The Economic Reform Special Committee’s  Public Enterprise Reform Subcommittee chaired by Rep. Lee Hyun-jae held on Sept. 19 a public hearing on the subject of reforming the public enterprises satisfactory to the people.

 The Public Enterprise Reform Subcommittee composed of eight members including five legislators such as Reps. Kim Hi-kook, Park Dae-dong, Lee Kang-hoo, Lee Man-woo and Lee Ie-jae, all of the ruling Saenuri Party and Dean Kim Joon-ki of the Seoul National University  Administration Graduate School was launched in April and met over 20 times and came up with a plan to reform the public enterprises. The plan is aimed at stopping loose management of those state-owned  business firms, while boosting the productivity to provide high-quality services to the people.

 With the year 2012 as the base, the debts of the public business firms  exceeded 493 trillion won , increasing by 200 trillion won in the past five years, furthermore what hurt the most has been that the management of those state-owned firms  did not have the wills to cut their debts letting the debts to grow as large as the debts of the government.

 Therefore, the subcommittee plan includes first, the provision that the laws and regulations governing the public enterprises be revised so that the public enterprises under the central government can be declared bankrupt and go out of business. They have been unable to go out of business even if they no longer had the capital to go on. The reform plan  includes the provisions that public enterprises under the central government can transfer their shares and also be broken up and closed down like the public enterprises in the local regions.

 Second, the reform plan also includes the provision that the public enterprises under the central government should also be able to clean up their financially poor affiliates, especially, those under the Korea Railroad Corp. The subcommittee blamed the railroad corp. for providing jobs for high-ranking government officials after their retirement from government services and in the past five year, the railroad corp. set up 142 affiliates and participated in biddings together with its affiliates like the Korea Electric Power Corp. did with its power generation affiliates  and Korea Oil Corp’s Harvest and investing in overseas projects without ample analyses of the projects. The subcommittee criticized them as a good example for loose management.

 Third, The reform plan also includes the provision that calls for cuts in the number of deals among the affiliates under the same mother company and to ensure the participation of the private business sector in the public business sector, the public companies will be prohibited to give their projects and other businesses to state-owned firms. Fourth, the management of state-owned firms will be transferred to the Prime Minister’s Office and fifth, the public firms will be forbidden to have former public servants  in important jobs in their companies to prevent the practice of so called, “parachute personnel appointment” in government-run public companies.

 Chairman Lee  of the subcommittee said he will see the reform of the government-run enterprises be made  not only prevent the loose management, but also break up those firms in extremely poor management conditions to go out of business to the level that the people would agree with.

 The subcommittee’s reform plan direction and the problems of the state-owned enterprises are as follows:

 Under the Km Dae-jung government(1998-2002), the government-run companies’ debts increased to 189.5 trillion won in 2002 from 101.1 trillion won in 1998 during the IMF financial crisis to the extent that the debts exceeded the capital.

 Under the Noh Moo-hyun government(2002-2007), total debts of state-owned companies were down to 186.9 trillion won in 2007 as 49 trillion won of the debts of the Korea Deposit Insurance Corp. were transferred to government debts by issuing bonds to reduce the debts.

 Under the Lee Myung-bak government(2007-2012), total debts of the state-owned companies rose to 410.2 trillion won, up 223.3 trillion won from 2007 bringing total debt ratio to 332 percent.

 In the past five years, the public firms’ debts rose 203.4 trillion won and from 2011, they exceeded the government debts.

Debts of some of the large state-owned companies at the end of 2012: Korea Land and Housing Corp.: 138.1 trillion won; Korea Electric Power Corp.95.1 trillion won; Korea Gas Corp. 32.3 trillion won; Koreas Expressway Corp.25.3 trillion won; Korea Oil Corp. 18 trillion won; the Korea Rail Network Authority 16 trillion won; Korea Railroad Corp. 14.3 trillion won, the Korea Water Resources Corp. 13.8 trillion won, the Korea Mining Resources Corp. 2.3 trillion won and Korea Coal Corp. 1.5 trillion won.

 The problems in the government’s normalization measures: Four major reform plan directions(April 2, 2014). 1. The expansion in information unveiling. 2. Debt reduction and loose management reform. 3. Improving productivity. 4. Readjustment of executives’ salaries.

 Reforming loose management and readjustment of executives’ salaries are not enough to reform the public corporations as they are the problems of those companies. The core of the salary readjustment is the readjustment of responsibility and the connecting debt reduction to loose management would weaken the important nature of  the function readjustment. The core is the government to retain its control power rather than giving more autonomy and responsibility to those business firms.

 The subcommittee plans to include a provision in the reform plan to enable the state-run firms to declare bankruptcy and go out of business to prevent loose management caused by the lack in the laws governing the state-run firms to close their doors due to bankruptcy.