State-invested firms face merger, sale

The government said yesterday it will sell, scrap or merge 131 state-invested firms as part of its efforts to reform the public sector.

The Ministry of Strategy and Finance said the fifth phase of the public sector reform program would focus on streamlining the government`s 5.8 trillion-won ($4.1 billion) stake in 273 state-invested companies.

The 131 firms were selected because their functions overlap with the private sector too much, or their performances were too poor to allow more government investment, ministry officials said.

While the government invested 3.1 trillion won in the 131 firms, the market value of the 112 to be sold is estimated to have reached 4.6 trillion won as of the end of 2007, they said.

Out of the 130 firms, 112 will be sold, 17 will be scrapped and the other two will be merged into their parent state-run companies, the ministry said.

The 111 state-invested firms whose government-held stakes will be sold include Korea Life Insurance owned by the Korea Deposit Insurance Corp., LG Powercom owned by the Korea Electric Power Corp., GM Daewoo Auto & Technology Co. owned by the Korea Development Bank.

The 17 firms to be scrapped include KEPCO Asia International invested by KEPCO and 11 firms invested by the Korea National Housing Corp. and the Korea Land Corp.

Since his inauguration in February, President Lee Myung-bak has been pushing to overhaul government-owned enterprises, which have been criticized for negligent management and waste of taxpayer money.

"The state-invested firms were the major cause for the public sector`s negligence in management. To get rid of public firms` management intervention, we decided to sell the firms," Vice Finance Minister Bae Kook-hwan said at at press conference in Gwacheon.

However, he did not give a specific timeframe by when the firms will be sold.

"The timing of the sale will vary, depending on market conditions," Bae said.

Bae added that he believed there would be a lot of interest in buying those firms.

He said management and labor of the public firms have already agreed to the government`s stake-selling plan.

Currently, there are 330 state-invested firms in which 305 state-run companies invested 5.8 trillion won of public money. The review included the 273 companies not already one of 57 public firms were already included in the previously announced public sector reform packages, they said.

Last month, the government announced that it would cut 19,000 jobs, or about 13 percent of its work force, at 69 public firms in the fourth stage of its public sector reform program.

By Kim Yoon-mi



(yoonmi@heraldm.com)