Repeating policies and vague responses to sensitive issues... Will public institution reform end as mere 'show'?

Choo Kyung-ho, "No tolerance for inefficiency and lax management, will push for painful innovation," but adds 'principled' caveats to 2023 staff reduction plan... Conscious of union backlash, reform will is low
At least started easy public sector reform, but likely to be just a show
"Public enterprises should not be used for government policy... Need to sell shares to expand private sector oversight"

[Asia Economy Sejong=Reporter Kwon Haeyoung] Concerns are already emerging that the public institution reform will fail as the government's recently released 'Public Institution Innovation Guidelines' are merely a 'rehash' of the measures announced in 2013. This is because the government, which prepared the guidelines, drew a line against the possibility of restructuring and turned a blind eye to the fundamental causes that worsened the financial situation. As a result, among the pension, labor, education, and public sectors targeted for reform, the relatively easier public sector was touched first, but many predict that even this will end up being just for show.

Looking at the 'Public Institution Innovation Guidelines' recently announced by the Ministry of Economy and Finance, it states that there are no plans to pursue artificial restructuring or privatization. Although there is a plan to reduce the workforce in 2023, it comes with the caveat of being 'in principle.' Since many institutions provide essential public services to citizens, even excluding the controversial public discussion on privatization, the possibility of workforce restructuring was also dismissed, leading to an assessment that the government has completely withdrawn from sensitive issues.

Moreover, most of the measures presented by the government are almost identical to the 'Public Institution Normalization Measures' announced in 2013. Selection of financially risky institutions, disposal of unnecessary and non-performing assets, adjustment of private competition and non-core functions, inspection of excessive welfare benefits, and cost efficiency measures were all included in the measures from nine years ago. There are criticisms that the measures lack strength compared to Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho's remarks such as "We will no longer tolerate inefficiency and reckless management in public institutions" and "We must pursue high-intensity reforms that cut to the bone."

Public institutions rapidly expanded during the previous Moon Jae-in administration. The workforce increased by 34.4% (115,000 people) from 334,000 in May 2017 to 449,000 as of May this year. Debt grew by 16.7% (83.6 trillion won) from 499.4 trillion won at the end of 2016 to 583 trillion won at the end of 2021. In particular, under the previous administration, all public institutions were mobilized as channels for job creation, leading to a sharp increase in cost burdens such as the conversion to regular positions. Additionally, energy public enterprises actively supported government policies such as nuclear phase-out and renewable energy transition, further worsening their financial conditions.

Although the government has declared high-intensity reforms for public institutions, it has not pursued reform measures that involve pain such as workforce reductions and that could provoke union opposition, leading to views that there is effectively no reform will. Since the government knows better than anyone why the financial situation of public institutions has deteriorated to this extent, many believe it can only engage in 'cosmetic reforms.' This is because all past governments have used public institutions as tools to support government policies, such as the Four Major Rivers Project, resource diplomacy, job policies, and nuclear phase-out. For example, Korea Electric Power Corporation (KEPCO), whose corporate bond issuance limit is nearly reached, saw its debt worsen significantly as it bore the cost burdens from the previous government's nuclear phase-out and renewable energy transition policies. A public enterprise official pointed out, "The government says it will reform public institutions, but it is not looking at the core problem of why public enterprises have come to this situation," adding, "If the diagnosis is wrong, how can a proper prescription come out?"

In December 2017, the Ministry of Economy and Finance, which is currently driving public institution reform, reduced the weight of financial indicators in public institution management evaluations and significantly increased the scoring for social values such as job creation. At the Cabinet meeting held in June, when Deputy Prime Minister Choo emphasized the need for public institution reform, another minister reportedly remarked, "It seems no different from the measures announced years ago," causing a stir in the meeting room.

There are also recommendations to pursue high-intensity restructuring such as workforce reductions for public institutions while ensuring profitability and strengthening private sector oversight functions. This includes rationalizing public service fees and fundamentally expanding market oversight roles by selling part of the public institution shares.

Professor Hong Kiyong of the Department of Business Administration at Incheon National University said, "Along with improving management efficiency of public institutions, it is necessary to guarantee profitability through rationalization of public fees," adding, "There is a tendency to excessively use public institutions as channels to realize government policies, but the government should consider selling shares to the private sector at a level not exceeding the majority to expand private oversight functions."