Reform cannot be delayed any longer given the mismanagement, growing debt and oversized growth of public institutions over the past five years. One in two public establishments recorded a loss last year. The total debt of all public institutions is 583 trillion won, up from 90 trillion won over five years ago and comparable to the government’s budget for this year of 607 trillion won.
In particular, Korea Electric Power Corporation is facing a serious situation with a loss of 7.8 trillion won in the first quarter of this year. Its loss increases as LNG prices rise due to the war in Ukraine, while the share of LNG power generation has increased under the previous administration’s policies to expand new generation. renewable energy and to phase out nuclear energy. The amount of corporate bonds issued by Korea Electric Power Corporation until April this year exceeded 50 trillion won. It even started credit operations due to the lack of funds to purchase electricity from its subsidiaries.
The oversized growth of organizations also negatively affects the management of public institutions. The number of employees in 350 public institutions increased by around 100,000 between 2017 and the end of 2021, while their labor costs rose from 24.2 trillion won in 2012 to 32.4 trillion won in 2012. last year. Even in such difficult situations, the executives of Korea Electric Power Corporation, Korea Hydro & Nuclear Power and energy-related subsidiaries received about 100 million won in incentives last year. The leaders of the Korea Real Estate Board, which has confused policy with its incorrect statistics, and the Korea Tourism Board, which has failed to generate a performance due to a huge drop in the number of incoming tourists to cause of COVID-19, also received incentives. They find it difficult to avoid criticism of moral hazard.
South Korean public institutions are the largest in number and in the role they play among OECD member countries. The mismanagement of public institutions is partly attributed to the fact that the government passes on the costs of policies to them. The debt of public institutions is called the “hidden national debt” because the government practically acts as a surety. It should be paid with taxes at the end, which can further damage the country’s finances, which are already in danger. Without hasty efforts to eliminate the inefficiencies of public institutions and put their management back on track, the country’s finances will face serious consequences.