertaken by KOICA itself in 2014 (KOICA, 2014a).
A new focus on quality assurance, accountability and sustainable results is leading to better partner country outcomes
In partner countries, KOICA and KEXIM are following systems and guidance developed in Seoul, leading to an increased focus on quality. Key improvements across the Korean ODA system over the past five years include:
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The roll out of an updated online ODA Management System: this registers ODA project-level data (including forward-spending estimates) in a standardised format across agencies and in line with ODA DAC statistical directives. It serves as Korea’s project monitoring system, helping to ensure a more consistent approach to quality assurance and results management across projects.
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Efforts to strengthen development co-operation transparency and accountability: actions include joining the International Aid Transparency Initiative in 20162 and improving the information available on the ODA Korea website.
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Launching KOICA’s Technical Assurance Group (TAG) in 2014: this is providing support for quality checks at four points during the grants project cycle, including through discussion with partner countries, with scope for greater sectoral or strategic level inputs in the future.
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Introduction of more regular (quarterly) reporting on loans, complemented by greater KEXIM field presence. This is improving quality assurance by providing more opportunities for on-site examination and special oversight.
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Introduction of a procurement ombudsman function for grants (KOICA) and updated procurement guidelines for partner government loans (KEXIM).3
Capabilities throughout the system
Korea is starting to deliver its programmes through new ways of working, including in fragile states and through the private sector. These new initiatives will need to be matched by new capabilities. A careful assessment of the skills and knowledge needed to manage a high-quality, growing programme, and to ensure these capabilities are located in the right places, could help Korea to fulfil the ambition embodied in its development co-operation goals. Streamlining structures and systems would reduce the administrative burden on staff and improve morale.
Human resources across the system are under increasing strain
Staffing has become a major issue for Korea’s expanding aid programme. While Korea has a core set of people dedicated to development (Table 4.1), challenges observed in the previous peer review have intensified as staff find themselves under pressure to manage increasing levels of ODA in more complex ways and contexts, including increasing engagement in fragile states (Chapters 2 and 7).
Although overall staffing levels have increased since 2012, including numbers of local staff, human resources at KOICA remain stretched, compounded by an expanding budget, new responsibilities and loss of Korean technical expertise in the field. Since KOICA was established in 1991 to manage the grant element of Korea’s development co-operation, its budget has grown by a multiple of 35 while its staffing has less than doubled (185%, cited in GoK, 2017a). In addition, a large number of staff are involved in managing volunteers (Chapter 5), leaving a relatively small staff complement available to manage the rest of the KOICA programme, act as a clearing house for grant ODA across government and pursue new initiatives. Furthermore, KOICA’s plan to deepen decentralisation by increasing staff numbers in the field from 130 in 2011 to 195 in 2015 has not materialised due to cuts in the planned budget for local staff in line with an overall scale back in human resources funding (KOICA, 2011 and 2014b).
Staff managing KEXIM’s EDCF loans are also under strain. As Table 4.1 shows, despite increasing numbers in Seoul, the growing EDCF portfolio and stronger engagement at country level is not well reflected in current staffing levels in the field. Staff surveys undertaken by KEXIM’s staff association show widespread concerns about workload, performance evaluation and increasing productivity demands. This has been compounded by a recent directive for staff to return pay increases and performance bonuses following the announcement of a 6.8% cut to KEXIM’s budget (Kukinews, 2017), with significant impacts on staff morale.
Korea will need to ensure appropriate capabilities across the system to deliver on its objectives
The human resources challenges observed by the DAC review team in 2012 were largely still present across all agencies in 2017: stretched resources, few incentives for mobility in development careers across agencies, lack of incentives for postings for families, and (in some parts of the system) pay cuts or comparatively low salaries. For example, as of 2016, KOICA salaries (USD 48 160 per annum) are estimated to be 85% of the average (USD 56 930 per annum) for the 321 Korean government agencies (GoK, 2017b). In addition, performance management mechanisms are weaker than those of other OECD members (OECD, 2017). These factors, combined with inefficiencies in the structures and systems of Korea’s development co-operation are increasing pressures on staff, damaging morale and, in the case of KOICA, affecting staff retention. Furthermore, as it explores how it can deliver aid in new ways and in fragile states (GoK, 2015; OECD, 2016), Korea risks adding new layers and actors into an already complex aid management system. These additional pressures come at a time when Korea’s administration budget has decreased, down to 3.3% of its total ODA in 2015 and below the DAC average of 4.4%.4
To help meet these challenges, Korea might benefit from a cost-benefit analysis of how it could streamline processes and consolidate small-scale projects into larger sectoral programmes to allow staff to reduce transaction costs. Such an analysis might also consider where technical and policy skills are located across the Korean development co-operation system and whether organisational mandates match the skills available. For example, while much of Korea’s aid policy experience lies within KOICA, the agency has no formal policy function within the Korean system.
Above all, in reflecting on what kind of donor it wants to be in a rapidly changing development landscape, Korea will need to ensure that its system as a whole has appropriate staff levels and capacity to deliver on its development objectives, and that staff with appropriate skills and knowledge are located in the right places.
Bibliography
Government sources
BAI (2017), “공적개발원조(ODA) 추진실태 보도자료” [Summary of Board of Audit and Inspection Office of Korea, Report on Korea’s Official Development Assistance], Administrative Safety Audit Bureau, released 24 May 2017, available in Korean only, www.bai.go.kr/bai.
GoK (2017a), “Memorandum of Korea”, OECD DAC Peer Review 2017, Government of Korea, Seoul (unpublished).
GoK (2017b), email communication with Korean government officials, October 2017.
GoK (2016), “Multilateral aid strategy”, Government of Korea, Seoul.
GoK (2015), “Mid-term strategy for development cooperation 2016-2020”, Government of Korea, Seoul.
KOICA (2014a), “A study on the risk management on [sic] KOICA projects”, Korean International Cooperation Agency, Seoul. www.koica.go.kr/download/2015/0001.pdf
KOICA (2014b), “Revised KOICA decentralisation road map”, KOICA Strategy Planning Team, Korean International Cooperation Agency, Seoul, (unpublished).
KOICA (2011), “KOICA strategy for decentralisation 2011-2015”, Korean International Cooperation Agency, Seoul, (unpublished).
National Assembly (2010), “Framework Act on International Development Cooperation”, National Assembly of the Republic of Korea, Seoul, updated in 2015, https://elaw.klri.re.kr/eng_mobile/viewer.do?hseq=33064&type=part&key=19\.
Other sources
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Kukinews (2017), “Announcement of KEXIM paycuts”, Kukinews, 31 January 2017, www.kukinews.com/news/article.html?no=427055
Notes
← 1. Korea defines fragmentation as the increasing number of government agencies involved in delivering Korean ODA.
← 2. Korea joined the International Aid Transparency Initiative (IATI) in 2016, with the ministries of foreign affairs, strategy and finance, and health, along with KOICA and KEXIM, agreeing to disclose information through a central ODA website. However the website is not yet a one-stop shop for Korean ODA. CIDC is still working to convince all relevant government ministries/agencies involved in delivering Korea’s ODA to participate in IATI and to increase the number of items being disclosed from 18 to at least 20, particularly commitment and disbursement information.
← 3. While partner countries are responsible for procuring Korean loans, KEXIM has introduced standard procurement guidelines on bidding procedures and encourages partner countries to follow these.
← 4. Administrative costs in KOICA country offices range from less than 1% in Vietnam and Cambodia to 12-17.5% in Afghanistan and Iraq, due to higher operational and security costs.