Handing the debt overIt is not shocking to see that debt of 347 public enterprises exceed 544 trillion won ($487 billion) last year. Ballooning losses in state firms were inevitable as they resulted from the Moon Jae-in government’s expensive policy to wean away from nuclear reactors, increase public-sector jobs and expand public housing. Even as the Education Ministry is reviewing streamlining and closure of universities in provincial regions due to low enrollment from the thinning young population, as much as 1.6 trillion won has been earmarked to build a four-year degree university under state utility firm Korea Electric Power Corporation (Kepco). Kepco’s debt stretched by 3.8 trillion won last year alone.
The combined operating profit of state firms sank 70 percent over the last four years under the liberal Moon administration. Loss-making public companies that numbed five in 2016 surged to 17 last year. Yet labor cost climbed up, with average pay jumping to 81.6 million won last year from 78.4 million won. Debt of state enterprises on a record streak for three straight years is expected to reach 1,855 trillion won, tantamount to 81.5 percent of the GDP by 2024.
The government must share the responsibility for the worsened performance of state enterprises. It used them to achieve the campaign promise of creating jobs and converting irregular workers to permanent positions. The Covid-19 crisis has aggravated their woes.
To prevent them from sinking further in the red, evaluation guidelines on state enterprise performance must change first. The share of “social value contribution” should be reduced and “pay and welfare benefit” must be raised to improve management so that companies become rewarded according to business performance.
To normalize management, the practice of filling the management as a kind of reward to the loyalty or contribution to the government or ruling Democratic Party also must change. Parachute appointments could become rampant ahead of the presidential election next March. If public enterprises come under professional managers instead of political figures, their performance can improve. Otherwise, the companies in the public sector must be subject to investigations and evaluation by the Board of Audit and Inspect and others for liability in the poor performance.