Appropriate appraisals needed for JDC

The Jeju Free International City Development Center, or JDC, was established in 2002 to promote various projects under the Special Act on Jeju Free International City, such as hosting English-based international schools, a science park, a health care and medical town, and a residential resort complex. Its efforts to raise the reputation of Jeju Island as a world-standard resort island, however, has not been fully appreciated due to the government’s blanket appraisal system for public enterprises.

The government, first of all, does not consider differences in public enterprises in its evaluation tool. JDC is a company with assets of 800 billion won ($713.6 million) and 260 employees. But its corporate performance is judged on the same set of guidelines applied to 17 other large public companies with assets averaging 5 trillion won and more than 1,300 employees. If this were a boxing match, it would be like putting a lightweight competitor against a heavyweight.

The appraisal method is another problem. The government reviews corporate performance of public corporations in three areas - leadership, accountability in management and key business projects. But that system is not always fair. For example, look at how the JDC’s duty-free stores are evaluated. The JDC’s shops are compared to the world’s top five duty-free shops. However, the Jeju shops primarily service domestic travelers and restrict individuals to spending no more than $400 a maximum of six times a year. The items available for purchase are also limited, to protect local merchants. It is unreasonable to compare their revenue to global duty-free shops that have no spending restrictions.

There must be some guidelines to enhance the objectivity and accuracy of the evaluation of public enterprises in order to raise the credibility of those judgments. For instance, revenues should be compared among duty-free shops of a similar scale and operation. These new rules should be applied from this year’s corporate review. To generate a positive effect from the evaluations, they must be fair and transparent.

by Byun Jong-il, former president of Jeju Free International City Development Center