New Administration to Privatize Public Companies

The government will draw up a basic plan to privatize public enterprises in the first half of the year. As such, the privatization of state-owned companies, which has been suspended since 2004, is expected to resume.

Immediately after the Ministry of Planning and Budget’s briefing to the presidential transition committee on Tuesday, Park Jeong-ha, vice spokesman for the transition team, told the media, “We will confirm a basic plan for the privatization of public corporations in the first half of the year and seek ways to implement an efficient management system to privatize the companies.”

However, it was noted that the transition team has yet to deliberate on specific methods of privatization and which state-owned companies would be privatized.

Although the privatization of public firms was encouraged in 1998, when the Kim Dae-jung administration tried to divide and sell off Korea Electric Power Corporation, this process was completely stopped under the incumbent administration following the recommendation of the Korea Tripartite Commission.

However, during the 2007 presidential campaign, President-elect Lee Myung-bak promised that he would gradually privatize public corporations that no longer served their original goals and are in competition with private companies.

As for the method of privatization, the “Singaporean style” is being considered a strong candidate. The Singaporean model allows the government to own shares of public corporations, while leaving their management in the hands of private experts.

During Tuesday’s report to the committee, the budget ministry said it would do a top to bottom review of all of its fiscal policies to slash the budget in the near future and to reflect its specific measures in the national fiscal management plan.

The ministry also said that it would reduce the national debt, which accounted for 33.4 percent of the GDP as of the end of 2007, to under 30 percent and tighten its supervision over public companies’ debts and public funds, such as the public pension fund and the military personnel pension fund.

koh@donga.com