Korean state firms are up for an immediate and major overhaul, starting with payrolls and CEOs

2013-11-15 16:50

Major shakeup to hit state-owned firms

By Kim Tae-jong
State firms are up for an immediate and major overhaul, starting with payrolls and CEOs, government officials said Friday. The Korea Land & Housing Corp. (KLH) is likely to be the first target as it has accrued the largest debt, currently 147.8 trillion won. The Korea Electric Power Corp. and Korea Gas Corp. are also saddled with heavy debts of 59.5 trillion won and 35.3 trillion won, respectively. KORAIL has the highest debt ratio of 500 percent.Eight firms, including the Korea Trade Insurance Corp. and Korea Exim Bank, are being criticized for offering “unreasonably” high incentives and benefits to executives and employees.
Consequently, the government is expected to regulate the 12 heavily-indebted public firms, and order them to come up with measures to address their hemorrhaging finances through business adjustments and asset sales.
“The government will come out with measures to normalize state-owned enterprises after looking into every issue, from A to Z,” Deputy Prime Minister and Finance Minister Hyun Oh-seok said Thursday.
According to the finance ministry, the total amount of debt accrued by state-run firms jumped to 493 trillion won in 2012 from 337 trillion won in 2009.
But the number of executives and employees increased to 254,000 from 234,000 during the same period.
The average annual salary of CEOs at public firms also increased 17.5 percent to 161 million won from 137 million won.
Some of the firms are also having a hard time paying interests on their loans due to their deteriorating financial state.
But some industry insiders blame the government for simply dodging its responsibility and heaping the blame on the doorsteps of public firms.
For instance, the government’s four river refurbishment project and large-scale housing projects compelled KLH to borrow huge sums resulting in the firm becoming heavily indebted. Similarly, in its bid to tame inflation, the government prevented public firms from raising utility fees without regard for the financial implications.
“Each time a new government comes in, they replace the heads of public firms with incompetent figures who happen to be key aides of the administration,” a market insider said. “The heavy debt and poor performance comes largely as a result of them following the government’s policies.”
On Thursday, Kim Ki-choon, President Park Geun-hye’s chief of staff, said the selection of new CEOs of state-owned enterprises will be completed by the end of this year.
“The selection procedure through candidate nominations is almost done,” he said during a National Assembly audit, Thursday. “We think it will be completed this year.”