Govn't Pushes ahead with Public Entity Reform

Implements schemes to advance public enterprises to an advanced level

The following are excerpts of an interview between NewsWorld and Kang Ho-in, director general of the Public Policy Bureau at the Ministry of Strategy and Finance (MOSF), who spoke on plans for the advancement of public entities and public entity CEO evaluations.
Question: Will you tell our readers about the progress of the government's plan to advance public enterprises?
Answer: Privatization, consolidation & merger, readjustment of functions, manpower reductions, a reduction in university graduates' starting pay and other steps, which were established under the government's plan to advance public enterprises since 2008, are now underway as planned.
Of 24 public entities subject to the privatization process, there are seven that are ready to be auctioned off and the rest are undergoing a prior preparatory process. The sale of Korea Asset Investment Trust Co. and Korea Real Estate Investment Trust Co. is on public notice, while preferred bidders have been chosen to buy Ansan Urban Development Inc. and Farmland Improvement & Modernization Co.
Of the 36 candidate public enterprises subject to merger or consolidation, 26, including Korail Tech and Korea Creative Content Agency, have been consolidated into 11 entities, while a process for merging 10 public entities into five is underway.
Of the five candidates for elimination, four public enterprises, including Korea Labor Education Institute and Korea Ad.com, were abolished while the disbanding of the fifth one is underway.
Of the 20 candidate entities to have their functions adjusted, nine have completed the process, one will be subject to function readjustment in 2009 and 10 others will be affected between 2010 and 2012.
Of the 129 candidates to have their employee numbers cut, 123 have had their manpower reduced by 12.7 percent or 22,000 employees compared to the new manpower quotas, and six others are also eliminating staff.
Of 129 public enterprises with newcomers receiving more than 20 million won in their starting pay, 247 or 94.3 percent had their starting pay lowered.
Q: Will you elaborate on the government's policy to privatize public enterprises and its future plans?
A: The government is pursuing the privatization of public enterprises that are considered competitive in the market or have future potential for competitiveness. It announced plans to privatize or dispose of 24 public entities on three occasions last year.
The privatization plans are progressing as planned. As of the end of July, nine public enterprises were put on the block this year. Boards of directors have approved or disposal screening committees have been formed to plan for the sale of stakes in six public entities, two of which have selected a preferred bidder. Stocks of three public entities are to be listed. Korean District Heating Co. has passed a preliminary stock listing evaluation, and Grand Korea Leisure and KOPEC are under a preliminary stock listing review.
Out of eight public entities to be put on the block after 2010, boards of directors have approved or disposal screening committees have been formed for plans to sell five public entities ― Korea Construction Management Corp., Kyongbuk Tourism Development Corp., KPS, Incheon Total Energy Company and Korea Enterprise Data. A lead manager for selling Kyongbuk Tourism Development Corp. has been chosen. Asset evaluations of three others ― IIAC, KAC and KHGC ― are to be completed by the end of this year. The timing of the public entities considered for early disposal may be advanced to this year.
As to the privatization of the Korea Development Bank (KDB) and the Industrial Bank of Korea and their five subsidiaries, the government plans to work out the detailed privatization schedule in consideration of the spin-off process of KDB and the stable operation of a policy financing mechanism. It plans to complete the divestiture of KDB by the end of October.
By checking the progress through monthly meetings and tackling problems through inter-ministry cooperation and institutional overhaul, the government is striving to implement the privatization plans as originally scheduled.
Q: What are the procedures and guidelines of the management assessment of the CEOs of public entities?
A: Public entity CEOs worked out a one-year management plan attached to their management contract during the period between June 2008 and March 31, 2009 in accordance with the guidelines on the writing of public entity CEOs' management plans that took effect in June 2008 before being approved by their supervising government ministers and submitted to the MOSF.
They submitted a management performance report to the management performance evaluation corps by April 15 according to a guideline on the writing of a management plan performance report that took effect in January.
The members of the management performance evaluation corps were preferably chosen among those who belong to management evaluation committees of public enterprises and quasi-government agencies. The legal qualification for management performance evaluation corps members is: certified public accountants, lawyers and asset experts with more than five years of field experience, and not more than 50 members should consist of civilian experts according to the evaluation guidelines, instead of the former 45 members.
The management performance evaluation corps is required to evaluate public entities according to objective and fair guidelines, and team-level agreement is required to minimize subjective evaluation discrepancies. Management performance evaluation corps members are banned from contacting each public entity and are required to submit ethical contracts to block lobbying activities.
Q: Will you comment on the outcome of the 2008 public entity management evaluation survey compared to the 2007 evaluation?
A: A change in evaluation models makes it hard to compare the 2007 and 2008 evaluation outcomes and figures directly.
Each public entity's financial results somewhat dropped due to the worsening of economic circumstances such as foreign exchange fluctuations and the recession of the domestic economy.
Overall, public enterprises showed some improvement in terms of management system overhaul results, however. They have been recommended to readjust functions and overhaul management systems according to plans on the advancement of public entities and management efficiency. This was owed partly to public entities' own efforts to implement cost-saving steps through the restructuring of organizations, manpower and work processes.
Q: Are there any additional supplementary steps to follow up on the evaluation of public entity CEOs?
A: The first evaluation of public entity CEOs was carried out with a focus on ensuring fairness and objectivity in selecting evaluation indexes and evaluation execution processes from an initial stage.
A public entity CEO evaluation system will be implemented by reflecting on the evaluation corps' own and the public's views on the basis of the public entity CEO evaluation outcome so that a more precise evaluation can be made next year. nw

Kang Ho-in, director general of the Public Policy Bureau at the Ministry of Strategy and Finance (MOSF)