Nearly half of Korea's public institutions lost money last year, hit hard by soaring oil prices and the coronavirus pandemic. According to Alio, a website that publicizes management information about the public sector, 170 public companies and agencies, or 47 percent of 362 surveyed, suffered operating losses in 2021.
Korea Electric Power Corp. (KEPCO), a state-run utility, posted the biggest operating deficit of 5.8 trillion won ($4.54 billion) owing to higher crude oil prices. The deficit more than doubled from a loss of 2.79 trillion won in 2008 when the global financial crisis shook the nation. KEPCO posted an operating income of 4.86 trillion won in 2020 thanks to low oil prices at that time.
Apparently affected by the COVID-19 outbreak, Incheon International Airport Corp. suffered the second-largest operating loss of 930 billion won, followed by Korea Railroad Corp. with 888 billion won. In contrast, Korea Land & Housing Corp. enjoyed the largest operating income of 5.6 trillion won last year, boosted by the brisk real estate market.
KEPCO, in particular, looks to be in dire straits this year, with its first-quarter loss likely to equal its annual deficit last year. For the whole of this year, the power company could suffer a staggering 17 trillion won loss. This is the consequence of an uptick in electricity rates while KEPCO's electricity purchase cost has kept rising over the past year.
Fortunately, the Yoon Suk-yeol administration has vowed to scrap the costly nuclear phase-out policy of the previous government and determine electricity rates based on supply and demand. However, it is doubtful whether the new administration could tolerate a spike in electricity prices at a time when the population is grappling with runaway inflation. That is why it is imperative to make public institutions more efficient and financially healthy. Yet this is easier said than done because they can make both ends meet via taxpayer money without voluntarily revamping their policy. The Yoon administration should consider a wide range of policy options to carry out public sector reforms.