[EDITORIALS]Better Management, PleaseThe lax management of state-run corporations is nothing new. The problem is that despite frequent warnings, the sloppy management shows no signs of improving. Against this backdrop, a Monday report by the Federation of Korean Industries, an association of leading business concerns, delivers important messages by pinpointing problems plaguing those organizations and calling once again for reforms.
State-run corporations and state-funded organizations are not classified as government administrative agencies, but are actually semi-official entities in that they carry out public projects. The problem is that there exist "gray areas" and they lack management openness. The government may have control of corporations in which it has directly invested. Other subordinate organizations are also entrusted with the government's tasks, but in reality, the government does not have a grasp of their management. The latest available data was released by the transition team in 1998, just before the launch of the current administration. According to the data, there were 191 state-run or state-funded organizations, with a combined 65,000 employees.
These institutions were established under various special laws that prevented private companies from competing with them. It is no exaggeration to say that the government, whose jobs include promoting competition, protected them and denied the Korean people access to cheaper services with better quality.
These organizations depended on the private sector for much of their operating budget. According to the Federation of Korean Industries, domestic businesses had to shoulder some 600 billion won ($461.5 million) in 1999. Moreover, the government provided 11 trillion won, or 12.7 percent of its yearly budget, to them under the name of subsidies and donations.
State-run corporations, of course, have their own functions and roles. However, organizations should re-examine their functions and roles, as things change. The government is responsible for the overhaul of state-run corporations, abolishing unnecessary organizations and adjusting operational overlaps. If corporate investments and activities are hampered by a slew of regulations, state-run firms must not capitalize on government regulations and discourage entrepreneurship.
Although the government has pushed for public-sector reforms, experts say that the results remain unsatisfactory. Without retooling state-run organizations, it is hard to expect to see tangible results in government reforms. It is true that the government has focused its public-sector restructuring efforts on reducing the number of state-run organizations and their employees. It has not tried hard enough to tackle more fundamental restructuring issues such as addressing operational overlaps among state-run organizations and promoting their competition with the private sector.
State-operated companies need to continue their management reforms and reduce their financial dependence upon the private sector by cutting various charges and commission fees. At the same time, the government should readjust the amount of subsidies and donations for public organizations.
In addition, each government ministry should scrutinize the functions, budgets and financing of agencies under its supervision and make public information about their management. The government also needs to pay heed to the Federation of Korean Industries' recommendation that it enact a basic law for the management of state-run organizations.