Privatization best prescription

The government has temporarily shelved a plan to sell its 57 percent stake in Woori Financial Group because of an absence of eligible buyers.

The Public Fund Oversight Commission, which was looking to privatize the bank by next summer, now says it will now look to complete a sale “as soon as possible.”

However, unless it reworks the terms of the sale, it’s unlikely that buyers will come forward any time soon.

The delay is obviously a setback to the government’s plans to privatize Woori, which the government has been pursuing since 2004.

But it’s hardly surprising. Only a handful of investors can meet the strict criteria attached to the sales plan.

Hana Financial Group - the most eligible suitor - has decided to buy a stake in Korea Exchange Bank instead, while a consortium comprised of Woori Financial Group employees and individual investors dropped its bid, citing rigid terms and a hefty price.

As a result, the Public Fund Oversight Commission said it will have to stop its sales campaign, as it has so far failed to attract bidders.

Considering the unrealistic terms it presented, we doubt that the government is serious about selling the lending company.

It has presented three major preconditions for privatizing the mammoth lender: Maximize returns from public funds it injected into the bank as part of a bailout in the wake of the financial crisis in the late 1990s; complete privatization at the earliest date possible; and ensure that the bank contributes to the development of the local financial industry.

In a nutshell, the government is attempting to hit too many birds with one stone. There are few buyers out there that can acquire the bulky bank under those conditions.

The government is either too naive or simply unwilling to let go of its ownership stake in the bank.

We must look deeper into the purpose of privatizing Woori Financial. We believe it is best if the government sells its stake as soon as possible. The government seems to fear that it will sell the bank too cheaply. But it should not delay its plans to privatize the lender any longer.

Woori Financial won’t be able to grow and develop under the ownership of the government, at least as it stands now.

The government must now work to come up with more realistic terms to sell its large stake in the bank.