S. Korea set to merge, reorganize 30 public firms

(ATTN: ADDS comments by expert from para 22)
By Lee Joon-seung
SEOUL, Oct. 10 (Yonhap) -- The government said Friday that it will privatize, merge and restructure 30 state-operated companies and organizations as part of its plan to enhance efficiency in the public sector.

The announcement by the Ministry of Strategy and Finance marks the final
"hardware" restructuring phase of a multi-phased plan that aims to overhaul the
country's public sector, which receives 23 trillion won (US$18.5 billion) from
taxpayers every year.
Improving the nation's competitiveness was a key campaign pledge of President Lee
Myung-bak last year.
Vice Finance Minister Bae Kook-hwan told reporters that the third phase of the
plan calls for the privatization of 10 companies, the merging of seven firms into
three, with the closing down of two and reorganization of one.
Eight other corporations will undergo extensive restructuring efforts designed to
boost earnings by incorporating more business-oriented management systems.
Of the companies to be privatized, Seoul plans to sell off 49-40 percent stakes
in Korea District Heating Corp., Korea Power Engineering Co. and Korea Plant
Service and Engineering Co., along with sales of Korea Housing Guarantee Co. and
other minor enterprises that do not need to be operated by the public sector.
"Selling off government controlled shares can generate revenue that can be used
elsewhere," the senior official said.
He added the government will retain at least 51 percent stakes in the district
heating corporation to prevent price hikes. Two subsidiaries of the corporation
providing services to Ansan and Incheon are to be sold off to the private sector.
The latest plan also calls for the merging of Korea Technology Credit Guarantee
Fund with Korea Credit Guarantee Fund and the reorganization of five subsidiaries
of Korea Railroad Corp. (KORAIL) into two companies.
"Because there may be a lapse of support for small- and medium- sized enterprises
as a result of mergers, the government plans to first establish contingency plans
and hold hearings before releasing detailed plans for the two credit
organizations later in the year," he said.
For Korea Gas Corp. and Korea Broadcasting Advertising Corporation the ministry
said the current monopoly in gas imports and TV advertising will be lifted to
allow more competition.
New gas suppliers will be allowed into the market starting in 2010, while a
roadmap for fueling competition in the TV advertisement arena will be made public
by late 2009.
Bae also said that Busan and Incheon harbor port management authorities will be
shut down since most of their work has been transferred to port security
corporations in these cities, with Korea Gas Technology Corp. to shed businesses
that are not directly related to maintenance of gas-related facilities.
The company operated the cogeneration plant and LPG fuel stations.
In addition, Korea Electric Power Corp. (KEPCO), KORAIL, Korea Highway Corp. and
five subsidiary power companies belonging to KEPCO will be required to cut costs
and enhance efficiency.
"There will be no privatization of basic utility companies during the present
administration but companies will be requested to push through far ranging
restructuring plans," the policymaker said.
He noted that rail service providers must convert the 641.4 billion won deficit
posted last year into a surplus by 2012. If no substantial steps are taken by
2010, Seoul may move to sell off the corporation altogether.
Bae also stressed that overall plans, particularly for large companies, will
undergo public hearings to receive feedback before restructuring efforts begin on
211 public companies not mentioned in the multi-phase reform package.
Seoul has reviewed restructuring plans for 319 public companies, including 14
businesses, like Daewoo Shipbuilding & Marine Engineering Co., that received
bailout funds from the government following the 1997-98 Asian financial crisis.
In the first and second restructuring plans released in August, Seoul said its
would push for changes in 81 companies, but since three organizations overlap,
the overall plan calls for a total of 108 public firms to be streamlined or sold
off.
Critics, meanwhile, said that the total number of companies that will be reduced
stood at 45, which is smaller than the 50 or 60 floated by policymakers earlier
in the year.
An Chong-bum, a economic professor at Sungkyunkwan University, said the overall
reform package does not measure up to expectations.
"Because of myriad conflicting interests the government only seems to have
targeted 'easy' corporations and organizations for restructuring and avoided
prickly issues," he said.
He said that if reforms proceed in a piecemeal manner, relatively large companies
that really need to raise efficiency may be left untouched.
This view was shared by Kim Dong-yul of Hyundai Research Institute, who said that
realistic constraints may have caused adjustments to initial goals.
Kim said that while policymakers stress that they want to transform public
companies into efficient entities, what is more important is to determine whether
they need to exist at all.
"The government may be better advised to determine if such companies need to be
maintained and if they must engage in the work they do," the researcher said.
yonngong@yna.co.kr
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