Is It Now or Never?

The Lee Myung-bak administration has insisted that the so-called “advancement of government-run companies” will strengthen their competitiveness and redefine the roles of the private and public sectors, and therefore improving the national economic system. A basic condition in becoming an advanced nation is the design of a system which makes sustainable growth possible through activation of the economy.

To this end, a basic idea in the advancement of government-run companies is to secure a system that stimulates a market economy based on the self-regulation and creativity of the public sector. In particular, one of the most significant points is to maximize efficiency by allowing private companies to do some work if they can do it better than government-run companies.

The Lee Myung-bak government has insisted that it can put off the advancement of government-run companies no longer. “Government-run companies should change themselves from organizations for employees to ones which can contribute to the development of the national economy,” a government official said.

The government has set up four major principles to expedite the advancement of government-run companies. The first principle is “a small government and a big market.” This principle involves allowing private companies to do some of the work of government-run companies through self-regulation and creativity. Therefore, this principle can make a market economy more active and efficient.

The second principle is to decrease burdens on people. If a government-run company is privatized, this should not lead to a rise in prices. Furthermore, the government intends to reduce burdens placed on the general public by decreasing its financial support of these companies. The support for which comes from taxes. Third, the government will guarantee job security for employees even though these companies will go private. This means privatized companies will continue to hire workers for a certain period of time. Integrated firms can manage the number of employees by making use of a natural decrease in the number of employees. The fourth and last principle is to execute the advancement of government-run companies through a national consensus. The government will collect the opinions of labor unions and other stakeholders. Under these principles, four directions have been chosen by the government; privatization, integration, changes in roles and more efficient management.

Celebrating its second anniversary in February 2010, the Lee Myung-bak administration evaluated that its policy for the advancement of government-run companies had paid off. According to a report entitled, “Advancement of Government-Run Companies for Two Years by the Lee Myung-bak Government by the Ministry of Strategy and Finance,” the government made plans regarding the advancement of government-run companies a total of six times and steadily put them into practice.

The report also said that the government obtained excellent results in terms of privatization, integration, compensation systems and labor-management relations. Government-run companies are being privatized if the government judges that they can perform better as private companies.

The government has also nearly completed integrating government-run companies with overlapping business areas and removing redundant human resources. Out of nine government-run companies, two have been sold off, three listed on the stock market and four scheduled to be sold off soon.

Furthermore, the government is executing policies to schedule the privatization of 15 government-run companies scheduled to go private at the beginning of next year. The government has so far liquidated 48 out of 131 government-run companies in which 35 government-run companies have equities. The remaining 83 are awaiting new owners after being advertised.

Meanwhile, 20 government-run companies were selected for changes in their functions. Among them, nine have so far finished adjusting their functions. In addition, the government lowered the basic salaries for heads, auditors, employees and new employees with college degrees at government-run companies, as well as reducing the absurdly excessive welfare funds. The government also had government-run companies change their free scholarship programs for children of employees into loan-type ones.

The government has also made it obligatory for labor unions and management to made public labor collective agreements, as well as devising a draft on the advancement of labor-management relations which considers labor-management harmony and rationality of labor collective agreements. Furthermore, the government is pushing ahead with a project to give more managerial power to the heads of government-run companies, as well as establishing a research center regarding policies for government-run companies in order to strengthen the policy capabilities of the government.