By Lee Hyo-sik
State-invested public companies are expected to undergo drastic surgery once the new administration is inaugurated on Feb. 25 as President-elect Lee Myung-bak has pledged to restructure them into a more efficient and profit-oriented entity.
The former Seoul mayor has said he will privatize the Korea Development Bank (KDB) and other financial public firms to create funds aimed at helping small- and medium-sized enterprises. He added that the role of state-owned banks has diminished and their excessive business expansion is producing unfair competition with private firms.
Daewoo Securities, a unit of KDB, will likely be put up for sale. The government plans to sell its stakes in Woori Financial Group and a number of other public firms, setting off a new round of mergers and acquisitions.
Lee is expected to introduce the performance-based salary system for public companies to prevent them from providing excessively high salaries and other benefits with taxpayers' money when they fail to generate profits.
He has also hinted that the new administration will appoint either private experts or promote people within the organization to the heads of the companies. The Roh Moo-hyun administration has appointed many former government officials and Roh's aides to manage public firms.
For years, state-run companies have faced mounting criticism for paying high salaries and benefits to their employees with taxpayers' money. Beside excessively high wages and perks, Korea Railroad and other money-losing public entities have recently come under fire for giving employees generous bonuses even while incurring huge losses.
During the presidential campaign, President-elect Lee made remarks against state-run companies on many occasions, pointing out that public firms are operating without proper supervision and that their size has become excessively bigger. He said state companies have focused only on increasing the number of employees, while neglecting to boost profitability and organizational efficiency.
Additionally, the former CEO of Hyundai Engineering & Construction will likely adopt more drastic measures to overhaul and privatize state-run companies in an attempt to differentiate his administration from the Roh Moo-hyun government, which has raised the number of public workers and dragged its feet on reforming public organizations for the past five years.
Lee has not yet specified which state companies he will turn into a private entity. But as he has promised to privatize public financial institutions to generate funds to assist small firms, the KDB and other state-run banks will likely be the first to undergo changes.
In July, the Ministry of Finance and Economy also unveiled reorganization plans for public financial firms, saying there should be a change in how state-owned banks operate for the past few years as the government role in the economy has diminished and commercial lenders are increasingly financing a range of state-run projects.
Other public companies to be most likely privatized include Korea Land Corp., Korea National Housing Corp. and Incheon International Airport Corp. Also, president-elect Lee is expected to speed up the sale of public fund-invested firms, including Woori Financial Group, Ssangyong Engineering & Construction and Daewoo International.