The South Korean government is launching a sweeping restructuring that will eliminate 109 state-run institutions. Five power generation companies will be merged into one, oil and gas state utilities will be combined, four port authorities will be consolidated and Korea Coal Corp. will be liquidated. Korea Land & Housing Corporation, known as LH, will be split into two entities along functional lines. The merger of Incheon International Airport Corp. and Korea Airports Corp., however, has been put on hold and will be reviewed again after the government assesses the results of efforts to revitalize regional airports.
The Ministry of Finance and Economy announced the plan, drawn up jointly with related ministries, on the 3rd. The overhaul centers on reorganizing functions scattered across institutions and consolidating similar or overlapping operations to improve efficiency and competitiveness in the public sector. The total reduction comes to 109 institutions. Of those, 15 fall under structural reform tied to national strategy, 11 involve merging similar or overlapping functions, and 83 involve consolidating subsidiaries and small institutions.
The most striking changes come in the energy sector. The government will merge five power generation companies — Korea South-East Power, Korea Midland Power, Korea Western Power, Korea Southern Power and Korea East-West Power — into a single entity tentatively named Korea Power Generation. The five were separated in 2001 to introduce competition. Power plant management, fuel procurement, renewable energy investment and research and development, now handled separately by each company, will be brought together to create a large state utility capable of responding to the energy transition and supply chain shocks.
Each of the five companies currently spends about 50 billion won a year on research and development and about 200 billion won on renewable energy construction, and the government expects the merger to expand investment capacity while enabling joint procurement and streamlining duplicated staff and organizations. The merged entity plans to reorganize around functions including renewable energy, just transition and regional renewable energy.
The oil and gas sector is also targeted for consolidation. The government will pursue a merger of Korea National Oil Corp. and Korea Gas Corporation (036460) to launch an entity tentatively named Korea Energy and Resources Corp. The plan is to combine the functions of oil and gas state institutions to strengthen energy security and supply chain response capacity.
Korea Coal Corp., by contrast, is headed for liquidation. All of its mines have now closed, with the last one — the Dogye mine in Samcheok — shutting down in June last year. Its debt stood at 2.59 trillion won as of the end of last year, and it incurs more than 75 billion won in annual interest costs even without any operating activity. The government plans to secure funding to settle the debt, revise related laws and liquidate the company promptly.
In housing, LH faces major change. The government concluded that mixing development projects and housing welfare work within a single institution has slowed housing supply and increased the burden of managing rental housing, and decided to split LH's functions in two. Land development and housing construction will go to an entity tentatively named Korea Housing and Urban Development Corp., while housing welfare and asset reserve functions will go to one tentatively named Korea Housing and Urban Asset Corp. The operating structures of the two will be designed so that profits from development projects can fund housing welfare.
In ports, four port authorities — Busan, Incheon, Ulsan and Yeosu-Gwangyang — will be merged into one. The plan calls for a merged entity tentatively named Korea Port Authority, with the four existing authorities converted into regional branches. The aim is to unify port policy and planning functions while preserving the specialized roles of individual regional ports to bolster global competitiveness.
Rail operations will also be brought under one system. The government already integrated the high-speed rail operations of Korail and SR on the 1st of this month, increasing seat supply and improving fare and mileage systems.
The airport merger, by contrast, was left unresolved. Rather than immediately combining Incheon International Airport Corp. and Korea Airports Corp., the government will first draw up measures to revitalize regional airports, review progress and then reconsider whether to merge them.
Incheon airport's success as a hub is clear, but losses at regional airports and regional imbalances are widening, so the government says it will first craft a strategy under which Incheon and regional airports can grow together. To that end, it will form a body tentatively named the Airport Strategy Council and pursue specialized strategies and financial restructuring plans for each regional airport. Aviation security functions currently spread across the two airport operators will be consolidated into a separate specialized agency.
