The Korea Herald

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[Editorial] Public sector reform

Ruling party should push through its proposals

By Korea Herald

Published : Sept. 21, 2014 - 19:12

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It is one thing to come up with reform measures and another to implement them thoroughly. This seems the prevailing public response to the public sector reform package announced by the ruling Saenuri Party last week.

No one disagrees on the urgent need to overhaul poorly managed, debt-ridden public corporations. At the end of 2013, Korea’s public enterprises were saddled with a combined debt of more than 523 trillion won ($500 billion), with their average debt-to-equity ratio nearly doubling over the past four years to 216 percent.

Previous administrations’ attempts to reform state-owned companies have been repeatedly thwarted by labor resistance and populist politicians who put political interest ahead of economic efficiency.

The incumbent administration under President Park Geun-hye seems to have been on the same track. After being installed early last year, it geared up for undertaking a full-fledged reform of the public sector only to place it on the back burner in the run-up to the local elections in June. The reform drive has further lost steam as it has followed the practice of filling top managerial posts at public corporations with political appointees with no professional expertise.

It is welcome that the ruling party has come forward to reinforce the effort to revamp the public sector. The reform package drawn up by a party committee calls for, among other things, revising a law to make it possible to liquidate public companies with chronic deficits and introducing a merit system based on employees’ performance rather than seniority.

It also includes a measure to abolish or merge underperforming subsidiaries, especially those of state-owned energy companies, which have made ill-fated investments abroad. Over the past three years, more than 60 percent of the 408 affiliates set up by public enterprises have yielded no profit.

The reform plan still leaves much to be desired. More drastic measures should be taken to open the public sector, including power generation and railway operations, to tougher competition. Stricter qualifications should be required for executive posts at state-funded corporations to prevent political appointees from occupying them.

It is understandable for many people to cast a dubious eye on whether the ruling party is truly determined to push through the public-sector reform against fierce resistance from workers. Saenuri officials opposed a government plan to privatize part of the railway operation last year, stepping in to broker a deal in favor of striking railroad workers.

The ruling party should disperse public skepticism by pushing for the thorough implementation of the reform measures it came up with. If it just made a reformist gesture without firm will, it would only result in deepening people’s distrust and sapping the momentum toward overhauling mismanaged public enterprises.

Given the prolonged political standoff, it will also be difficult to secure cooperation from opposition lawmakers in enacting the relevant bills. But the fact that no major elections will be held until early 2016 may provide favorable conditions for pushing through legislation. Ruling party and administration officials should not miss the crucial period.