Reforming state-run firms

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Reforming state-run firms

The government will probably move again to accelerate reforms of state-run companies following a workshop for the heads of 70 state-run companies last weekend.

At the meeting, Kim Hwang-sik, head of the Board of Audit and Inspection, said the audit agency would actively demand that managers be dismissed if slack management at their companies is unearthed.

President Lee Myung-bak, who presided at the meeting, said the heads of state-run companies should resign if they cannot guarantee that they can reform themselves and their companies.

This was a good move by Lee, to spell out that reform of state-run companies must begin with management reform.

However, it isn’t easy to trust in the government’s pledge to reform — we have seen what former administrations have done in this regard. All past administration made this issue part of their plans when they started their terms in office. They drafted reform ideas that looked to privatization and better efficiency, but these ambitions started with a bang and ended in a whimper.

We saw that many top managers colluded with unionized workers at the state-run companies to perform lukewarm, slack management.

Crucial to the reform of state-run companies is appointing able managers. Using incompetent managers to oversee companies is pointless and only serves to remind us of the inability of past administrations to get the job done.

Additionally, people say that only those who worked on President Lee’s campaign team can expect a management position at a state-run company or state-run think tank. If this is true, we will never see any reforms take place, which is why we call for such old management practices to be abolished.

To solve this problem, the current administration should immediately start screening out incompetent managers at state-run companies and replacing them with professionals.

The government should also require companies to get involved in the government’s less profitable businesses. For example, it should compel the Korea National Housing Corp. to purchase unsold apartments and shift the management of the loss-making Incheon International Airport railway onto the shoulders of Korail.

The government should also review its public institution development plan: Its plan to privatize 24 of the 300 state-run companies is not good enough.

The goal of the reform of state-run companies should be to hand over things that the private sector can do to the private sector.
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