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Initially, 41 firms would participate in president’s long-promised plans
August 12, 2008
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The Ministry of Strategy and Finance yesterday said that 41 state-run companies out of the total 319 - including the Korea Development Bank, the Industrial Bank of Korea as well as the Korea National Housing Corporation and the Korea Land Corporation - will be included in the initial phase of reforms. The outline was drawn up by a committee under the Finance Ministry consisting of three government officials and four from the private sector headed by Oh Yeon-cheon, a Seoul National University professor of administration. The number of institutions slated for reforms is larger than the 33 mentioned by Kang Man-soo, minister of strategy and finance, earlier in the day when he met with policymakers from the ruling Grand National Party to discuss the plan. “We will privatize firms that are competitive in the market economy. Those that will remain under the government’s management will provide quality service at low price,” Kang said. The minister added that the second and third phases of reforms will follow as soon as preparations are completed. Bae Kook-hwan, vice finance minister, said the earlier figure presented by the minister excluded enterprises such as Korea Development Bank and the Industrial Bank of Korea, whose reform plans had been publicly disclosed earlier. Government departments have already completed changes at Incheon International Airport Corporation. Bae added that after the second and third phases of the restructuring take place, roughly 100 state-run enterprises will be privatized, consolidated or restructured. The restructuring of the public institutions to boost efficiency was one of the key campaign promises made by President Lee Myung-bak. The government’s plan to push forward with the restructuring has been stalled after widespread demonstrations against the importation of U.S. beef expanded to become anti-Lee administration protests. There are 260,000 employees working at the institutions with a total 2008 budget of 338 trillion won [$328 billion]. The government said 35 public institutions since 2002 have had a higher annual growth rate in annual wages than labor productivity, and excessive employee benefits, including education expenses. According to the first phase reform plan, 27 state-owned companies will be privatized, two will be either merged with overlapping businesses and 12 institutions will have business restructuring. Korea Development Bank will be split into a holding company and Korea Development Fund, which will specialize in financial policy that will indirectly assist small and midsized companies. The holding company will be privatized as well as the bank’s subsidiaries including its capital and asset management departments. Industrial Bank of Korea and its subsidiaries including IBK System, IBK Capital and IBK Credit Information will be privatized with its shares sold in the open market. Five state-run businesses including the New Seoul Country Club, Korea Asset Investment Trust and Korea Real Estate Investment Trust will be privatized. The government also plans to sell off its large investments in 14 private companies including Daewoo Shipbuilding and Marine Engineering, Woori Financial Holdings and Ssangyong Engineering and Construction. Detailed plans on how the sales will be made will be announced by the Financial Supervisory Commission by the end of this month. The government currently has a 50 percent stake in Daewoo Shipbuilding, a nearly 73 percent stake in Woori Financial Holdings, and 38.8 percent in Ssangyong Construction. In addition, the government will sell off 49 percent of its stake in the Incheon International Airport Corp. The statement noted that to secure international competitiveness, the reformed airport company will include a strategic alliance with a foreign company that specializes in managing airports. The Finance Ministry added that it could probably make additional sales of its stake in the airport company to draw foreign investors. The merger and the shutting down of overlapping departments between Korea National Housing Corporation and Korea Land Corporation will proceed as already planned. Other corporations will have their operations changed. Korea Tourism Organization will sell off its non-essential businesses, including duty- free shops and golf courses. The overlapping support for small and medium-sized companies at Korea Trade Investment Promotion Agency, Small Business Corporation and Korea IT International Cooperation Agency will be restructured. While support for overseas businesses will be exclusively handled by the trade promotion agency, Small Business Corporation will manage only local businesses. The dates on when these reforms will take place were not specified. “The committee and the government have only given out the general outline,” said Oh, head of the reform committee. “The specifics will be worked out by the related government departments,” Oh added. This includes corporate restructurings, including any layoffs at the institutions. The vice minister confirmed that the government will not privatize public companies that are closely connected to basic living necessities, including entities providing electricity, gas and water. “Those that are not under the reform program are public companies that are evaluated to have weak competitiveness,” Bae said. “Instead we plan to focus on improving management efficiencies,” he added. Legislative bills related to the reform plan will be submitted to the National Assembly during its regular session in September. Additionally, Bae said discussion on the second and third phases of the reform will be held later this month and early next month. The overhaul of the public sector, however, is much smaller than the government’s initial plan. The government in May said those that were considered for privatization would likely stand at 50 enterprises, which includes Korea Power Engineering Co. Additionally, institutions considered for merger or shutting down were to add up to 50, including Korea Credit Guarantee Fund and Korea Technology Credit Guarantee Fund. “Practically, only a few public institutions are being privatized since the reform includes the 14 private companies that the public fund has invested in, such as Daewoo Shipbuilding and Marine Engineering,” said Kim Kwang-soo, a professor of management at Kangwon National University. “I don’t see too much of a reform mentality.” Oh, head of the reform committee, said the first phase only includes institutions whose reforms are most likely to receive public support. By Lee Ho-jeong Staff Reporter/ Kwon Hyuk-joo JoongAng Ilbo [ojlee82@joongang.co.kr] |
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