Published : 2014-01-02 19:48
Updated : 2014-01-02 19:48
The government is ratcheting up pressure on public organizations to cut their mounting debts and trim excessive welfare benefits.
The government has recently selected 38 public organizations as targets for reform. Among them, 12 were chosen for their unsustainable debts. The list includes Korea Land and Housing Corp., Korea Water Resources Corp., Korea Railroad Corp. and Korea Expressway Corp.
The remaining 26 were picked for their heavy welfare spending. They include Korea Racing Association, Korea Exchange, Incheon International Airport Corp., Korea District Heating Corp. and Korea Housing Guarantee Co.
On New Year’s Eve, the Finance Ministry told the 12 debt-ridden corporations to take a draconian approach to cutting their liabilities. It urged them to cut expenses by all means and sell off all their assets, domestic or overseas, except for those essential to providing public services.
The ministry encouraged the CEOs of these companies by saying that they would not be held responsible even if losses were caused in the process of selling assets, as long as they had taken all due care.
For the 26 spendthrift organizations, the ministry’s instruction was to curtail their welfare benefits in eight areas, including retirement allowances, educational and health care subsidies and paid leave, to the level offered to the civil service.
The ministry also encouraged the CEOs of these entities to take bold steps by saying that they would not be punished even if employees went on strike in protest against welfare cuts.
The 38 organizations are required to submit reform plans by the end of January and will face an assessment of their performance in the fourth quarter. The CEOs are required to attain their goals or face dismissal.
The adjustment of welfare benefits to the level of the civil service is a requirement for all public entities, of which there are 295. The deadline for the submission of a reform plan for other organizations is the end of March.
The government’s determined push is welcome. It has heightened expectations that reform of public organizations could succeed this time. All preceding governments have tried to reform them but failed in the face of strong resistance from their labor unions.
The incumbent government has recently shown its resolve to reform the public sector by responding to the protracted strike of Korea Railroad workers in a principled way. It should maintain the same unwavering attitude in the face of industrial action by other unions.
Yet the government’s push for the sale of assets has a problem. These days, many financially troubled private business groups are also seeking to dispose of their assets to repay debt. If there are too many sellers and not enough buyers, the prices of those assets are bound to fall.
And the government’s reform drive is pushing public corporations to increase utilities prices. For instance, Korea Gas Corp. raised the price of natural gas by an average 5.8 percent from Jan. 1. State-owned companies should not be allowed to transfer their debt burdens to consumers.