April 20, 2024

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[THE INVESTOR] South Korea’s government is considering designating 10 public organizations as government enterprises for stricter control, a move strongly opposed by labor unions.

The Ministry of Strategy and Finance will have a meeting by Jan. 31 to decide whether or not to change the status of the 10 public organizations, including three government-owned banks currently categorized as “other public agencies,” to public enterprises. 

The three banks include Korea Development Bank, Industrial Bank of Korea and the Export-Import Bank of Korea. Other organizations include casino and leisure company Kangwon Land, Grand Korea Leisure, three KEPCO subsidies and Korea Gas Technology Corporation.

The Finance Ministry is also considering to name Korea Securities Depository as a quasi-government organization.

Organizations categorized as “other public agencies” are given relatively more freedom and are under the supervision of the Financial Services Committee.

But if designated as a public enterprise, it will also be overseen by the Finance Ministry and subject to the ministry’s annual review on management.

There are currently no government-run financial institutions that are designated as a public enterprise.

The Korean Financial Industry Union issued a statement on Jan.17 and strongly criticized the move as an ”excessive bureaucracy.” The union claimed that such bureaucracy has in the past led to misuse of power, citing the influence-peddling scandal of Park Geun-hye and Choi Sun-sil.

“If the Finance Ministry is added to the current supervisors of the Financial Services Committee, Financial Supervisory Service and the National Assembly, the bank cannot pursue policies preferred by the market,” a member of the labor union at KDB said. “This will weaken our global compatibility.”

The union said that designating a company as a public enterprise is more suited for companies such as Korean Electric Power Corporation that enjoys monopolistic position in the market.

The government had excluded KDB and IBK from the public organization list in 2012 so as to promote privatization and boost their compatibility. But the two banks were named as “other public bodies” in 2014 during the Park Geun-hye administration, citing management failure.

“It has been pointed out many times that it is time the address the problems associated with the involvement of KBD and Exim Bank in Daewoo Shipbuilding & Marine Engineering scandal,” said an official from the Finance Ministry.

The two banks, the two major creditors of the DSME, were accused of failing to thoroughly check the shipbuilder‘s balance sheet, or ignoring the financial problems of the company, according to the Board of Audit and Inspection.

There are 321 public entities, 202 of which are categorized as other public organizations.

By Park Ga-young /The Korea Herald (gypark@heraldcorp.com)