Privatization Key to Enhancing Competitiveness of State Firms

A recent survey has shown that women employees at state-run companies are the first choices for brides among men considering marriage. The poll conducted on 1,462 unmarried people by Duo, a matchmaking company, says 60.9 percent of respondents cited either workers at state firms or civil servants as their most preferred spouses. This compares with previous polls, which showed most men preferred teachers.

This means public companies have already become the most preferred jobs among youngsters with their stability, high pay and easier work. But we must express concern over the companies' high salaries despite their low efficiency, as such a trend inflicts losses on others. Getting wages higher than one's work performance will result in a rise in production costs, thus increasing the burden on consumers. And it also leads to less investment with little chance to create new jobs.

The total debt incurred by the nation's state firms reached 122 trillion won at the end of 2006, according to the Ministry of Budget and Planning. One out of five pubic companies is still struggling with a widening deficit. In 2006 alone, debt snowballed by 25 trillion won.

Notwithstanding the poor performance, the companies have been offering high wage packages to their executives and employees. Yearly payment for some CEOs of the companies reached more than 700 million won. The average income of the company employees was 1.7 times that of private large enterprises. In one case, employees with the lowest performance rating nevertheless received an achievement bonus of 330 percent of their monthly income. Some firms even provided compensation of two million won on the death of an employee's wife's grandparents.

All the problems prove moral decay prevalent in the public sector, chiefly due to the absence of competition amid lack of efficiency. Upon taking power, the current government stopped decades-long efforts toward privatization of public companies, buffeted by pressure from trade unions. Populist oriented policies ignoring market principles have further entangled the process of reform at the companies.

It is ironic that the government, which has boasted a progressive reform, has put the brakes on endeavors toward reform of public firms. The state companies should be the first and foremost targets of reform although they have so far been reluctant to change and remain sanctuaries free from reform.

Privatization and marketization are the keys to enhancing the competitiveness of state-run companies and to return them to the hands of the people. Regrettably, however, they have so far been ``booty'' to be captured by winning political forces. Executives have been appointed by Cheong Wa Dae and governing parties in accordance with their role in presidential and parliamentary elections. Ill versed in company affairs they have managed the firms in a lax and ineffective manner. Now it is high time to speed up reform of public firms so that they can become the companies of the people and for the people in the real sense of the word.