President Moon Urges Public Firms to Prime the Pump for Innovation-led Growth

"Public organizations should play a pump-priming role for the Korean economy to achieve innovation-led growth," President Moon Jae-in told heads of public organizations on August 29. Moon stressed job creation while emphasizing the public nature of public organizations. However, he did not refer to their chronic problems and inconvenient truths such as high wages, irresponsible and ineffective management, and debt problems.

"We are now pushing forward with a big economic paradigm shift based on income-driven growth, innovation-powered growth, and a fair economy," Moon said in an address to participants in the 2018 Public Organization Workshop in Wonju, Gangwon Province. "Change is not a matter of choice but a matter of survival. The government will do everything it can do to change the structure and constitution of the Korean economy and maximize its growth potential. "

President Moon asked heads of public organizations to give more support to and make more investment in new energy industries, smart farms and smart cities. "I hope that you will also actively consider ways to contribute to the creation of an innovative ecosystem by sharing public organizations’ data, facilities and equipment," he said, adding, “In that regard, I promised to guarantee autonomy at public organizations so that they can freely try new things for innovation."

In addition, Moon said, “In short, the goal of public organization innovation is to restore their public nature." In that connection, he referred to public organizations’ recruitment irregularities and abuses of power, and told them to deeply reflect on themselves.

"We cannot deny the responsibilities of the government and society that place a top priority on maximizing efficiency and profit in the evaluation of public organizations," Moon said. "The proportion of the public sector in the national economy is getting bigger. For example, the total budget for public organizations is 1.6 times that of the government budget. I hope that ministries will respect public organizations as partners in state administration and cooperate closely with them." This is interpreted as a message to increase the hiring of full-time workers by actively utilizing the finance of public institutions in line with the government’s income-led growth and job creation policies.

In fact, Kim Dong-yeon, deputy prime minister and minister of economy and finance, laid out a "plan to reform public organizations" right after the president’s address. "We will run a self-regulatory employee quota system with budget management organizations. We will change the management system of public organizations in the direction of expanding their self-regulating operations," Kim said.

President Moon and Deputy Prime Minister Kim emphasized the public nature of public organizations, especially in connection with job creation. Some experts say that their emphasis on the public nature of public organizations is intended to ease the serious employment shock in a short period of time. However, they also say that this message should be accompanied by an additional one to prevent the first message from being misinterpreted to mean that the government will not touch moral lapses by some employees at state-run companies.

Public organizations’ debts totaled around 520 trillion won in 2014, but the figure fell to 495 trillion won (US$445 billion) last year through management rationalization. However, management efficiency still faced trouble and net profit dropped to seven trillion won from 11 trillion won (US$9.9 billion) in the same period. Meanwhile, the number of employees at public organizations soared, reaching 320,000 in 2013 and 270,000 in the second quarter of this year. Their average annual salary hit 67.07 million won (US$60,300) last year, far exceeding that of employees at the largest 100 companies in Korea, which was 54 million won (US$48,600) as of September last year.