The government unveiled its "Public Institutions DIET 2026" plan on the 3rd. It calls for cutting 109 public institutions through 15 strategic structural reforms, 11 consolidations of similar or overlapping functions, and 83 mergers of subsidiaries and small institutions. High-impact items — such as merging the five power generation companies and four port authorities, and splitting the Korea Land & Housing Corporation (LH) — all fall under strategic structural reform. The direction of trimming fat from the public sector is right.
But the composition of that 109 deserves scrutiny. Some 83 of them, or 76% of the total, are subsidiaries and small institutions with fewer than 100 authorized positions. Nine involve not mergers or abolition but "removal of the grounds for public institution designation." Bodies such as the Construction Industry Education Institute, the Korean Accreditation Board of Nursing Education and the Women Enterprise Support Center will not disappear as organizations — they will simply drop off the list of designated public institutions. Being taken off the oversight list does not mean their functions have been reorganized.
The diagnosis underpinning the urgency of reform also needs to be precise. The government said financial soundness has deteriorated because of rising debt levels and debt ratios. Yet the charts in its own materials show the debt ratio peaked at 183.0% in 2023 before easing to 180.6% in 2024 and 174.1% in 2025. Authorized headcount also fell from a peak of 445,000 to 432,000 in 2025. Total debt, by contrast, rose from 542 trillion won in 2020 to 769 trillion won in 2025, and personnel costs climbed from 29.6 trillion won to 37.7 trillion won over the same period. Rising total debt must be distinguished from a falling debt ratio, and shrinking headcount from rising personnel costs. An accurate diagnosis makes reform more persuasive.
The policy record also merits a second look. Government documents state that the power generation sector was split into five companies in 2001 "to introduce competition into the electricity business." This time they are being merged again, on the grounds of pooling capacity for the energy transition and achieving economies of scale. For the port authority merger, the government separately cited "curbing excessive competition." A change of direction is not wrong in itself. But merging the generators without assessing what 25 years of separation gained and lost leaves no yardstick for judging the new policy's results.
The port authority merger warrants particular caution. The government plan would merge the four authorities in Busan, Incheon, Ulsan and Yeosu-Gwangyang into an entity provisionally named Korea Port Authority, converting the existing authorities into regional branches. The stated purpose of the merger is "unifying policy and planning functions," while the role of regional branches is "carrying out region-specific projects." That reads as a structure in which the merged entity takes policy and planning while regional branches execute specialized projects.
The four port authorities have 285 authorized positions in Busan, 283 in Incheon, 129 in Ulsan and 180 in Yeosu-Gwangyang, for a combined 877. Those figures alone are not enough to conclude that cost savings from the merger would be small. The government should disclose cost-benefit estimates that include the cost of merging. If the core purpose is unifying policy and planning functions, the substance of the merger is closer to a redistribution of authority than to downsizing.
Airports, an equally national piece of infrastructure, were handled differently. The government decided not to move immediately on merging Incheon International Airport Corporation and Korea Airports Corporation. Its stated approach is to draw up measures to revitalize regional airports, review how those measures are progressing, and only then revisit whether to merge. The judgment is to look first at whether the hub airport and regional airports can grow together.
Ports need the same phased approach. The four ports differ in cargo volume, primary freight, supporting industries and the roles they play in international logistics networks. The government should explain why airports get a decision on merging only after regional characteristics and shared growth are examined, while ports are bundled into a single authority without such vetting.
With a second round of relocating public institutions out of the capital area under discussion, clawing back the decision-making power of regional bodies to a single headquarters does not add up. Keeping only the address in the provinces while concentrating authority at the center is not balanced development but administrative recentralization. Regional organizations must be guaranteed authority over projects, budgets and personnel. Regional investment plans should be reviewed by consultative bodies that include local governments, port users and local businesses.
The merger of the five power generators should be judged by the same standard. Under the government's tentative plan, a renewable energy division at headquarters would handle large projects such as offshore wind, while three or four regional renewable energy divisions would take on solar and onshore wind. A "just transition division" tasked with retiring coal-fired power plants would also sit at headquarters. If regional divisions have no budget or decision-making power of their own, a just transition will remain a slogan. Transition support is also needed for subcontractors and indirectly employed workers excluded from job guarantees, and for local commercial districts.
The attempt to split LH into a provisionally named Housing and Urban Development Corporation and Housing and Urban Asset Corporation — separating the profitability of development from the public purpose of housing welfare — is worth noting. The government plans to set aside part of the development corporation's profits in a separate account of the Housing and Urban Fund and inject it into the asset corporation. But routing money through a fund leaves it vulnerable to shifting policy priorities. The transfer ratio, minimum scale and permitted uses should be written into law.
The government diagnosed the rise in the number of institutions as the result of "competition to host them, driven by regional, ministerial and political interests." If that diagnosis is right, the prescription should be to raise the bar for creating new institutions and strengthen after-the-fact evaluation. In the same materials, the government noted that the World Bank rated South Korea highly for centralized oversight, performance-linked management and fiscal discipline. If so, whether the policy and planning authority of regional bodies must also be gathered into a single headquarters requires separate proof. Unifying oversight and clawing back regional decision-making power are not the same thing.
Before finalizing reform plans for individual institutions, the government should clarify three things: the public value that mergers will raise, the benefits the public will gain, and how regional autonomy and accountability will be guaranteed. Performance indicators must not stop at the number of institutions cut. The government should measure and disclose how service quality and safety, purchases and orders from local firms, and regional organizations' authority over budgets, personnel and projects change before and after mergers.
The goal of public institution reform should not be small government but capable and accountable government. Organizations can be merged. But public value and regional authority must not be absorbed into central headquarters.
