[Viewpoint]Even the gods are envious

It has been some time since people have spoken out publicly against the inefficiency of public enterprises. But that criticism has grown louder recently, as people are saying the lax management of public corporations has gone too far.
For example, the scandalously high salaries paid at public financial companies, including the Korea Development Bank, have become the talk of the town.
And recent revelations about inspectors from public enterprises enjoying junkets abroad at company expense, politicians without expertise being appointed as top-ranking executives of public corporations and employees of public enterprises receiving excessive fringe benefits are enough to conclude that these public enterprises are not there for the people, but for their employees.
Because of these problems, new terms such as “a workplace from heaven” and “a workplace even the heavens envy” have emerged, reflecting the people’s cynicism about public enterprises.
Statistics on Korea’s public corporations reveal their worrisome state of mismanagement.
The Bank of Korea estimates that the total debt of all public sector companies as of the end of 2006 had reached 295.8 trillion won ($321 billion). That is a 51.8 percent increase, or 100.8 trillion won, over the past four years. In 2002, the year before President Roh Moo-hyun took office, it was 195 trillion won.
The number of employees at public sector companies has also greatly increased under the present government.
A study of the human resources data of 288 public enterprises published on the Web site of the Ministry of Planning and Budget shows that the number of employees in public sector companies increased 12.1 percent, on average, from 2002 to 2006. In some cases, there was an increase of nearly 50 percent during the same period.
The study also found that the amount of government subsidies had increased more than 40 percent during the same period ― in contrast to the private sector, which had been hard at work on belt-tightening reforms.
Why does such lax management still exist, despite the government’s numerous reform campaigns in the public sector, including much-touted plans for the introduction of a new operations system, improved corporate governance and improved performance management systems?
The biggest reason is because the government has only stressed “a government that works well” while failing to present a blueprint for “an efficient government that works well.” Furthermore, it has failed to prioritize the readjustment and structural reorganization of public sector companies as major policy objectives.
In other words, the domain of the public sector has continued to drastically expand because public corporations do not think deeply about why they are given certain mandates, while focusing their efforts on the short-term tasks of improving “operational methods.”
The second reason is that despite efforts to pursue management reform, the policy priority is hijacked by the political goal of increasing the amount of investment and job creation in certain areas of the country.
This was the reason why government policies for the restructuring of network industries and privatization of public enterprises pursued by the Kim Dae-jung administration came to a halt after the launching of the Roh Moo-hyun administration. Planning to restructure and privatize the power, gas and railway industries stopped on the rationale that there was no competition in those industries, among other unconvincing political reasons.
Currently, the government is trying to maintain the prevailing monopolistic public enterprise system.
The next administration, then, has to present a fundamental solution that can overcome the limits inherent in public sector companies, rather than focusing on the gradual reform and improvement of their operation and management.
In order to do this, a clear road map should be provided for a detailed and fundamental restructuring and privatization. A rational system to promote that privatization is also needed.
Public enterprises which deal with industrial fields that can be done better in the market should be privatized. The enterprises that remain in the public sector should be managed more systematically for better performance.
This will be possible only when the most senior policymakers show a sustained interest and a strategic plan to solve the “territorial” problems of those involved, and when such a plan is established and put to practice.
In addition, the next government should rethink ways to reorganize market structures and revise regulatory systems to stimulate competition and protect consumers after the privatization of monopolistic public sector enterprises.
What is more important than securing a visible outcome in the short term is the implementation of proper reform, which can improve the competitiveness and management performance of industries after restructuring and privatizing them.
Public enterprises should be reborn as enterprises that serve the people, not workplaces that even the gods envy.
Bold restructuring and privatization are the only ways for public enterprises to survive.

*The writer is a professor at the Graduate School of Public Administration, Seoul National University. Translation by the JoongAng Daily staff.

by Kim Jun-ki