&#91VIEWPOINT&#93Successful reform starts at top

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[VIEWPOINT]Successful reform starts at top

That the public sector is less productive and efficient than the private sector is not a matter of ability and will power of people working there. It has to do with the nature of public firms.

Countries where the public sector accounts for a large portion of economic activity have less economic vigor and lower productivity than countries with the highest degree of free enterprise. Nations with an inflated public sector and monopolistic state-run companies never succeed in strengthening and reforming their economy. This is why former socialist nations promoted reform and privatization of public companies as they embraced the market economy.

Public organizations, by their nature, place process above result and fairness above efficiency. Since the purpose of a state-run organization is public interest, decisions are made out of political consideration; there is no competition among employees and pressure to close these entities. Two persons at a public firm do the task that requires one person at a private firm, and it takes more time and money for this task at a public firm than at a private firm.

Politicians and bureaucrats meddle with management and personnel affairs at Korea's public firms. The appointment of managers is made out of political considerations or to offer a position to retired high-ranking government officials. Bad decisions are justified in the name of public interest and government policy.

President-elect Roh Moo-hyun's transition team announced recently that it will follow the principles of privatization, but would review existing privatization plans until ways to ensure transparency in management and the ownership structure following privatization are laid out. The announcement seems to suggest that privatization would lead to opaque management and that the government's control of public companies is transparent and responsible.

The announcement overlooks the fact that privatization of public companies is necessary because of government intervention in management. Management problems at a handful of privatized firms were the result of continuous interference by the government and politicians in the firms' personnel affairs even after privatization.

The announcement by the Millennium Democratic Party that it would consider appointing "reform-minded" executives for public companies obviously means there is no alternative to privatization for public sector reform.

Some worry that public interests could be hurt after privatization, but government regulations would be able to solve any problems. Numerous private companies in Korea are already participating in business activities that are strictly related to public interests, such as telecommunication, education, medical, energy, transportation and security.

The plans to reform the electricity, gas and railroad industries have been discussed for years. I participated in some of these discussions, many of which have taken place throughout the decades among domestic and foreign specialists. Thus, privatization plans are the result of the intensive debate, with the participants fully aware of the distinctive characteristics of railroad, electric and telecommunication industries and public concerns about infrastructure. In contrast, the government plans are too risk-averse and aimed at maintaining the status quo. The government is trying to protect whose interests? What is more ironical is that the reform-minded incoming administration is slowing public sector reform, which has been one of the core reform projects of the Kim Dae-jung administration.

Reforming and trimming an inflated public sector, increasing productivity of the national economy and distinguishing and focusing on key affairs are needed for complete government reform. How can the government reform the nation without first reforming itself?

* The writer is a professor of economics at Hongik University.


by Kim Jong-seok

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