The government plans to cut the number of state-run institutions by 109, merging five power generation companies and combining Korea National Oil Corporation with Korea Gas Corporation. Korea Land & Housing Corporation (LH) will be split into two state-owned enterprises, one handling land development and housing construction and the other housing welfare and asset reserves. The relocation of central administrative agencies and public institutions in the Seoul metropolitan area to the provinces will also begin in earnest. Starting with the Ministry of Justice and the Ministry of Gender Equality and Family in the first half of next year, the Public Prosecution Office, the Serious Crimes Investigation Agency and the National Police Agency will move to Sejong City once new buildings are completed. Under a principle of minimizing exceptions, 350 public institutions based in the capital region will begin relocating next year.
Lax management at state-run institutions has been targeted for reform by successive administrations, yet progress has been slow. Expansion focused on outward size has eroded financial soundness and management efficiency while undermining public benefit. The five power generation companies, launched 25 years ago under a competitive structure, have likewise been criticized for deepening structural inefficiency through overlapping and duplicate investment. There is unlikely to be much disagreement that institutions with overlapping functions and business areas should be boldly consolidated.
Yet this reform plan also carries no small cause for concern. There is no concrete blueprint for how Korea National Oil Corporation, an unlisted company, and Korea Gas Corporation, a listed one, are to be combined. Some in the market even suspect that the losses of the oil corporation, whose capital is impaired, are being pushed onto the gas corporation. The LH split, pursued in the name of securing momentum for housing supply, could also concentrate the financial burden on one side while expanding only public rental purchases. Careful design that weighs both the benefits and the side effects of merging and splitting must come first.
The goal of reforming state-run institutions is to strike a balance between efficiency and public purpose and to raise competitiveness in step with changing policy conditions. Rather than clinging to uniform reduction targets and a rush for speed, the government should examine closely the functions and business competitiveness of each institution. If a competitive structure introduced to prevent the harms of a rail monopoly is now to be consolidated again on grounds of inefficiency, the government must also answer concerns that public benefit could be reduced. Overlapping functions should be boldly cleared away, but forcing mergers even in areas that need competition must not be allowed to weaken competitiveness. Nor will moving public institutions to the provinces on its own resolve concentration in the capital region or regional imbalance. A rush driven by political calculation could undercut the competitiveness of these institutions and deepen regional conflict. Every step, from functional reform to relocation, must be pursued in a direction that raises national competitiveness and public benefit.
