[Weekly Review] Next Year, 30% Reduction in Public Enterprises and Quasi-Governmental Agencies... Government Says "Not Privatization"

Choi Sang-dae, the 2nd Vice Minister of the Ministry of Economy and Finance, is briefing on the plan to reorganize the public institution management system at the Government Seoul Office briefing room on the 18th. 2022.8.18
[Photo by Yonhap News]

[Asia Economy Sejong=Reporter Son Seon-hee] The government has decided to reduce the number of public enterprises and quasi-governmental institutions directly supervised by the government by about 30% (42 institutions) starting next year. As part of the 'public institution reform' promoted by the Yoon Seok-yeol administration, the aim is to convert these institutions into other public institutions to increase management autonomy.

On the 18th, the government held the Public Institution Management Committee (PIMC) chaired by Choi Sang-dae, the 2nd Vice Minister of the Ministry of Economy and Finance, and deliberated and approved the 'Public Institution Management System Reform Plan' with this content. The Ministry of Economy and Finance has conducted annual management evaluations and supervised overall personnel and financial management for public enterprises and quasi-governmental institutions, but from next year, the scope of supervision will be significantly reduced.

Public institutions are classified into three types according to the size of personnel and assets: public enterprises, quasi-governmental institutions, and other public institutions. The core of this reform plan is to significantly expand the personnel standard for public enterprises and quasi-governmental institutions (currently 50 people) to 300 people. The income criterion (3 billion KRW → 20 billion KRW) and asset criterion (1 billion KRW → 3 billion KRW) will also be raised respectively. As a result, 42 institutions (32%) previously classified as public enterprises or quasi-governmental institutions are expected to be reclassified as other public institutions.

These criteria were established when the Public Institution Management Act (PIMA) was enacted in 2007 and have been maintained for 15 years. Since the scale of public institutions has increased and the management system has stabilized compared to when the law was enacted, the plan is to transfer management authority from the Ministry of Economy and Finance to the relevant ministries and strengthen the autonomous management system of each institution.

For the 88 institutions that remain as public enterprises or quasi-governmental institutions, the management evaluation criteria will be changed to strengthen financial management. In the '2022 evaluation' scheduled for the first half of next year, the weight of financial performance, which was previously 10 points, will be doubled to 20 points. On the other hand, the weight of social value will be reduced from 25 points to 15 points. The criteria for preliminary feasibility study targets for public institutions will also be raised: total project cost from 100 billion KRW to 200 billion KRW, and institution/government burden amount from 500 billion KRW to 100 billion KRW or more.

This has sparked criticism from some opposition parties who see it as a step toward privatization, and political debate is expected. The Ministry of Economy and Finance has firmly denied any possibility of privatization. Vice Minister Choi emphasized, "There is no plan for artificial restructuring or privatization," and "The government has never considered privatization and has no plans to consider or promote it in the future."

Household income in Q2 increased at the largest rate ever... Negative impact on distribution indicators due to loss compensation payments to high-income groups

Household income in the second quarter increased at the largest rate ever due to the payment of loss compensation to small business owners and the lifting of social distancing measures. However, consumption propensity was the lowest ever recorded for the same quarter since related statistics began in 2006, as the economic outlook remains unfavorable.

According to the 'Q2 Household Trends Survey Results' recently announced by Statistics Korea, the average monthly income per household was 4,831,000 KRW, an increase of 12.7% compared to the second quarter of last year. Both nominal and real incomes showed the highest growth rate among all quarters since 2006. However, excluding the impact of inflation, the growth rate was 6.9%.

The average propensity to consume, which indicates the proportion of disposable income spent on consumption, fell by 5.2 percentage points from a year ago, reaching 66.4%, the lowest ever for the second quarter.

The sharp increase in income is largely attributed to the 21 trillion KRW loss compensation payments made to small business owners during the second quarter. Although income increased across all quintiles, government-provided public transfer income surged by 165.4% particularly in the 5th quintile (top 20%). It is interpreted that loss compensation payments were concentrated in households belonging to this quintile. Lee Jin-seok, head of the Household Income and Expenditure Trends Division at Statistics Korea, explained, "Many households that received loss compensation payments moved up to higher income quintiles," adding, "Self-employed households that were in the 4th quintile may have received loss compensation payments and moved up to the 5th quintile."

As transfer income increased significantly for high-income households, the trend of improving income distribution, which had continued for three consecutive quarters, has stopped. The equivalized disposable income 5th quintile ratio, which indicates the income gap between quintiles, rose slightly to 5.60 times from 5.59 times a year ago, an increase of 0.01 points. The 5th quintile ratio is an indicator obtained by dividing the income of the 5th quintile by that of the 1st quintile; a higher number means a larger income gap and worse distribution. This is the first time in four quarters since the second quarter of last year that the 5th quintile ratio has increased year-on-year.

This content was produced with the assistance of AI translation services.