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[Editorial] Mergers, liquidations

Talks on forced mergers and liquidations are under way. The targets are not corporations that have become insolvent or are nearing insolvency, but junior colleges and universities whose finances are in bad shape.

One of the first steps to be taken in this regard is to pass a bill on restructuring private schools. The presidential office and the ruling Grand National Party agreed on the bill’s early passage when they held talks on the restructuring of institutes of higher education on Monday.

A lawmaker of the ruling party, who is privy to the government-led reform program that is yet to be unveiled, says 50 of the 324 junior colleges and universities are candidates for liquidations this time. Another 40 will have to be closed by 2030, according to a report from the Korea Economic Research Institute.

Primarily responsible for this crisis is the government, which in 1995 allowed anyone to establish junior colleges and universities if he met the basic requirements. As a result of the liberalization, the number of universities almost doubled ― from 108 in 1995 to 196 now.

Again, it is the government that is obstructing necessary reform. Those institutions of higher education that should have been closed are getting by on government subsidies. This is not to say none of the founders and their family members are unblemished. On the contrary, some of them are accused of being more interested in lining their pockets than providing better education for students.

Reform is long overdue. The Korea Economic Research Institute, which says the number of students enrolled in junior colleges and universities in 1995 was at an appropriate level when compared with the economically active population at the time, claims it exceeded the level by 660,000 in 2010.

The situation will worsen if no action is taken soon. From 2018, the number of high school graduates will be smaller than the sum of the government-set admission quotas. Reform is not a choice but a necessity for survival.

Against this backdrop, the government is preparing to submit a reform bill when the National Assembly opens its regular session in September, if not earlier.

One of the key points should be how to dispose of post-liquidation, residual assets. Currently, when a private school foundation is liquidated, its residual assets are required to be transferred to another school foundation or the state coffers. This regulation poses a huge obstacle to the pending reform. If the government is to speed up the reform, it is necessary to return the residual assets to the founder or his family.

Another key point is for the government’s reform committee, affiliated with the Ministry of Education, Science and Technology, to establish a fair rule by which to determine which private colleges and universities to close.

Reform must not be limited to moribund private educational institutions. Instead, it should be extended to healthy private colleges and universities and public institutions of higher education.

A model is set by Gachon University of Medicine and Science and Kyungwon University, which are set to merge in March 2012. Lee Gil-ya, founder of Gachon University, who doubles as president of Kyungwon University, says the new university will enhance investment efficacy by consolidating similar or duplicate departments and keeping the number of students at an affordable level.

Universities that have more than one campus may take a similar action. They have every reason to save resources and put them to better use by eliminating duplicate departments. That is what Dankook University is planning to do. It is reportedly aiming at reducing the combined number of departments at its two campuses from the current 92 to 60 by 2013.

National universities cannot be exempted from reform. The government will have to consolidate different national universities in any province ― for instance, two in North Chungcheong Province and three in South Chungcheong Province.

Resistance to reform will be great, with many faculty members exposed to the risk of being forced out of their jobs in the process of liquidation and consolidation. But the government will have to overcome it. If no action is taken, more people will eventually lose their jobs.
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