Overcoming the 1997 98 crisis

Knowledge Sharing Program

Ministry of Strategy and Finance, Republic of KoreaGovernment Complex 2, Gwacheon, 427-725, Korea ● Tel: 82-2-2150-7712 www.mosf.go.kr

Korea Development InstituteP.O. Box 113 Hoegiro 49 Dongdaemun-gu Seoul, 130-740 ● Tel. 82-2-958-4114 www.kdi.re.kr

Knowledge Sharing ProgramCenter for International Development, KDI

● P.O. Box 113 Hoegiro 49 Dongdaemun-gu Seoul, 130-740● Tel. 02-958-4224 ● www.ksp.go.kr

Korea Development InstituteMINISTRY OF STRATEGYAND FINANCE

Overcoming the 1997-98 Crisis : Public Sector Reform

March 2010

Overcom

ing the 1997-98 Crisis : P

ublic Sector R

eformM

arch 2010


The author greatly benefited from intensive interviews with Mr.JIN Nyum (former Chariman of Planning andBudget Commission and later Minister for Ministry of Planning and Budget), Mr. KIM Tae Dong (formerSenior Advisor to the President KIM Dae-Jung on Policy Planning), Mr. KIM Tae Kyum (former Director-General for Administrative Reform, PBC), and Mr. KWON Soon Won (former Director for Public CorporationManagement, MPB). The views or mistakes in this report, however, are solely those of the author.

#KSP공공문전체_5차 2011.2.15 11:14 AM 페이지1 지앤피2263-3111 T


Korea Development Institute(KDI)

Ministry of Strategy and Finance(MOSF), Republic of Korea

Wonhyuk Lim, Director, Policy Research Division, Center for International Development(CID), KDI

Jin Park, Professor, KDI School of Public Policy and Management

Yoon Jung Kim, Research Associate, Policy Research Division, CID, KDI

Kwang Sung Kim, Freelance Editor

Government Publications Registration Number 11-1051000-000102-01

ISBN 978-89-8063-464-4 93320

Copyright ⓒ 2010 by Ministry of Strategy and Finance, Republic of Korea

Project Title

Prepared by

Supported by

Project Director

Author

Project Coordinator

English Editor



Government PublicationsRegistration Number

11-1051000-000102-01


March 2010

Knowledge Sharing Program

MINISTRY OF STRATEGYAND FINANCE

Korea Development Institute


Contents

Background of Public Sector Reform ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 7

Establishing the Reform Driver and Guiding Principles₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 11

1. Birth of the Planning and Budget Commission (PBC) ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 12

2. Choice of Reform Agenda and Strategies ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 13

Reform for Small Government (1998) ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 17

1. Privatization of Public Corporations₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 18

2. Downsizing the Public Sector ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 24

3. Massive Regulatory Reform₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 31

Reform for More Effective Government (1999) ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 33

1. Review of Ministries’ Function₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 34

2. Bureaucracy Reform₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 38

3. Fiscal Reform ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 42

Chapter 03

Chapter 02

Chapter 04

Chapter 01


Evaluation and Suggestions ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 45

1. Evaluation₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 46

2. Suggestions for Reform-Driver₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 55

Conclusion₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 59

Appendix & Reference₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 62

Chapter 05

Chapter 06


<Table 1> Size of Public Corporations (1998) ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 19

<Table 2> Privatization Efforts in Korea in the past 40 Years₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 20

<Table 3> Three Types of Privatization Planned in 1998 ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 22

<Table 4> Results of Privatization by December 2002 ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 23

<Table 5> Changes in the Public Corporations ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 24

<Table 6> Financial Performance of Privatized Public Enterprises ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 24

<Table 7> Trend in the Number of Civil Servants ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 26

<Table 8> Classification of Public Entities during 1998 (number of organizations) ₩₩₩₩₩₩₩₩₩₩₩₩ 26

<Table 9> Distribution of GAOs by Size in 1998 ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 27

<Table 10> Summary of Restructuring Plan of Public Entities ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 29

<Table 11> Workforce Reduction in the Public Sector ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 30

<Table 12> Compensation Structure ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 40

<Table 13> Performance Bonus Rate (as of 2000)₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 40

<Table 14> The First Revision of the Performance Bonus ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 41

<Table 15> The Range of Annual Pay (as of 2005) ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 42

<Table 16> Number of Public Funds ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 42

<Table 17> MD World Competitiveness Evaluation and Ranks ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 47

<Table 18> Comparison of the Reform Driving Bodies ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 52

<Table 19> Government Reform Agenda among Top 100 National Agenda₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 53

<Table 20> Changes in Officials’ Training Institutes ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 55

<Figure 1> Public Sector Reform Agenda ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 14

<Figure 2> Number of Privatized Public Corporations ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 22

<Figure 3> Decision Tree of the Government Function Review₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 37

<Figure 4> Organizational Chart of the Reform-Leading Organization ₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩₩ 57

Contents | List of Tables & List of Figures


Background of Public Sector Reform

Overcoming the 1997-98 Crisis : Public Sector Reform Chapter 01


Though Korea’s economic crisis of 1997 was mainly caused by the problems in the private

sector, the public sector was also responsible. By the 1990s, the government-led growth model,

which involved extensive state intervention in the private sector, was no longer applicable to the

Korean economy. In particular, the state’s role in financial distribution led private companies to

believe that they were insured by the government against all possible risks. Ultimately, this

moral hazard led firms to over-borrow, which in turn became the internal cause of the 1997

crisis.

The bloated public sector in terms of its size and responsibility was the basis for a slow and

inefficient policy-making process. The public sector was an overweight patient with

arteriosclerosis. The circulation of information within government bodies was not smooth, and

civil servants were just repeating what they had done in the past without trying to anticipate

impending risks or opportunities to the economy. It was thus not surprising that the government

failed to foresee the worst economic crisis that had ever hit Korea. The surplus labor in the

public sector was not only imposing a burden on the taxpayers but also creating unnecessary

regulations to justify their existence. There was a dire need for reducing both the market


008

Background of Public Sector1 Reform

Chapter 01

1_ The public sector in this report refers to the administrative bodies and public entities. The administrativebodies refer to the central and local government, local offices of education and national universities. Theemployees in those organizations are all civil servants. On the other hand, public entities include publiccorporations, government-funded organizations etc. The employees in the public entities are not civilservants, but their budgets and activities are controlled by the government. The political arena such as thenational assembly or local councils, and the judiciary are also a part of the broadly-defined public sector, butthey are not covered in this chapter. ‘Public sector’ reform is interchangeably used with ‘government’reform in this report.


interventions and the surplus labor in the public sector.

The public sector was also needlessly wasting taxpayer’s money. Large portions of

government expenditure was misused or abused. Such problems were even more serious in

public entities such as public enterprises and government-affiliated organizations. Since fiscal

soundness was the main locomotive to driving the Korean economy out of the crisis, public

expenditure reform was very critical to Korea’s credit rating. With all these problems latent in

the Korean public sector, the economic crisis revealed a need for public sector reform to reduce

government intervention and expenditure as well as to improve the overall performance of the

public sector.

After the crisis, the International Monetary Fund (IMF) sought drastic reforms in the

corporate, financial and labor sectors. However, other than a reduction in government

expenditures, the IMF did not ask for any public sector reforms. Nevertheless, the Korean

government considered public sector reform to be an important catalyst to reforming the other

three sectors. In essence, the government, by reforming itself, tried to set the precedence that

would drive the sweeping changes needed in the private sector.

Before his inauguration in February, 1998, then president-elect Kim Dae-Jung created

drivers of reform: the Ministry of Finance and Economy for corporate reform, the Financial

Supervisory Commission for financial reform, the Planning and Budget Commission (PBC) for

public sector reform, and the Korea Tripartite Commission for labor reform. Chapter 2 will

explain one of these newly created reform drivers, namely the PBC in a more detailed way

along with the strategies that it took.

The goal of the public sector reforms was to achieve a smaller and more efficient, but better-

serving government. This ultimate goal was targeted at three aspects of government

administration: input, process, and outcome. The first effort was to reduce the input to downsize

the government in terms of its budget, staff, and scope of functions. The objective was to reduce

not only the input costs but also the government’s intervention in the market. There were three

major reform initiatives in this category carried out during 1998: privatization of public

corporations, downsizing of the public sector, and massive deregulation, which were viewed as

symbols of Korea’s willingness to undergo extensive reforms. Chapter 3 covers these three

reform efforts.

The second aspect of the government reform was to pioneer a new business process within

the public sector. Increasing the overall competency of civil servants and effectiveness in policy

formulation was an integral part of the reform in preventing the recurrence of economic crises.

The government tried to accomplish this goal by reviewing the functions of the ministries, and

by improving the bureaucracy system and implementing fiscal reform. These three were the

Chapter 1 _ Background of Public Sector Reform

009


major reform initiatives on the agenda during 1999, which will be explained in chapter 4.

Third, improving public policy and service, as the output of the government, was also one of

the three reform initiatives. It was essential to restore the citizens’ trust of the government.

These reforms, however, were conducted after 2000, along with anti-corruption and electronic

government initiatives. As such, these reforms are not covered in this report, which assesses

policy responses during the 1998~1999 period, immediately following the economic crisis.

Chapter 5 will evaluate government reforms during 1998~1999 based on four key factors

that are deemed necessary to successfully carry out reforms: presidential leadership, the reform

driving organization, roadmaps and action plans, and implementation. Suggestions will also be

made regarding the reform driving organization, which this report finds to be strategically the

most important factor to any reform effort and the most commonly applicable to all countries.

Chapter 6 will conclude the report.

The objective of this report is to explain Korea’s policy response to the economic crisis from

the perspective of government reform so that other countries can learn from the Korean

experience. However, what Korea was able to achieve may not be applicable to other countries

since each country has its own unique initial conditions in its economy and government.

Instead, the way Korea went about in accomplishing the reforms could offer more universal

lessons that can be applicable to other countries. This report, therefore, will focus on the

strategic aspects of how Korea conducted the reforms rather than offering a simple description

of what Korea did.


010


1. Birth of the Planning and Budget Commission (PBC)

2. Choice of Reform Agenda and Strategies

Establishing the Reform Driver andGuiding Principles



1. Birth of the Planning and Budget Commission (PBC)

In early January, 1998, about a month before his inauguration, then President-elect KIM

Dae-Jung established the Government Restructuring Sub-committee under the Presidential

Transition Committee. The Sub-committee consisted of both government and non-government

members, and its mandate was to reorganize all cabinet ministries, mostly with the aim of

consolidating or restructuring the ministries. This sub-committee prepared a final proposal,

based on the reports of various sources,2 which was subsequently approved by the National

Assembly on February 17, 1998, eight days before the President’s inauguration.

This pre-inauguration reform initiative was different from past efforts in that non-government

members played a major role in the decision-making process. Coming as it did in the wake of a

major economic crisis, there was a widespread consensus that any government reform should be

carried out by experts from non-government sectors.3 One of the important directions of this

cabinet restructuring was to restructure the Board of Finance and Economy (BOFE), which had

been criticized for its failure to prevent or foresee the economic crisis. BOFE was thus separated

into three ministry-level bodies: the Ministry of Finance and Economy (MOFE), the Financial

Supervisory Commission, and the Planning and Budget Commission (PBC).


012

Establishing the Reform Driver and GuidingPrinciples

Chapter 02

2_ For instance, the Ministry of Government Administration and the Korean Development Institute (KDI)3_ This idea had been reflected much in the staff composition of Planning and Budget Commission (PBC)as well. PBC recruited 14 experts from non-government sectors such as universities, research institutes, andprivate firms in consulting, accounting, and law.


The PBC had two mandates: establishing guidelines for formulating the national budget and

reforming the public sector.4 As a presidential commission, the PBC was expected to have

strong authority to reform other ministries. The combination of the two mandates —

government reform and budget planning — was an idea inspired by the US Office of

Management and Budget (OMB). The budget function of the PBC was effectively used as an

implementation tool for reform since many of the reform initiatives were tied with budget

saving.

Initially, the PBC was expected to be given wide jurisdiction over not only budget planning

but also full-fledged budget formulation. However, concern about the possible over-

concentration of power lying with the president led to the division of the budget function into

two parts, planning and formulation.5 The PBC was given the function of budget planning and

setting priorities and guidelines for budget formulation, while the actual function of formulating

the budget based on the PBC’s guidelines remained in the Budget Office under the Ministry of

Finance and Economy (MOFE). The Budget Office, therefore, had to report to the PBC even

though the Office was under the umbrella of MOFE. The Budget Office was integrated into the

PBC, thus, forming the Ministry of Planning and Budget (MPB) in May, 1999.

2. Choice of Reform Agenda and Strategies

There was no clear roadmap for public sector reforms during the 1997 presidential

campaign. Although the Presidential Transition Committee had a list of reform initiatives on its

agenda, it did not have specific priorities or strategies much less action plans for executing each

of the reform initiatives. This is why government reform had stalled for about a half year until

the second half of 1999 when all the major reform initiatives explained in this report were

completed.

The PBC’s major reform agenda in 1998~1999 included the privatization of public

corporations, downsizing the public sector, mass deregulation, followed by a review of all

Chapter 2 _ Establishing the Reform Driver and Guiding Principles

013

4_ The PBC’s mandate of public sector reform came partly from the Ministry of GovernmentAdministration, which was merged with the Ministry of Home Affairs to create MOGAHA (Ministry ofGovernment Administration and Home Affairs). In 2008, however, its name was changed to MOPAS(Ministry of Public Administration and Security).5_ Unlike MOFE, the PBC was not a part of the cabinet, and thus, was not under the control of the prime-

minister, but placed directly under the president. The division of the budget function was the result of acompromise between then President-elect Kim and the Prime Minister-to-be, the second shareholder of theco-habitant government. Both of them knew that the budget function was a source of power.


ministries’ functions and bureaucracy and fiscal reform. These reform initiatives were among

those listed in the final report by the Presidential Transition Committee and officially selected

as the PBC’s mandate in close consultation between the PBC and the Presidential Office.

However, the National Assembly did not play much of a role in formulating the reform agenda.

In April, 1998, the PBC announced three major public sector reforms as the following figure

shows. However, the PBC did not pursue the three reforms at the same time. The input reform

was initiated under the banner of “small government” until September, 1998. The need for the

process reform was introduced in late 1998, and attracted the attention of the public throughout

1999. After 2000, the outcome reform on anti-corruption and better delivery of government

services to its citizen was the top reform priority.

This gradual progression of reform priorities (input → process → outcome reform) turned

out to be an excellent approach, though it was not explicitly planned as such in early 1998. The

reduction of inputs was imperative as a way to secure fiscal soundness and also as a catalyst for

other reforms in the corporate, banking, and labor sectors. The sequence proved adequate from

the point of conflict management and resolution as well. Since resistance from stakeholders was

highest during input reform, and weakest during outcome reform, it was the right choice to start


014

Figure 1 | Public Sector Reform Agenda

Source: MPB (2002), significantly modified.

Small and Efficient but Better-Serving Government

1998

<Input Reform>Downsizing

1999

<Process Reform>Operation system innovation

2000~

<Outcome Reform>Improving public service

Downsizing workforce,Outsourcing

Reducing employees

Integration of organizations

Uniform budget cuts

Privatization of publiccorporations

Regulatory Reform

BPR of the Government (Business Process Reengineering)

Decentralization

Bureaucracy ReformPayment system

Open appointment

Budget process reformPerformance budgeting

Multi-year budgeting

Public fund and special account

Clean & Transparent Gov’tAnti-corruption

Administrative information disclosure

Improving administrative procedure

e-Government11 projects such as G4C, G2B…

Customer satisfactionCitizen’s Charters

Customer satisfaction survey

Simplifying civil application process


reforms in the areas that had the most resistance during the early days of the Presidency. In a

way, it was an inevitable choice for the government to focus on less controversial agendas such

as e-government6 at the later part of the President’s term.

The PBC had a firm principle that was applied to all the reform efforts: market over public

sector. This philosophy was consistent all throughout the Kim administration and commonly

shared by the members of the PBC. No other reform initiative from previous administrations

had such a clear orientation. The background behind this firm orientation was the understanding

that the government had been intervening in the market excessively. It was true that the NPM

(New Public Management), which had been a global trend since 1980s had a significant

influence on the adoption of this strategy. On the other hand, there was also criticism that the

reform was biased towards neo-classical ideology. Some scholars noted that the reform was

overly focused on increasing efficiency as seen in the application of private sector management

practices in the government, without recognizing the difference between the two sectors.

However, it was in a way inevitable and necessary to have the pendulum swing to the other

extreme before an appropriate level of government intervention was reached.

The reform was conducted in a top-down manner. Action plans for each reform initiative

was pushed by the PBC down to the line ministries and the public entities in a rather high-

handed manner. As a result, there was criticism that the PBC saw the public servants merely as

a target of restructuring rather than as partners with whom to cooperate. However, the ad hoc

reforms would not have otherwise taken place, given that the initiatives such as downsizing the

workforce, privatization, and integration of organizations were all painful for the relevant

organizations. A strong top-down approach from the PBC was, therefore, inevitable during

1998 when input reduction was a major objective of the reform. After 2000, however, the

reform had evolved into one which encouraged voluntary participation from inside each of the

organizations.

Despite the top-down nature of the reform, however, the PBC tried to embrace the various

positions of stakeholders. The PBC sought to build a consensus with the relevant ministries,

who were generally cooperative because they knew that the public sector reform was strongly

supported by both the President and Korean citizens. Sometimes, however, when it came to an

issue that was not in their interests, line ministries would not comply with the PBC’s guidelines

and directives. In such cases, the Presidential Office intervened and resolved the disagreement

between the PBC and the line ministries, usually siding with the PBC.

Chapter 2 _ Establishing the Reform Driver and Guiding Principles

015

6_ In early 2001, the Special Committee for e-Government was established under the President to leadgovernment-wide e-government projects. This committee then selected 11 major e-government projects tobe completed by the end of 2002. President Kim showed his interests in e-government projects by reviewingbi-weekly progress reports.


The PBC also had its own powerful tool to enforce its guidelines: budgetary discretion.

During 1998~1999, when it negotiated with the line ministries, the PBC did not have to use its

budget function as leverage, but after 2000 when public support for reform waned, the PBC

actively took to the principle of “no compliance, no budget” to push its reform agenda.

Another feature of Korea’s public sector reform during 1998~1999 was that it was pushed

forward in an extremely drastic manner. Most of the privatization plans for public corporations

were made within two months of time, and the review of all the ministries’ functions was

completed in four months. This was because the public sector reform had to achieve a ‘quick-

win’ in order to set a model for other sectors, as well as to facilitate a recovery from the

economic crisis as soon as possible. Kotter (1996) also emphasized the creation of the guiding

coalition in the early stages of reform to ensure success. Another rationale for this ‘rush job’

was the fact that as much of the reform as possible had to be accomplished while the President

still enjoyed strong public support in the early years of his presidency.7


016

7_ In Korea, where the President is allowed to serve only one five-year term, the lame duck periodgenerally starts from the 4th year of the presidency.


1. Privatization of Public Corporations

2. Downsizing the Public Sector

3. Massive Regulatory Reform

Reform for Small Government (1998)



1. Privatization of Public Corporations

The privatization of public corporations took the highest priority of any reform initiative on

the agenda in 1998. Highly symbolic of market-oriented reforms, privatization was expected to

enhance the international credit rating of Korea as well as increase revenue for the government.

Initial Conditions

In 1998, there were 26 public corporations, which had 82 subsidiaries operating under their

umbrella. Their total employment reached 214,000, substantially more than the 162,000 people

employed as central government officials, not including teachers and policemen. If the

government owned more than 50% of the firm’s share, it was called a Government-Invested

Institution (GII), and a Government-Contributed Enterprise (GCE), if less than 50%,.8 Since the

GIIs were considered to have a more public mission than GCEs, GIIs were more tightly

controlled by the government.


018

Reform for Small Government (1998)

Chapter 03

8_ However, this classification is no longer effective. Depending on its own revenue share among the totalrevenue, public corporations are categorized into two types: Market-type with 85% or more, semi-markettype with 50~85%. All of the market-type ones have assets of more than 2 billion USD, and are generallybigger in terms of revenue and employment than semi-market type ones. (Park, 2009) See appendix 1.


Public corporations had many problems. They had over-expanded and eroded the private

sector. For example, Pohang Steel (POSCO) had 16 subsidiaries, while Korea Telecom (KT)

owned 13 subsidiaries in various fields, all competing with private companies. Furthermore,

loose management practices resulted in bloated payrolls, which led to excessive expenditures on

wages and welfare. In addition, these firms were overly dependent upon their supervising

ministries and had little autonomy over their internal management and business decisions. To

address these issues, the PBC established a principle that public corporations with potential for

commercialization should be privatized.

The Reform Process

Mandated to manage Korea’s national assets including the government’s share in public

corporations, the Ministry of Finance and Economy (MOFE) argued that any privatization effort

should be led by them and, not by the PBC. However, the Presidential Office made it clear that

the PBC should be the locomotive of the privatization train. It was expected that MOFE would

be less pro-active in the privatization efforts since it would reduce the number of national assets

to be ‘managed’ by the Ministry. As we will see in chapter 5, a ministry will not reform its own

responsibilities if the change goes against its own interests. The PBC established the Public

Corporation Privatization Committee, which included experts from academia along with the

ministers supervising the public corporations under their umbrellas. The Chairman of the PBC

also served as the chairman of the Privatization Committee, and the MOFE vice-minister served

as the vice-chairman, which was the result of negotiations between the PBC and MOFE. The

PBC had to work with MOFE because the laws related with the privatization of public

corporation were under the authority of MOFE.

In May, 1998, the PBC started to formulate plans based on data submitted by each line

ministry. The names of public corporations to be privatized and detailed action plans were

worked out with the help of professionals from government-funded research institutes such as

KDI. The detailed privatization plan was announced in the summer of 1998. It took only 2 ~3

Chapter 3 _ Reform for Small Government (1998)

019

Public Corporations

Government-Invested Institutions 13 (30) 85,000 44.0

Government-Contributed Enterprises 13 (52) 129,000 54.9

Total 26 (82) 214,000 98.9

Number

(subsidiaries)Employment

Budget

(billion$)

Table 1 | Size of Public Corporations (1998)

* Six public financial corporations and their 43 subsidiaries are not included here. ** The exchange rate is set at $1 = 1,000 won for computational convenience.Source: Press release (PBC, July 1998)


months to come up with the action plans for 108 public corporations. This prompt formulation

of action plans was made possible by the prior studies conducted during the previous

administrations.

Although privatizing public corporations had been done in 1968, previous efforts had never

been particularly successful due to both the government’s reluctance to transfer ownership and

stakeholders’ resistance. The privatization plans of 1998 were radical compared to previous

efforts in the sense that they pursued privatization of ownership instead of a simple sale of the

government’s ownership share.


020

Phase Past Efforts Main Objective and Evaluation

Table 2 | Privatization Efforts in Korea in the past 40 Years

1st Phase

(‘68~‘73)

Privatization of 11 Public corp.

Korea Machinery

Korea Transportation

Korea Shipping

Korea Ship-building

Incheon Heavy Manufacturing

Korea Steel Corp./ Korean Air

Korea Mining Refinery

Korea Saltern Corp./ Commercial Bank

Korea Fishery Development

Birth of private companies

→ market economy

Successful privatization

2nd Phase

(‘78~‘83)

Privatization of 7 public corporations

Daehan(Korea) Reinsurance

Daehan(Korea) Oil

Daehan(Korea) Dredging Corp.

Hanil Bank / Jeil (First) Bank

Seoul Trust Bank / Choheung Bank

Financial market promotion

Since government’s intervention was

continued, the objective of the

privatization was not fulfilled.

3rd Phase

(‘87)

Privatization of Korea Stock Exchange

Reducing government share

KEPCO (Korea Electricity Power Corp.)

POSCO (Pohang Steel Corp.)

Redistribution policy: Sale of

government share to individuals rather

than companies

It was not a privatization in its real

sense of the word.

4th Phase

(‘93~’97)

Privatization

Daehan(Korea) Tungsten

Kookmin Bank / Housing Bank

Other 7 subsidiaries of public corp.

Reduce gov share of 22 public corp.

Original target: privatization of 58

corporations except energy and

telecommunication industry but only

partially successful.(Conglomerate’s

dominance was a main issue.)


Privatization Plan

The first issue was whether to allow ownership to be concentrated or to pursue a more

diluted ownership structure dispersed among many shareholders. A concentrated ownership

structure was considered to be more efficient due to its clear line of accountability, yet the risk

remained that concentrated ownership would lead to monopoly power. The PBC thus believed

that a more dispersed ownership structure had to be pursued in instances when privatization

risked creating a monopoly.

Another issue was whether to sell shares of public corporations to foreign investors or to

Korea’s big conglomerates, chaebols. The decision to open the door to foreign capital was

relatively easy since it was viewed as a symbol of Korea’s willingness to follow global

standards. The PBC conducted an open bidding process with international investors by issuing

foreign depository receipts (DR). However, the issue of chaebols was a different story in light

of their ties with the government which was criticized as one of the root causes of the economic

crisis. Since their economic power was already dominant in the Korean economy, the general

public and thus the government did not want to reinforce their economic influence by

transferring the ownership of major public corporations to them. As a result, the big

conglomerates such as Samsung, Hyundai, LG and SK were not invited to the privatization

shopping spree.

The third issue was whether public corporations should be privatized right away or after

some period of restructuring. Immediate privatization was deemed the solution for five public

corporations. They were all government-contributed enterprises with less than 50% share of

government ownership, and were less controversial when it came to the decision of

privatization. By contrast, six public corporations were subjected to phased privatization

because the stakeholders needed a transition period as in the case of KT&G, or because the

network industries had to be reshaped to avoid a private monopoly. As the following table

shows, there were three different types of privatizations for 11 public corporations.


021

Source: MPB (2002), Ministry of Strategy and Finance, Park (2009, modified)

5th Phase

(‘98~’02)

Privatization of 8 public corporations

(original plan was 11 public corp.)

Privatization of 67 subsidiaries of

public corp. (original plan was 77)

Restructuring and downsizing

Very extensive privatization plan

Privatization of the three network

industries (Electricity, Gas, Heating)

was stopped by Roh administration

(2003~2008).

6th Phase

(‘08~’10)

Privatization of subsidiaries

Asset sales

The three network industries have not

been privatized yet.



022

Immediate Privatization Phased Privatization

Table 3 | Three Types of Privatization Planned in 1998

Concentrated

ownership

Korea Technology Banking Corp.

National Textbook Company

Korea Heavy Industry & Construction Co.

Korea General Chemical Corp.

Dispersed

ownershipPohang Iron & Steel Company (POSCO)

Daehan Oil Pipeline Corp.

Korea Telecom (KT)

Korea Tobacco and Ginseng (KT&G)

Korea District Heating Corp.

Korea Electric Power Corp. (KEPCO)

Korea Gas Corporation

Figure 2 | Number of Privatized Public Corporations

Public Corporations (24)

Government-Invested

Institution (GIIs, 13)

Government-Contributed

Enterprises (GCEs, 11)

GIIs GCEs Total

Immediate Privatization - 5 5

Phased Privatization 1 (KEPCO) 5 6

Restructuring only 12 1 13

Total 13 11 24

Subsidiaries (75)

GIIs had 29 GCEs had 46

GIIs GCEs Total

Immediate Privatization 8 25 33

Phased Privatization 14 14 28

Integration 3 3 6

Restructuring only 4 4 8

Total 29 46 75

Source: PBC, Press Release, January 1999, modified


24 public corporations and their 75 subsidiaries — a total of 99 organizations — were

reviewed for privatization.9 11 out of 24 public corporations were selected for either immediate

privatization or in phased privatization. The privatization of their subsidiaries was even more

drastic: in that 61 out of 75 subsidiaries were selected for privatization.

Achievements

Out of 88 public corporations to be privatized, 74 cases were completed by the end of 2002.

Among 11 public corporations to be privatized, Korea District Heating Corporation, Korea

Electric Power Corporation, and Korea Gas Corporation have not been privatized yet. Their

privatization phases were supposed to be extended after President Kim’s administration

(1998~2003). The original privatization plans were reviewed by the Roh administration

(2003~2008), and subsequently stopped or nullified. The Lee administration (2008~2013) then

reexamined the possibility of privatizing the three public corporations in 2008, but failed to

revive their privatization.10 As the old adage goes, we must strike when the iron is hot, and so

too must we work to achieve reform when it is strongly supported by the public. This approach

is even more crucial in a country like Korea, where the President can only serve one five-year

term.

Despite some exceptions, most of the public corporations and subsidiaries were privatized.

As a result, their numbers have decreased by 78.3%, and the number of employees working in

those corporations decreased by 61.8%.


023

9_ Out of 26 public corporations, two news-media corporations, Korea Broadcasting Company (KBS) andSeoul Newspaper were exempted from the review along with their 7 subsidiaries.10_ The Roh administration did not like the idea of privatization whereas the Lee administration failed toprivatize them due to a lack of public support after the candlelight vigil caused by the Korea-US beefnegotiation.

Immediate Privatization 5 5

Phased Privatization 6 3

Subsidiaries 77 66

Total 88 74

Planned Completed

Table 4 | Results of Privatization by December 2002

Source: Summarized from MPB (2003, p.119)


As a result of the privatizations, the government was able to secure revenue of 24.3 trillion

won, and $10.7 billion of foreign currency denominated revenue. This was, of course, a great

boon to Korea, which was then undergoing a foreign currency crisis. Moreover, the financial

performance of the privatized public corporations significantly improved, which implied that

privatization was not merely a way of generating revenue but also of improving Korea’s

national economic competitiveness.

2. Downsizing of the Public Sector

For the sake of fiscal soundness, downsizing of the public sector was an essential part of the

reform. Given that numerous financial institutions and private companies were to be liquidated,

it was inevitable that the pain would also spill over to the public sector. The PBC had both


024

Public Corporations 26 19

Subsidiaries 74 22

Staff # (1,000) 212 81

1998 Nov. 2002Number

Table 5 | Changes in the Public Corporations

*The figures do not include financial public corporation.Data: MPB (2002, modified)

Korea Heavy Industry and Construction Co△24.9 (‘00) → 433.5 (Dec. ‘00) →

25.1 (‘01) 755.4(July ‘02)

Korea Technology Banking Corp.△128.2 (‘98) → 81.5 (Dec. ‘98) →

13.2 (‘01) 211.0(July ‘02)

POSCO955.5(‘00) → 7,660.6 (Oct. ‘00) →819.3 (‘01) 12,353.7(July ‘02)

Daehan Oil Pipeline Corporation △28.6 (‘00) → 9.0 (‘01) Unlisted

Net profit

(billion won)

Market value

(billion won)

Table 6 | Financial Performance of Privatized Public Enterprises

* Decline of POSCO’s profit was due to reduced international demand. POSCO’s profitability recovered soon after,and its profit reached more than 3 trillion won in 2009.

* Since the National Textbook Company was merged into Dae-han textbook, its performance is not made available.Source: MPB (2002)


universal restructuring guidelines and organization-specific reform plans. The common

guidelines to both the administration and the public entities were targeting reduction in the

number of staffs, size of budget, and pension benefits. The organization-specific actions, on the

other hand, were given to each public entity but not to the ministries. Each ministry was given a

prescription after a function review in 1999, as will be explained in the chapter 4.

Ministries in the Administration

A proposal to downsize the central government was initially suggested prior to the

President’s inauguration in February, 1998, and later reinforced in May, 1999. The plan was to

lay off 26,000 employees, equivalent to 16% of the total number of employees of 162,000, not

including public school teachers and policemen. A plan to reduce local government employees

by 30% was announced in 1998 and 1999 by MOGAHA (Ministry of Government

Administration and Home Affairs). Since local governments were expected to have more slack

in their payrolls, their reduction rate was expected to be higher than that of the central

government. Although the central government had limited influence on the autonomy of local

governments, the central government used its discretion over financial transfers to local

governments as leverage in getting their cooperation on the downsizing plan.

Civil servants in Korea had the benefit of lifetime employment under statutory law, unless

they committed a crime. Therefore, the downsizing plan depended on the natural attrition of

employees and incentives to induce voluntary retirement. In order to speed up the process, the

retirement age was also adjusted down from 61 to 60 for higher ranking officials, and from 58

to 57 for lower ranking officials during 1998.11 These reforms would not have been easy had

there been labor unions in the government. It was not until 2002 that the Korea Government

Employees’ Union was established,12 and the union was legalized in 2005 with the right to

organize and to bargain collectively but without the right of collective action such as strikes.

Though the number of civil servants had increased rapidly in the five years leading up to the

1997 crisis, it dropped by 5.1% between 1997~2002, a first in the history of Korea’s public

administration. Though the net reduction shown in the table during 1997~2002 was 48,000, the

gross reduction was 79,000 (22,400 from the central government and 56,600 from local

governments) since 31,000 new employees were hired during the same period especially

teachers, police officers, firefighters and welfare workers.


025

11_ Korea’s bureaucracy had 9 ranks, with ranks 1-5 representing higher-ranking employees and 6-9representing lower-ranking employees. Beginning in 2013, the retirement age will be equalized for all ranks.12_ The government employees working for the railway or postal service were allowed to have a laborunion long before 2002: 1945 for the railway, and 1958 for the postal service.


Public Entities

Public entities are organizations that were established and financially supported by the

government in return for their service to the government. These include public corporations,

government-affiliated organizations (GAO), and government-funded research institutes. Though

many public corporations were privatized as described earlier, the remaining ones had to endure

painful downsizing plans under the PBC. Unlike public corporations, which had their own

revenue sources, GAOs were financially more reliant upon government budget because their

missions did not generate market revenues. Depending on the type of financial support, GAOs

were divided into three categories, as shown in the following table. Government-funded

research institutes were GAOs in their legal status, but due to their different governance

structures they were separately categorized.

The number and the size of GAOs had been expanding rapidly because the government had

used GAOs as policy agents and also because GAOs were providing job opportunities for civil

servants after retirement. As a result, there were 324 GAOs in the central government. In 1998,


026

No. of Civil Servants*

Rate of increase (%)

1982 1987 1992 1997 2002

Table 7 | Trend in the Number of Civil Servants(unit: thousand persons)

* Includes teachers, police, firefighters, and welfare workers.Source: MPB (2002)

648 705

8.8

886

25.7

936

5.6

888

-5.1

Public

corporations (26)

Gov-affiliated

organizations (GAO)

(324)

Gov-Funded

Research Inst. (59)

Gov-invested Institutions (13): whose government share is more than 50%

Gov-contributed Enterprises (13): whose government share is less than 50%

Gov-funded Institutes (50): whose budget is entirely or partially funded by the

government indicated by a law

Gov-subsidized Institutes (206): whose specific projects are subsidized by the

government year by year.

Gov-commissioned Institutes (68): who finance themselves with public

mandates commissioned by the government (no budget support)

Government-funded Institutes in the field of Research (KDI, KIST, …)

Table 8 | Classification of Public Entities during 1998 (number of organizations)

Source: MPB, Press release (January 1999)


their total employment was 93,000 people, and their total budget was $34.2 billion, with $4.4

billion of government budget support. Despite their large number, the total employment and the

budgets of GAOs were around 40% compared to those of public corporations because they were

much smaller on average.

Reform measures specific to each organization such as integration, asset sales, outsourcing,

eliminating monopolistic functions, and deregulation, were suggested to each GAO. After the

PBC received basic information from GAOs during May 1998, the organization-specific action

plans were formulated within three months, and announced in August.

After all the organization-specific prescriptions were implemented, a 20% cut on running

costs was also applied uniformly across all GAOs. Since this uniform cost cutting measure was

implemented after the organization-specific restructuring, the restructuring pain of the GAOs

was even more serious. The PBC, therefore, tried to mitigate resistance by providing a three-

year implementation period. As a result of these organization-specific plans and universal

downsizing, GAOs had to shed 25% of their total employment on average. The 20% running

cost cut became somewhat more flexible later because of different initial conditions, in that

some organizations were more efficient than others.

There was a widespread consensus that the retirement pensions of both public and private

sectors were excessively generous. In December 1998, the government announced plans to

abolish the cumulative system of legal retirement pensions of the public sector. The plan was

expected to trigger a similar change among private companies as well. Additionally, the

generous early retirement package program of the public entities was adjusted to that of the

government in July, 1998.

However, these reform efforts by PBC had no formal statutory basis, as each GAO was

supposed to be supervised by their relevant ministry, rather than by the PBC. The PBC’s reform

effort during 1998 was effective because it began in the wake of an economic crisis, especially

during the first year of the Presidency. However, when the lame-duck period of President Kim


027

Employment

(# of GAOs)

2,000~

(11)

1,000~2,000

(21)

500~1,000

(14)

100~500

(74)

~ 100

(204)

Total93,000

Budget,million USD(# of GAOs)

500 ~

(13)

100~500

(23)

50~100

(19)

10~50

(64)

~ 10

(205)

Total34,200

Table 9 | Distribution of GAOs by Size in 1998

Source: PBC press release (August 17, 1998), $1=1,000won


began in 2001, the line ministries argued that the supervisory power over GAOs should be

returned to the ministries. During 2001~2003, the reform momentum for GAOs was

dramatically weakened. If the PBC, and later the MPB, had established the statutory basis to

manage the GAOs during 1999~2000, the reforms would likely not have stalled. After 2001, the

MPB tried to enact a law that would give it supervisory authority, but it was not successful due

to the strong resistance of line ministries. It was only at the end of 2003, the first year of the

Roh administration (2003~2008), that the law was finally enacted. This is a reminder that any

reform which runs counter to the interests of the line ministries should be pursued in the early

period of a presidency, rather than during the lame-duck period.

Government-Funded Research Institutes

Though government-funded research institutes, including the Korea Development Institute

(KDI) and the Korea Institute for Science and Technology (KIST) are relatively insignificant in

terms of their employment and budget size, their contribution to the Korean economy has been

more significant than these numbers suggested. The most serious problem for these

organizations was the excessive influence of the umbrella ministry, which was an obstacle to

neutral and objective research. To address this problem, the PBC established five National

Research Councils which functioned as boards of directors, each supervising 7~14 research

institutes.13 Before 1998, all research institutes had their own board of directors, which were

almost insignificant. The newly-created Councils were placed under the supervision of the

Prime Minister’s Office in order to weaken the tie between the ministry and the corresponding

research institutes.

Each Council had a mandate to select the heads of research institutes and coordinate their

research activities. The members of each Council are vice-ministers of the relevant ministries,

and non-government members, mostly from academia. Through their representation in the

Council, the government can partially but not fully control the selection of presidents of

research institutes. Despite this change in the governance structure, the selection process of

presidents is still very much influenced by the relevant ministry and the Presidential Office.

However, the three year-term limit of the head of a research institute has been better protected

after the Council was established.

Another problem for research institutes was that their research activities were supplier-


028

13_ The five research councils were Korea Council for Humanities and Social Research Institutes, KoreaCouncil for Economic and Social Research Institutes, Korea Research Council for Fundamental Science andTechnology, Public Science and Technology, Industrial Science and Technology. At present, there are onlythree councils, as the first two were merged into one new council, while the latter three were merged intotwo councils.


driven. The government, the primary and direct consumer of the research, had complained about

the lack of a customer driven mindset among the institutes. The government thus reduced the

ratio of financial support previously provided from 100% to 50~70% depending on the

marketability of the institutes, and left them to earn the rest by paid research projects, which

often required competitive bidding. Though this new system introduced competition among

research institutes, there was criticism that they were forced to pay less attention to research

with longer-term horizons because most of their customers generally sought research to pending

issues.

Since the reform of the research institutes was the first reform agenda, some suggested that

the political environment accommodative to reforms immediately following the inauguration of

the President was wasted in reforming research institutes, which was neither an urgent nor a

critical part of the reform. On the other hand, since research institutes were relatively an easy

target, this first reform initiative provided an opportunity for members of the PBC to warm up

before they embarked upon more serious reform initiatives on the agenda, such as privatization

and the review of ministries’ function.

Summary of the Downsizing Plan

Public entities including public corporations, government-affiliated organizations and

research institutes were asked to downsize 59,308 staff by 2001, and to cut their budgets by 349

billion won by 1998. During the year of 1998, 40.2% of the three year target was accomplished

by laying off 23,841 staff.


029

Restructuring Plan 1998 target Accomplishment of 1998

Table 10 | Summary of Restructuring Plan of Public Entities

Public

Corporations

By 2002, among 108,

privatize 11 public

corporations and 67

subsidiaries.

The number of

subsidiaries from 75 to 8

by 2002 (△89%)

Consolidation of 7

subsidiaries

Divest government shares

of POSCO and KT

Foreign DR of POSCO

(350 million USD on

(12.11)

Sales of KT (12.23)

Workforce reduction

from 166,415 to 125,223.

(△25%)

Workforce reduction of

10,614

Workforce reduction

12,713 (120%)


As a result of these downsizing efforts, the public sector workforce was reduced by 141,000

during the three years between 1998~2001. The reduction rate was higher in public corporations

and government-affiliated organizations than in the central and local government.


030

Restructuring Plan 1998 target Accomplishment of 1998

Source: PBC Press release (January 1999)

Government-

Affiliated

Organizations

Government

Funded Research

Institutions

Total

Consolidation of 19 out of

131Consolidation 14 11 completed

Research Councils Enactment of a new Law

△349 billion won

△59,308 staffs by 2001

△349 billion won

△21,235 staffs

△356.1 billion won

△23, 841 staffs

Reducing budget support

from 3.6 trillion to 2.8

trillion won (△22%)

Workforce reduction

from 62,938 to 47,352

(△25%) by 2000


8,091

250 billion won budget

reduction for year 1999


8,656 (107%)

Size of the Budget

803.9 (‘98) 707.6 billion

won (‘99)

Workforce reduction

from 18,378 to 15,848

(△14%) by the end of 1998

Budget reduction of 99

billion won in 1999


2,530

Budget reduction of 106.1

billion won in 1999 (107%)


2,472 (98%)

Central government (excluding teachers, 16.2 2.2 13.8police, and military)

Local government (excluding teachers) 29.1 5.7 19.5

Public corporations 16.6 4.2 25.1

Government-affiliated organizations 8.1 2.1 25.5

Total 70.0 14.1 20.2

Workforce at the

end of 1997 (A)

Scale of workforce

reduction between

1998 and 2001 (B)

Rate of reduction

(%, B/A)

Table 11 | Workforce Reduction in the Public Sector

Source: MPB (2002), modified.


3. Massive Regulatory Reform

Given that one of the causes of the economic crisis in Korea was heavy government

intervention in the market, massive deregulation was a focus during the second half of 1998. As

a driving force for regulatory reform, the Regulatory Reform Committee (RRC) was established

under the President, with the co-chair being the Prime Minister and, most commonly, a

professor. Its members were comprised of six ministers and generally twice as many experts

from non-government sectors.

The massive deregulation drive of 1998 was led by the Presidential Office, but it was

supported by a secretariat established in the Prime Minister’s Office. The RRC set up a taut

target of reducing regulations by half, which was, of course, challenged by all the ministries.

The Presidential Office, however, strongly advocated the target. After months of tug-of-war

between line ministries and the RRC, the ministries ultimately trimmed the number of

regulations by 48.8%, out of 11,125 regulations initially screened. As a result, it was proved that

this kind of strong drive can make a difference. Complaints from private companies were

valuable sources of recommendations for deregulation. Furthermore, private sector

associations14 played an important role in this process.

Although the quantitative target of cutting by 50% was almost achieved, the qualitative

aspect or the impact of the deregulation was less satisfactory because ministries suggested only

trivial deregulations to meet the 50% targets. It was an inevitable consequence of having a

quantitative rather than qualitative target.

To this day, the RRC continues to be active: Any new regulation must undergo a review

process by the RRC to determine its appropriateness. Currently, however, the total number of

regulations has slightly increased compared to 2000, as the number of the newly-created

regulations exceeded the number of those abolished during the reform drive.


031

14_ Federation of Korean Industries, Korea Chamber of Commerce and Industry, Korea International TradeAssociation, Korea Federation of Small and Medium Business, Korea Employers Federation



1. Review of Ministries’ Function

2. Bureaucracy Reform

3. Fiscal Reform

Reform for More Effective Government (1999)



1. Review of Ministries’ Function

Right before the inauguration of President Kim in February, 1998, the Presidential

Transition Committee reorganized government organizations. However, there was an argument

that the committee had not fully reviewed the functions of each ministry, focusing instead on

the integration or creation of the ministries. There was thus a need to review the functions of

each ministry to see whether its organizational trees were well-structured, and whether its

operational processes needed to be re-engineered. In addition, there were multiple overlaps

among ministries in their responsibility of certain government functions, indicating a need for a

better division of labor.15

The initial plan was to review the functions of only a few ministries, but the Presidential

Office wanted to review all the ministries. The PBC therefore categorized all the ministries into

the following eight groups. In addition, some local governments volunteered for this initiative,

and they were included in group ⑨. Each group was to be reviewed by a group of nine

consortiums comprised of consulting companies, research institutes, and universities. Notably,

this was the first time in the history of Korea’s public administration that all government

ministries were reviewed by a private company or research institute.16


034

Reform for More Effective Government (1999)

Chapter 04

15_ Examples are: (1) Consumer protection between MOFE and Fair Trade Commission; (2) Forestryprotection between Ministry of Agriculture and Ministry of Environment; (3) Job Training betweenMinistry of Labor and Ministry of Education; and (4) Budget formulation between PBC and MOFE etc.16_ Since the overall monetary cost amounted to more than 4 million USD, the PBC had to formulate asupplementary budget for this project.


① Foreign Affairs and National Security: Ministry of Unification, Ministry of Foreign

Affairs and Trade, Ministry of National Defense

② General Administration: Ministry of Justice, Ministry of Government Administration

and Home Affairs (MOGAHA), Ministry of Legislation, Office for Government Policy

and Coordination

③ Education and Culture: Ministry of Education, Ministry of Culture and Tourism

④ Social Welfare: Ministry of Labor, Ministry of Health and Welfare, Ministry of Patriots

and Veterans Affair

⑤ Economic Policy Coordination: Ministry of Finance and Economy, Fair Trade

Commission, Financial Supervisory Commission, Planning and Budget Commission

⑥ Industry, Science and Technology: Ministry of Science, and Technology, Ministry of

Commerce, Industry, and Energy, Ministry of Information and Communication

⑦ Infrastructure: Ministry of Construction and Transportation, Ministry of Maritime Affairs

and Fisheries

⑧ Agriculture and Environment: Ministry of Agriculture and Forestry, Ministry of

Environment

⑨ Local governments17: Choongchung Province, Cheonan City, Yeongi-Gun, Gangnam-Gu

The nine teams under the Government Reform Office (GRO) of the PBC were responsible

for supervising the nine consortiums. Of the three director-generals under the GRO, the

director-general for Administrative Reform was in charge of this mega project, supervising all

nine teams in the GRO including the teams under two other director-generals. This was an

example of the flexible operation of the GRO’s internal branches.

MOGAHA, which had extensive experience in reviewing the functions of each ministry,

joined in this initiative as one of two leading ministries with the PBC. Though MOGAGA’s

experience played a role in many respects, they advocated more conservative changes than

those put forth by the PBC, which called for more drastic reform measures. As a result, there

was a productive tension between these two ministries that managed the project. For the PBC, it

was inevitable that it request MOGAHA’s participation because MOGAHA was in charge of

the National Government Organization Act.

Between November 1998 and February 1999, the PBC checked the progress of the

assessment every two weeks with all the nine project managers. Each team in the GRO had to

suggest reform recommendations to the consulting companies. Since the ministries were major

sources of information, less competent companies tended to be biased toward the interests of the

Chapter 4 _ Reform for More Effective Government (1999)

035

17_ A Province or Metropolitan City is a high level local government, whereas City, Gun, or Gu aremunicipal level governments. A City (populated area) and a Gun (less populated area) are under a Province,and a Gu is under a Metropolitan City.


ministries or even beholden to them. For the PBC, the four-month review process was marked

by struggles with all the line ministries and some of the less competent consulting companies,

and sometimes with MOGAHA.

In order to coordinate the different interests of the line ministries, the PBC established the

Coordination Committee comprised of nine non-government members and four civil servants,

including one each from the PBC and MOGAHA. Based on a study by the consulting

companies, the PBC formulated a draft of recommendations, which was finalized by the

Committee. After a public hearing, the Committee forwarded its official recommendations to

the PBC and MOGAHA in March 1999.

The original recommendation included radical plans for the integration of ministries.

However, those ministries that were targeted for integration were mostly under the influence of

the Prime Minister, who was a shareholder of the incumbent government. The President, who

wanted to maintain a partnership with the Prime Minister in an upcoming general election of

year 2000, ordered that the integration plan be conducted in close consultation with the Prime

Minister. As a result, the integration plan was eliminated from the recommendation. However,

the final plan maintained the rest of the original recommendations including: redesigning of the

internal organization and business processes, and clear division of redundant or conflicting

responsibilities among ministries. The review of government functions went through the

following decision tree.

Some of the government functions that were not a responsibility of the government were

privatized or corporatized. For instance, the Korea Railroad Authority, which used to be a

government agency under the Ministry of Construction and Transportation, became a public

corporation in 2005 according to plans made in 1999. As in many other cases,18 the public

corporatization of the railway system was a stepping stone to privatization. Some functions

were outsourced to the private sector or public entities, and some were separated from the

ministry, and some were put in an independent executive agency all together.19


036

18_ KT&G (Korea Tobacco and Ginseng Corporation) and KT (Korea Telecom) used to be a governmentagency before they became public corporations, and they were privatized around 2000. (Park, 2009) 19_ The idea of executive agency Korea benchmarked the U.K.’s Next Step. However, due to insufficientempowerment and poor evaluation system, the agencies have not proven to be an effective administrativearrangement in Korea. 10 executive agencies were first designated in January 2000 followed by 13 more ayear later. The list of executive agencies includes: Defense Media Center, Driver’s License Agency,National Medical Center, Aviation Meteorological Office, National Livestock Research Institute, KoreaForestry Research Institute etc.


Another important consideration in reviewing the functions was whether functions of the

central government should be devolved down to the local level. The Kim Administration

(1998~2003) had listed decentralization as one of a hundred reform initiatives on its agenda.

Accordingly, it enacted the law for administrative transfer to local governments in January,

1999. The nine consulting consortiums suggested that many functions of the central government

be transferred, but the line ministries were not enthusiastic about the devolution of power. To

push the decentralization initiative, the government established a special committee for

decentralization chaired by the Prime Minister, which consisted of academics, members of civil

society, and representatives from the central and local governments. However, compared to the

other reform measures, the decentralization efforts did not draw much attention or results during

1998~1999.

There was criticism that the government’s review of functions should not have focused on

the integration of ministries, which had been already conducted in February, 1998, before the

presidential inauguration. Although it was supposed to focus on the assessment of the functions

and internal organizational trees, the PBC spent too much time and energy in proving the

necessity for integration of the ministries because the PBC regarded it as a symbol of intensive

government reform. If the PBC had actually adhered to the original purpose of the review, it

could have accomplished the project with a much better outcome and with less resistance.

Reformers can easily focus too much on the achievements that garner publicity but which are

not, in fact, very meaningful.


037

Figure 3 | Decision Tree of the Government Function Review

Source: Press release of PBC (March 1999), modified significantly.


2. Bureaucracy Innovation

Open Recruitment System

The review of the government’s function produced many suggestions for reforming

bureaucracy. The most notable change was the introduction of an open recruitment system to

appoint 20% of the director-generals through a competition open to the private sector. Prior to

this change, Korea’s bureaucracy was a closed system in which the government recruited

young staff, mostly in their twenties, who generally remained a bureaucrat until retirement. In

this closed bureaucratic system, almost all the positions were filled by those who were already

in bureaucracy. Since the entrance exam was tightly administered by the central government,

the closed system worked as an effective way to ensure that the recruitment process was not

subject to any kind of nepotism or corruption. The system was also effective in shielding the

civil service from political influence, thereby building a sense of duty among government

employees.

However, the closed system had two problems: a lack of specialization and a shortage of

competition. Since civil servants had to rotate regularly, they tended to become generalists

rather than specialists. In addition, competitive forces were relatively weaker than in the private

sector because promotions, in many cases, were based on seniority rather than on competency,

and because lifetime employment was guaranteed by law.

In order to expose the civil service sector to competitive forces while still maintaining the

merits of the closed system, an open recruitment system was partially introduced in May, 1999.

Initially, 30% of the director-general positions were supposed to be open to wider

competition,20 but the ratio was reduced to 20% to allay the concerns of government officials.

All the ministries tried to designate unpopular positions as ‘open positions’, but the Central

Personnel Commission (CPC),21 which was newly created under the President in May, 1999,

actively negotiated with the line ministries to select positions in a way which ensured that the

newly introduced open system had some impact.

In this open system, when there was an opening in a designated position in a ministry, civil

servants in that ministry or other ministries were able to apply for the job, but they had to

compete with applicants from the private sector. A minister then chose three finalists and


038

20_ In 2002, some divisional head positions were also opened for competition.21_ CPC was created with the personnel management function separated from MOGAHA in 1999. In 2008,however, the CPC was remerged with MOGAHA to form the Ministry of Public Administration andSecurity (MOPAS).


ranked them according to his evaluation. Finally, the CPC selected one from the three

candidates, usually following the preferences of the minister.

Despite this screening process by the CPC, not many experts from the private sector joined

the government. Out of 119 open positions, only 18 (15%) experts from the private sector were

selected through the open competition process with civil servants. We cannot exclude the

possibility that there may have been bias on the part of the line ministries when they chose the

three finalists from the pool of applicants. Another reason was that there may not have been

many qualified applicants from the private sector. During 2000~2002, less than two years

before the presidential elections, potential candidates in the private sector may have presumed

that they would have to leave the government after a 2~3 year contract. Additionally, the terms

of the contract—including salary and working conditions—were not good enough to attract

many capable experts from the private sector.

All these problems have been corrected over the years, and the ratio of external hires filling

the open positions rose to around 45% during the Roh Administration (2003~2008), who

emphasized the effective implementation of this open system. The lesson here is that an open

system cannot be successful unless the political leader pays attention to its effectiveness.

Moreover, in order to neutralize the vested interests of the line ministries, the approval process

should be strongly conducted by a neutral third party, such as the CPC in Korea.

Performance-based Payment22

Another important reform in the bureaucracy was the introduction of performance-based pay

schemes. Before this system was introduced, annual pay rates for Korean civil servants were

determined by a number of factors, including seniority and rank, the private sector’s pay

scheme, the financial state of the government, and the standard cost of living, with more

emphasis of course given to seniority and rank. This pay scheme tended to discourage civil

servants from achieving high productivity and efficiency in their performance. In 1999,

however, the government introduced three different types of annual pay systems: Fixed Annual

Pay System, Performance-Related Annual Pay System, and Job-Based Performance Pay

System.


039

22_ This part is based on Jin Park (2006), but has been significantly modified.


The Fixed Annual Pay System was for political appointees, such as ministers and vice-

ministers, whose performance was very hard to measure. Under this system, a fixed amount is

provided based on the level of difficulty and responsibility of the position. The amount is also

determined by the annual pay increase rate set at the beginning of each year.

The Performance-Related Annual Pay System is applied to high ranking officials, and their

annual salary is divided into a base salary and a variable performance-based pay scheme which

depends on a performance evaluation through the MBO (Management by Objective). Though

the initial base salary is determined by seniority and rank, its annual increase rate also depends

on the results of an evaluation, as the following table shows. Therefore, the current year’s base

salary would determine not only next year’s performance-based pay but also the base salary. In

this respect, the performance evaluation has emerged as a major factor in determining the

annual salary of mid or high-ranking civil servants.

Lower ranking officers receive a fixed monthly pay depending on their seniority and rank.

To induce a competitive environment, a performance bonus (PB) system was introduced in

1998. A non-cumulative, extra lump-sum bonus is paid once a year in February based on a

performance evaluation of the previous year. There used to be a similar scheme, called a special

bonus, which the government provided only to the top 10% of civil servants in each bureau or


040

Types of Pay System Coverage Factor

Fixed Annual Pay Political Appointee Position

Performance-Related Annual

Pay (cumulative)

Assistant Ministers

Director-Generals

Division heads

More by performance

Less by seniority and position

Basic Salary +

Performance Bonus

(non-cumulative)

Associate division heads

or lower

More on seniority and position

Less by performance

Table 12 | Compensation Structure

Source: Park (2006), modified

Excellent (S) Outstanding (A) Normal (B) Understanding (C)

Top 20 % Next 30 % Next 40% Bottom 10 %Distribution

+10 % + 7 % + 3 % 0 %Increase rate of

basic payment

Table 13 | Performance Bonus Rate (as of 2000)

Source: Park (2006)


office. The amount of the payment was only 50~100% of the monthly pay, which was too low

to be considered as an incentive scheme. The government thus revised this system and adopted

a performance bonus system, which is applied to all public servants including military officers,

police officers, and teachers.23

The first version of the PB introduced in 1999 offered a bonus that ranged from 0% to 200%

of their monthly pay as the following table shows. The government revised this first version

because the bottom 50% of civil servants felt excluded and thus experienced a drop in morale.

The government therefore revised the PB system in 2000 so that differentials in PB among

individuals were reduced. Since then, the distribution and pay rate has become more evenly

distributed with greater autonomy at the line ministries. In Korea, the performance-based pay

scheme started in an ambitious manner, but has gradually lost its ability to differentiate

individual performance, resulting in only confusion. The lesson is that a performance-based pay

system for the civil service should be gradually introduced.

Prior to the 1997 crisis, the salary level of civil servants was only about 65% of the private

sector. The government, however, had a clear vision that the level of remuneration for

government officials should be increased to enhance productivity and reduce corruption. In

order to persuade the citizens and the National Assembly of this idea, the government used three

strategies: downsizing the public sector, improving government services to the citizen, and

introducing competition in the pay scheme. As a result of these efforts, the annual salary for

civil servants has reached round 93% of the private sector’s as of 2005,24 with an expanded

spectrum as the following table shows. The lesson here is that citizens are willing to accept

public sector pay raise more comfortably when the increase begins with a performance-based

payment.


041

23_ The performance bonus system has faced very strong resistance from teachers who even returned theirbonuses as a collective action, and it is not very effective as of now.24_ The ratio was the highest in 2004 (95.9%) and 2005 (93.1%), but has been brought down since then:2006 (91.8%), 2007(89.7%), 2008(89%), 2009(89.2%). (Internal report of MOPAS, 2010)

1999Range Top 10% Next 15% Next 25% Bottom 50%

Pay Rate 200% 100% 50% 0%

Range Top 10% Next 20% Next 40% Bottom 30%

Pay Rate 150% 100% 50% 0%

Table 14 | The First Revision of the Performance Bonus

Source: Park (2006).

2000


3. Fiscal Reform

Financial soundness allowed Korea to overcome the economic crisis. The first thing that the

PBC did in early 1998 was to review large-scaled infrastructure projects, such as high-speed

railways and the Incheon International Airport. However, many of the projects had already been

launched and the initial budgets were granted, so the PBC could only assess possible

adjustments to the project schedules.

In facilitating a recovery from the economic crisis, one of the more significant fiscal reforms

involved the public fund system. The public fund is a secured and flexible budget source for each

ministry, separate from the general account of the national budget. Line ministries had excessively

increased public funds as a fiscal source, since it was out of the control of the budget authority. As

a result, the total fund size was bloated to twice as much as the national budget. However, the lack

of transparency and operational efficiency was an inherent problem of the fund.

In June, 1999, the PBC announced a plan to reform the public funds, which included the

abolition of public funds and improved operational transparency. As a result, the number of

public funds started to decline after 2000, and the total size of the funds started to fall after

2002. This reform created serious resistance from the line ministries, but the strong will of the


042

Maximum 78,336 72,367 67,823 62,045

Minimum 52,224 48,246 45,217 35,789

Grade 1

Assistant

Minister

Grade 2

Director-

General (DG)

Grade 3

Deputy DG or

Division Head

Grade 4

Division Head

Table 15 | The Range of Annual Pay (as of 2005)

Unit: USD, Exchange Rate: 1 USD=1,000 Korean Won. Since the actual exchange rate is around 1USD=1,200 won in2010, the above levels are slightly exaggerated.

Source: Park (2006)

grade

Year

Number of Funds 75 75 75 61 62 58

Total Fund size (billion USD) 82 165 197 220 232 193

1997 1998 1999 2000 2001 2002

Table 16 | Number of Public Funds

Source: MPB (2002, P.128), modified.


Presidential Office and the PBC made the reform possible.

Another important fiscal reform was the introduction of pre-feasibility studies in 1999. In

the past, feasibility studies had been conducted by the very ministry which proposed the project.

As a result, 32 out of 33 feasibility studies before 1998 approved the projects, meaning that the

study was merely a rubber stamp. Starting from 1999, however, large scale budget projects over

50 billion Korean won were asked to go through a pre-feasibility study by KDI. In the first year

of the feasibility study, 12 out of 19 projects were approved by KDI, and during 1999~2002,

only 54 out of 120 projects passed the tough screening process.

Reducing the burden of ‘quasi-taxes’ was also an important stepping stone to a more market-

friendly government. Quasi-taxes refer to monetary obligations other than taxes in the course of

corporate activities. Most of the quasi-taxes were imposed through government regulations, but

implicit pressure, at times, by the government for charitable donations was also a form of the

quasi-tax. The government thus collected recommendations from private companies and

unveiled a plan to abolish 11 taxes and to defer one tax. The government also enacted a law in

December, 2002, to prevent the abusive imposition of quasi-taxes.

As for the fiscal reform at local governments, MOGAHA adopted a Fiscal Assessment

System in 1998 as a way to assess the fiscal soundness of local governments. It was a measure

to balance empowerment and monitoring as Osborne and Plastrik (2000) suggested.25 To

enhance the effectiveness of the evaluation system, MOGAHA’s financial transfers to local

governments were tied to the results of the fiscal analysis, and those with poor results had to

submit a plan that sought to improve their fiscal soundness.

There were many other fiscal reforms during 1998~1999, including the implementation of

performance budgeting, budget ceilings, budgetary incentive systems, etc. All these reforms

sought to give more control of the budget authority to the PBC over the line ministries.

However, fiscal reforms that sought to give more autonomy to the line ministries, such as top-

down budgeting, and reforms that may have reduced the flexibility of the budget authority, such

as mid-term fiscal planning, were very slow to materialize. There is a wide consensus that the

fiscal reform carried out during the Kim administration (1998~2003) was relatively more

sluggish than the other reforms. This seemed to be the result of a conflict of interest among the

reformers, the PBC, and then later, the MPB (see appendix for its organization), which

controlled the budget function. This is a clear proof that a reform should be conducted by an

organization that does not have a conflict of interest.


043

25_ It suggests that the control strategy (empowerment) should be coupled with the consequence strategy(evaluation) since devolution of power could result in an uncontrollable situation without a properevaluation scheme, which is more so in developing countries.



1. Evaluation

2. Suggestions for Reform-Driver

Evaluation and Suggestions



1. Evaluation26

The public sector reform of 1998~1999 was both wide-ranging and intensive. First of all, the

coverage of the reform was incomparably more extensive than previous efforts. The reform

targeted not only the central and local governments but also public entities such as public

corporations and government-affiliated organizations, which previous administrations had not

attempted to reform. The scope of the reform included all three aspects of government: input

reduction, process innovation, and outcome enhancement, such as better government services to

citizens. The outcome reform, however, started after the year 2000, and was not covered in this

report.

In addition to being extensive, the intensity of the public sector reform was equally

unprecedented, especially during 1998. Former President Kim even stated that, “rough-and-

ready reform is acceptable as long as it is innovative and necessary.” This radical drive for

reform was made possible by the prevailing sense of crisis. Though the intensity of the reform

was diminished after 1999, and became even weaker after 2001, the overall intensity and

performance of government reform during 1998~1999 should be acknowledged.

As a result of such public sector reform, the efficiency in government administration has

improved substantially according to IMD’s evaluation. The table demonstrates that government

efficiency has increased by the largest margin. Since 1999, the efficiency of government


046

Evaluation and Suggestions

Chapter 05

26_ The main ideas regarding the success factors are from Jin Park & J.I. Yoon (2008; 41~45) withsignificant modification.


administration has gradually improved in the IMD World Competitiveness Index, contrary to

fluctuations in other fields, showing the biggest improvement among the listed fields.

What were the factors behind the success of the government reform during 1998~1999?

What could have improved the outcome of the reform? This chapter will evaluate the early

efforts of the government’s reform under President Kim during 1998~1999 based on four

preconditions necessary for a reform to be successful: presidential leadership, a reform driver,

roadmaps and action plans, and implementation.27

Presidential Leadership for the Reform

It goes without saying that the outcomes of any reform depend heavily on leadership. No

matter how much effort civil servants invest, reforms will not be successful without a political

leader’s support. Unless the President shows keen interest and support for the reform agenda,

government reform will never be successful. The leadership of the President can be evaluated

by the following three sub-criteria.

First, the President should stress the importance of reform and address any resistance and

problems that occur in the course of reform with a firm and consistent approach. Usually,

important stakeholders such as line ministries and labor unions try to measure the President’s

determination for reform and match their degree of resistance accordingly. For instance,

ministries who did not show much resistance against the reform drive in 1998 suddenly raised

their voice and strongly opposed government restructuring in early 1999 when President Kim

said: “make the process of reform prudent”.

Chapter 5 _ Evaluation and Suggestions

047

Year

Nation as a whole 36 41 28 28 27 + 9

Economic performance

government administration

corporate management

economic infrastructure

1998 1999 2000 2001 2002 change

22

42

35

38

38

43

40

39

13

33

27

28

19

31

31

34

24

25

27

28

- 2

+17

+8

+10

Table 17 | IMD World Competitiveness Evaluation and Ranks

Data: IMD World Competitiveness Yearbook, issues from 1998 to 2002

27_ These four criteria are the revised version of 8 steps of transformation presented by Kotter (1996): 1.Establishing a sense of urgency; 2. Creating the guiding coalition; 3. Developing a vision and strategy; 4.Communicating the change vision; 5. Empowering broad-based action; 6. Generating short-term wins; 7.Consolidating gains and producing more change; 8. Anchoring new approaches in the culture.


The President should also nominate innovative and well-balanced reformers as heads of

public organizations. The heads of reform-leading organizations such as the PBC, MPB, and

MOGAHA are especially important as they are the leaders who actually drive the reform

process. Heads of line ministries and public corporations are the implementers of reform. In this

respect, we need three layers of leadership in place to undertake government reform: the

President, Reform Driver, and Line Ministries and Public Entities. It is the role and

responsibility of the President to ensure that reform-minded leaders be appointed to those

positions.

It is crucial that innovative leaders should make up the third layer of the leadership so that

reforms can be implemented in a more deep-rooted way. However, under the Kim

administration, there were many cases in which reform-minded leaders such as ministers or

vice-ministers had to step down, and were then replaced by those considered to be less

innovative. However, the inaction of the ministers and heads of public entities was partially

overcome by pressure from the reform driving ministry, the PBC. This is why government

reform under President Kim was criticized for its top-down nature and for lacking the

spontaneous participation of the public sector.

The President has a responsibility to form favorable political conditions to promote

government reform, especially to mitigate against resistance from stakeholders. Japan’s Prime

Minister Koizumi demonstrated his leadership in this way when finalizing the privatization plan

of the postal service, though it is now being delayed by his successors. As President Kim was

the first president to be elected as a candidate of the opposition party, he started with very

strong support from the public under the banner of ‘change’. After a series of corruption

scandals involving members of his staff and family, he lost much of the support. Another

important political condition for reforms is being driven by a sense of crisis. The Kim

administration in August 1999 announced a complete recovery from the economic crisis with

early redemption of the IMF bail-out loan. While this announcement initially heightened the

national pride of the Korean people, public support for reform decreased significantly

afterwards.28 Although the political leadership for reform got off track somewhat after the

second half of 1999, and although some of the ministers and heads of public entities were not

very innovative, the government reform during 1998~1999 was successful due to a sense of

crisis, presidential support and the well-established reform leading organization, the PBC.


048

28_ Another incidence that stalled the pace of reform was the so called strike-provocation of June 1999. Inorder to manufacture a reason to repress the labor union of Korea Mint Corporation, the president of thecorporation and a senior prosecutor colluded to instigate a strike by the labor union.


Establishing a Reform Leading Organization

The President needs an organization to act as an agent that will carry out the reform agenda.

The most important factor to ensuring the success of reforms is the reform leading organization,

such as the PBC in Korea’s case during 1998~1999. The PBC, and later the MPB, had a

Government Reform Office (GRO) which played a pivotal role in driving the reform.

There is a Korean saying that “a Buddhist monk cannot have his hair cut by himself,”

meaning that you need someone else to take care of your own problems. Under the PBC and

MPB during President Kim’s administration, the progress of fiscal reform was very slow

because the formulation of the national budget was one of its main missions. On the other hand,

MOPAS (Ministry of Public Administration and Security), which is leading the government

reform under President Lee (2008~2013), is not very enthusiastic about reforms in the

bureaucracy because bureaucracy management is their main mission. No one wants to reform

themselves, and that’s why we need someone else to reform others.29

It is extremely important to establish a reform driver in the right way, and such an

organization must have several features in order to be successful. First, it should be a permanent

body. If the reform driving organization will not exist in the next administration, as was the case

of the PCGID (Presidential Commission on Government Innovation and Decentralization)

under President Roh, line ministries may not take any reform action; instead they may choose to

wait until the end of the President’s term. In addition, a temporary organization will have to

recruit staff from the line ministries, and these individuals may have a conflict of interest when

it comes to a reform that relates to their home ministries. Since the PBC was newly created, it

recruited many of its staff from other ministries, but its staff did not consider going back to their

original ministries because the PBC was a permanent organization. This permanent nature is

especially important in a country like Korea where the President can only serve one 5 year term.

Second, the reform should be a core function of the reform driver. When responsibilities

other than government reform represent a core function, reform is easily forgotten. In the

government, tasks which are important but not imperative receive lower priority than less

important, but more urgent tasks.30 Public sector reform is not viewed as critical for any

government official because problems of the status quo are not easily perceived by the citizens.

The PBC’s core mission was therefore public sector reform, and budget planning was not a


049

29_ Of course, there are reforms that can be better performed spontaneously by insiders. However, too muchreliance on such a voluntary approach usually results in only marginal changes.30_ This is what Osborne & Plastrik (2000, Ch. 3) notes: when an organization is able to conduct both thesteering and rowing functions, civil servants tend to focus on rowing, rather than on steering, becausesteering is relatively less urgent.


dominant responsibility of PBC. After the PBC absorbed the budget office to become the MPB

in 1999, however, the budget formulation function of the MPB received more attention from the

Minister than did public sector reform. This is another reason why the pace of reform slowed

after the second half of 1999.

Third, it will be better if the reform driver is directly under the President, the head of the

administration. This is because the strong support of the political leader is a must for the

success of a reform, and it makes it easier for the reformer to actively communicate with the

President. Having a stronger legal basis such as the Presidential Commission which is

differentiated from line ministries will also help the reform driver pursue the reform agenda

which may meet resistance. The PBC was directly under the President, whereas the MPB was

under the Prime Minister, which is another reason why reform was less actively pursued after

the second half of 1999. Of course, a more important factor for the reform driver is being

empowered and trusted by the President rather than knowing to whom the organization

belongs, but this kind of institutional arrangement is in many cases a symbol of the President’s

willingness to reform.

Fourth, the reform driver should have a diverse composition of staff comprised of both

career civil servants and non-government sector workers. The government reform office (GRO)

under the PBC recruited 14 contract-based civil servants from non-government sectors31 along

with around 30 career civil servants. The career civil servants were relatively less pro-active but

more experienced. On the other hand, contract-based officials recruited from non-government

sectors had less institutional knowledge of the government, but tended to be more results-based

because they had to prove themselves during the contract period. This personnel mix created

tremendous positive synergy effects. Encouraging a diverse organization was a powerful way to

maintain its reform capacity. Nine out of fourteen contract-based officials left the government

by 2002, which both reflected the loss in momentum and waning enthusiasm for reform.

Fifth, a reform-leading organization must have a flexible organizational structure; that is, the

assignment of projects among teams should be flexible given that a high impact reform agenda

requires many teams working together in a short period of time. The PBC followed this rule:

though three director-generals in the GRO had around three teams, equivalent to the size of a

division, each under their supervision, one director-general worked with five teams for the

privatization of public corporations, and the other director-general oversaw all nine teams under

the GRO for the review of all ministries’ functions. During 1998~1999, the head of a team had

to report to different director-generals depending on the tasks on which his team was working.


050

31_ They included universities, research institutes, consulting/accounting companies, law firms, privatecompanies.


Sixth, the reform driver should have a wide spectrum of responsibility, but without

specifically being assigned a task. This vague, yet broad, mandate forces the reformer to seek

out tasks that need to be done. Since no ministry will suggest a new reform agenda, the reform

driver’s role of setting a new agenda is essential for the success of the government reform. In

this respect, the reformer should be like a hunter scouring the landscape looking for game rather

than a farmer working only on his pre-assigned plot of land. The PBC’s work scope was

‘government reform’ which was wide enough to cover almost all areas of reform, including the

privatization of public corporations, integration of ministries, e-government, fiscal reform, and

even reducing teachers’ retirement age. Other than the legislative and judiciary branch, every

aspect of government administration and its affiliated organizations were within the scope of

PBC’s reform mandate.

Since each team did not have a pre-assigned task, a proper incentive mechanism should have

been established to encourage pro-active efforts in setting a reform agenda, which was not

existent in the PBC. During 1998, most of the reform directives of the PBC were given by either

the minister or the Presidential Office, but each team was encouraged to set an agenda after

mid-1999. As a result, any given team was extremely busy all the time whereas the other teams

were relatively less busy depending on their efforts to find a new reform agenda. However,

there was no reward or penalty for these different performance levels, which reduced the overall

productivity of the PBC. The more a team dug into the reform agenda, the more working hours

and resistance it encountered, but without reward for the effort. To promote a more pro-active

approach on the part of the reformer, there should have been a proper incentive scheme beyond

simple recognition.

Seventh, the reform driver should have a built-in consensus-building process. Reform is a

painful process involving conflict management and negotiations, and it is hard to reach an

agreement with line ministries at the working level. During 1998, much of the reform agenda

had to be agreed upon among the ministers, and they sometimes required the coordination of the

Presidential Office. The PBC, as a commission, consisted of commissioners mostly from non-

government sectors such as universities, the news media, or NGOs, but the line ministries’

representation was very limited. As a result, the ‘Commission’ of the PBC did not work for

consensus-building which was instead made mostly at a working level outside of a formal

arena. Reforms with more serious conflicts of interest among ministries were reported to the

President’s Office by the PBC. The Office then reached a conclusion and issued an order, which

was given to the line ministries. This unilateral process was accepted by line ministries during

1998 right after the crisis, but it did not work after the second half of 1999, especially after the

PBC, a presidential commission, turned into the MPB, one of the ministries under the Prime

Minister.32 The PBC’s commission should have included ministers relevant to government

reform so that it could have worked as a consensus-building body. The importance of a formal

and legal basis for such a process cannot be over-emphasized.


051


The following table evaluates each agent of reform according to the seven criteria explained

above. The PBC was the best institutional arrangement as an agent of reform in the history of

Korea’s public administration followed by the PCGID. The PBC satisfied almost all aspects of

these features except for the consensus building criterion. It was directly under the president and

it was the first permanent organization in Korea that focused on government reform. The PBC

recruited a great number of non-governmental experts and managed them in a flexible manner.

As a reform driving organization, the PBC served more effectively compared with other reform

drivers,33 and this is probably the most important endogenous success factor.


052

32_ This is why the MPB had to establish the Presidential Commission on Government Innovation (PCGI)in August 2000. The chairman of the Commission was from academia and its members included majorministers along with experts from the private sector. The GRO of MPB functioned as a secretariat for theCommission. On the other hand, the Presidential Commission on Government Innovation andDecentralization (PCGID) of the Roh administration had its own secretariat, which differentiated itself fromthe PCGI. 33_ The MPB (Ministry of Planning and Budget) was a successor to the PBC with the additional function ofbudget formulation. The PCGI under President Kim was not a reformer independent from the MPB becausethe MPB was its secretariat. In this respect, the PCGI was a supporter rather a driver of the reform. UnderPresident Roh, the PCGID (Presidential Committee for Government Innovation and Decentralization)served as a main driver for reform with the help of MOGAHA (Ministry of Government Administration andHome Affairs).

Criteria

Permanent Body O O O X

Core Mission △ X X O

Presidential Body O X X O

Staff Mix O △ X △

Organizational Flexibility O X X △

Coverage O △ X △

Consensus Building Process X X X O

Kim Administration

(1998~2003)

Roh Administration

(2003~2008)

PBC MPB MOGAHA PCGID

Table 18 | Comparison of the Reform Driving Bodies

O: Yes, X: No, △: Partly yesSource: Jin Park and Jong-In Yoon (2008, modified)


Roadmap and Action Plan

First, even before the presidential inauguration, the incoming administration needs a clear

roadmap for reform that will be used during the Presidency.34 Given that public support for a

government is usually strongest in the first year of the Presidency, important and difficult

reforms should be pursued during this time. The roadmap should not be just a list of things to

do; instead, it should contain specific strategies and priorities. President Kim’s first plan for

government reform was included in the “Top 100 National Agendas,” written in January 1998

by the Transition Committee for the Presidency. The Committee simply made a long list of

reforms totaling 100 without elaborating on a strategy or priorities. Due to this lack of a clear

roadmap, the MPB, a new name for the PBC after June 1999, wasted almost four months

trying to figure out what to do.35

Second, an action plan for certain reforms should include the following: strategies, a series

of concrete actions with a deadline, a person in charge of each action, a performance index and

a method of measurement, a specific target, benchmarking, expected obstacles and ways to

overcome them, internal and external consensus-building processes, etc. The reform plan made


053

34_ The roadmap should even consider the next administration. Since not all reform initiatives can befinished within a president’s term of office, and since reforms must be continued by the next administration,the reform plan should state what should be done by the next government, and what should be preparednow.35_ A need for institution building of the newly-established MPB was not a reason for this lack of actionbecause the GRO (Government Reform Office) did not go through much change.

85

88

89

90

91

95

96

97

98

99

100

Public security enhancement by shifting responsibilities to local governments

Empowerment of local governments and participation of citizens

Simplifying the current three layers of local governments

Enhancement in conflict resolution capacity

Change of local tax system to expand local financial capacity

Abolition of inefficient bureaucratic red-tape

Introduction of enterprise management style to government

Decentralization and privatization of government functions and restructuring front-line

organizations

Strengthen incentive system to increase productivity of public sector

Accountable real-name policymaking and open administrative information

Audit function that promotes creative policy making

Table 19 | Government Reform Agenda among Top 100 National Agenda

Source: Presidential Transition Committee (1998), recited from Jin Park and J.I. Yoon (2008)


during 1998~1999 contained only actions to be taken before the deadlines, but nothing else. For

example, when reforming government-funded research institutes, we should have included

goals and objectives with a specific target. The background of the reform was that the research

outputs were not independent from the influence of the umbrella ministries and that the output

was not being fully utilized. However, the means to judge how much independence the

institutes have gained and to what degree research output have been utilized under the new

system were not verified.

Third, the direction of the reform must be aligned with national priorities, and should be

shared by as many people as possible. During the Kim Administration, under the main goal of

streamlining the government, the reform initiatives pursued reform agenda that included

privatization, work force reduction, and deregulation. It is important to form a consensus on the

fundamental direction of reforms. Agreement within the reform-leading organization is the first

priority, and then that consensus should be extended to line ministries. In the end, public

consensus should be followed. Due to the financial crisis, a strong consensus was built around

the goal of “small government” both in and out of the government. Despite the problems of

lacking roadmaps and action plans, the clear guiding principle widely shared across the country

was thus a factor for success.

Implementation

First, interim check-ups must be made periodically to see whether or not the task is on the

right track. Without this monitoring process, a line ministry may postpone the implementation

of action plans, especially in the later part of the Presidency.36 Together with monitoring,

evaluation is also important. Interim evaluations provide feedbacks that are useful in correcting

or ensuring the implementation of the initial plans. In the course of implementation, there can

be many unintended effects, and a reformer needs to resolve these problems. Ex-post evaluation

on the process and outcome of the reform is also very useful in the sense that it may even reveal

future reforms that should be pursued. Ex-post self-evaluation reports must be made as a

condition of the reform procedure. The PBC, or later the MPB, regularly checked the progress

of reforms, and thanks to this monitoring effort, almost all the action plans formulated in 1998

were completed by 2002. However, interim or ex-post evaluations were not conducted by the

PBC, but it was done mostly by academia and the media.

Second, education and training are important means to mitigate resistance and to stabilize


054

36_ One example was the integration of two state-owned enterprises, Korea Housing Corporation and KoreaLand Corporation, which the Presidential Office, PBC and Ministry of Construction and Transportation(MOCT) had agreed upon in 1998. MOCT was supposed to implement the action plans to meet theintegration deadline in 2001, but nothing had been done for two years, until the end of 2000. The twocorporations were finally merged in 2009, forming the Korea Land and Housing Corporation (LH).


the effects of reform. In any organization, resistance against change generally comes from mid-

level management, such as divisional heads or director-generals. Therefore, education and

training for those positions are important in the reform process. However, the budget for

training decreased dramatically after the economic crisis, and recovered back to 1997 levels

only in 2001. Furthermore, its recovery was slower than other budget items. While the total

budget of the government in 2003 increased by 62% compared to 1998, expenditure on training

and education of government officials increased only by 46%. However, training should have

played a more important role in the process of government reform.

In all, monitoring the implementation process of action plans was very thorough and

effective under the PBC and MPB, but it lacked serious means of self-evaluation and training to

help manage the changes. This shows that the public sector reform carried out during

1998~1999 generally targeted restructuring, such as privatization and downsizing. For process

and outcome reforms, which were major reform goals under President Roh (2003~2008),

evaluation and training were an integral part of government reform.

2. Suggestions for a Reform-Driver37

Since the right driving force is the key to success in government reform, this sub-section will

present the ideal reform driver. The suggested name for the reform-leading organization is

Presidential Commission for Government Reform (PCGR). It is directly under the President and

consists of ministers related with reform and experts from the non-government sector. The

chairman of the PCGR should have the status of a minister or, preferably, deputy Prime

Minister. The commission can have sub-committees that cover various reform areas such as


055

Total budget 63,692 73,226 80,510 88,736 99,180 109,630 118,356

Budget for training 76 61 61 58 77 89 89

Number of regular staff 2,230 1,747 1,535 1,688 1,615 1,615 1,609

1997 1998 1999 2000 2001 2002 2003

Table 20 | Changes in Officials’ Training Institutes

* Unit: thousand US dollar (1 USD=1,000 Korean won)Source: CSC (2005)

Budget*

37_ Many of the suggestions here were first raised in the co-authored book, Kim, Park, and Park (2006).


administrative and personnel affairs, public finance, e-government, local empowerment, reform

evaluation, etc., so that each agenda can be thoroughly examined before being brought to the

Commission.

The PCGR should not have any other function but carrying out the reform. The PBC had the

function of budget planning which was a very powerful leverage for inducing the cooperation of

ministries. If the PCGR is given a budget function, it will not be able to reform the budget

function, and it may treat government reform as a second priority after the budget function. The

PCGR should concentrate on government reform. Instead the authority to conduct an

evaluation of each ministry should be used as leverage. The Office of Management and Budget

of the U.S. submits evaluation reports to the President on the performance of twenty-six federal

government organizations that undergo reform.38 However, it will be necessary for the PCGR to

maintain a strong coalition with the budget office to enforce and implement the reform agenda.

The PCGR should be a permanent organization and its chairman should be a full-time

position, and the secretariat of the commission will then have its own staff, which should not be

dispatched from the line ministries. The PCGR is very similar to the PCGID (Presidential

Commission for Government Innovation and Decentralization) that was under President Roh in

terms of its role and composition, but different in that the PCGR is a permanent commission

with a full time commissioner, and therefore it has its own staffs, not dispatched from line

ministries. The PCGR is similar to the PBC (Planning and Budget Commission) in its

permanent nature, but different in that its role and responsibility is solely government reform,

and that it is a collective decision-making body which consists of line ministries and experts. In

this respect, the PCGR is a combination of the PBC and PCGID (see appendix for their

organization).

The Commission’s secretariat can be led by a vice-minister or assistant minister, and it will

need approximately eight teams, with each covering a set of line ministries. Each team should

be responsible for the reform of the ministries under their charge. As we have seen previously,

the reform-leading body must not act as a programmed farmer conducting its pre-set tasks each

season, but a flexible hunter that is always searching for new tasks. The following is one


056

38_ Five Missions for Government Reform under the Bush Administration(1) Strategic management of human resources: Reduce the class of government officials and increase

contact with citizens(2) Utilization of competitive resources: Maximize private sector utilization rather than use of

government officials(3) Improvement in financial affairs: Raise timeliness and reliability in reports and usefulness in

financial result indexes (4) Expansion of e-government: Connect systems of human resources and supply, raise convenience for

citizens (5) Connection between budget and outcome: Reflect outcomes when drafting budget


example of the division of labor among teams.

Team 1: General, Prime Minister’s Office, Government Administration, Audit

Team 2: Justice, Home Affairs, Police, Foreign Affairs, National Defense

Team 3: Planning, Budget, Tax, Customs, Anti-Trust, Financial Supervision

Team 4: Industry, SMEs, Trade, Energy, Information & Communication

Team 5: Education, Science & Technology, Culture, Tourism

Team 6: Health, Welfare, Labor, Gender Equality, Veterans Affairs

Team 7: Agriculture, Forestry, Fisheries, Environment

Team 8: Construction, Transportation

To support the head of the secretariat, three officials should be appointed as director-

generals, with each covering a specific field such as administration and personnel reform, fiscal

reform and local empowerment, e-government and reform evaluation. These officials should

function as staff assisting the head of the secretariat based on their expertise. Each official

should not have teams under its direct supervision, but should be able to utilize all eight teams.

This is a matrix structure with a division of labor both by function (3 director-generals) and by

objective (8 teams). Such a structure has several merits. First, large-scale projects that cannot be


057

Figure 4 | Organizational Chart of the Reform-Leading Organization

Source: Kim, Park, and Park (2006), modified.


handled by one team can be easily managed since each team has no functional barrier. Second,

since each director-general and head of a team would pro-actively search for reform tasks, all

line ministries (by 8 heads of teams) and all aspects of administration (by 3 director-generals)

are open to reform at all times.

Certain shortcomings do exist in this matrix structure, but most can be overcome. First, the

three director-generals would have to compete with one another to secure the time inputs of the

eight teams. Coordination is therefore an important job of the head of the secretariat. Secondly,

each team would have a better understanding of ministries that it is in charge of, but may have a

lower grasp over a functional expertise such as personnel matters or e-government. It ultimately

boils down to a matter of choice between functional vs. ministry expertise. Comprehension of

each ministry is harder to come by as it stems from internal information and experience, and

this institutional knowledge is more important in formulating a reform strategy appropriate for

each ministry. Also the three director-generals and sub-committees can supplement the lack of

functional specialty of each team.

The composition of human resources in the Commission is also very important. The chair of

the Commission must be someone the President deeply trusts since the position can easily

generate enemies and criticism. The head of the secretariat can be chosen from career civil

servants or can be recruited from the non-government sector. It would be better if the three

director-generals were recruited from outside of the government. As for the heads of each team,

a 50-50 mix of private and government staff would be ideal. The success of the matrix structure

depends on a pro-active search of reform initiatives made by these director-generals and heads

of the team. It would be better if the team members, however, were chosen mostly from career

civil servants.


058


Conclusion



President Kim Dae-Jung was the first President of Korea that included government reform in

his official agenda, linking it with reforms in the corporate, financial, and labor sector. The

ultimate goal of public sector reform after the economic crisis was to achieve a government that

was smaller and more efficient, but provided better service to its citizens. The reform covered all

aspects of government administration: input reduction, process improvement, and outcome

enhancement, among which the first two were given more emphasis during 1998~1999. The

major reform agenda included privatization of public corporations, downsizing the public sector,

massive deregulation, review of ministries’ function, bureaucracy innovation and fiscal reform.

The public sector reform under President Kim was relatively successful compared to

previous efforts, and contributed to overcoming the economic crisis. The sense of crisis during

1998 was the most important exogenous variable in creating a reform-friendly environment for

the Kim administration. However, Korea did not waste this golden opportunity for reform, as

there were other endogenous success factors. President Kim exercised strong leadership by

successfully cultivating favorable political support for reform among the citizens, news media,

and the legislature. He also established the PBC as a reform-leading organization which met

most of the necessary requirements for a good reform driver. The guiding principle of the

reform, small government, was an appropriate choice during the post-economic crisis period,

and it was a goal widely shared among the public. After the formulation of action plans, the

government successfully monitored the implementation progress. However, it was unfortunate

that the government did not prepare a Five-Year reform plan, and that it did not appoint reform-

minded leaders as heads at each public organization. In all, however, there is no doubt that the

public sector reforms of 1998~1999 laid the foundation for a more efficient, better-performing

Korean government.


060

Conclusion

Chapter 06


Any reform agenda, and the changes it intends, is destined to create winners and losers. In

order to protect their vested interests, those who stand to lose will strongly resist the reform.

Those who see a potential gain, however, often do not even know that they are potential

beneficiaries of the reform, and thus lend the reformer only weak, if any, support. Machiavelli

(1532) wrote that “the innovator makes enemies of all those who prospered under the old order,

and only lukewarm support is forthcoming from those who would prosper under the new,”

which is absolutely true in today’s government reform.

There is no reform that is free from side-effects. When a new reform is carried out,

therefore, the reformer should weigh the possibility and the seriousness of these side-effects,

and compare it with the potential benefits of the reform in a balanced way. However, achieving

a balanced measure of the costs and benefits is not easy because those who suffer from the

reform tend to exaggerate its costs and underestimate its benefits. On the other hand, those who

gain from the reform tend to remain relatively silent. Also, the benefits of reform are in many

cases unrealized, intangible ones, in which the costs of reform are more easily seen by the

general public than the benefits. For instance, if one argues that railway service should be

privatized, people start worrying about the possible increases in the fees without recognizing the

benefits such as reduced government subsidy. This is why government reform is difficult.

In conclusion, the following is what Korea has learned from carrying out public sector

reform after the economic crisis in 1997. If you want to see a more efficient and better-serving

government, a country’s political leader should establish a reform driver in an appropriate way,

and a roadmap that focuses on prioritization, implementation strategies, and conflict

management. Most importantly, support from the political leader and the general public is a

must for the success of the reform since the reformer is destined to be lonely.

Chapter 6 _ Conclusion

061



062

markettype Incheon International Airport Corporation MLTM

markettype Korea Airports Corporation MLTM

markettype Korea Gas Corp. MKE

markettype Korea Electricity Power Corp. MKE

markettype Incheon Port Authority MLTM

markettype Busan Port Authority MLTM

semi- market type Korea Container Terminal Authority MLTM

semi- market type Korea Land and Housing Corp. MLTM

semi- market type Korea Expressway Corp. MLTM

semi- market type Korea National Oil Corp. MKE

semi- market type Korea Water Resources Corp. MLTM

semi- market type Korea District Heating Corp. MKE

semi-market type Korea Railroad Corp. MLTM

semi- market type Korea Housing Finance Corp. MLTM

semi-market type Korea Workers Accident Medical Center Ministry of Labor

semi-market type Jeju Free International City Development Center MLTM

semi-market type Korea Appraisal Board MLTM

semi-market type Korea Racing Agency MCST

semi-market type Korea Broadcasting Advertisement Corp. MCST

semi-market type Korea Tourism Organization MCST

semi-market type Korea Minting and Security Priniting Corporation MOSF

semi-market type Korea Coal Corp. MKE

semi-market type Korea Resources Corp. MKE

Name Ministry

Appendix A1: List of 23 Public Corporations in Korea as of 2010

MLTM: Ministry of Land, Transportation and Maritime AffairsMKE: Ministry of Knowledge-Based EconomyMCST: Ministry of Culture, Sports and TourismMOSF: Ministry of Strategy and FinanceSource: Park (2009)


Appendix & Reference

063

Appendix A2: Organizational tree of MPB

Source: MPB(2002, p.13)

Appendix A3: Organizational Tree of PCGID (2007)

Source: http://innovation.pa.go.kr/intro/organization.htm, modified.


[Korean]

Ahn, Moonseok. 2001. Future plan for reform of public sector: Administrating state affairs for

the latter half of the year and task for restructuring. Seoul: Graduate School of Public

Administration at Seoul National University Press.

Jin-Hyuk CHOI, ‘Critical Review on the Decentralization Roadmap’, Korea Public

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Chung, Jeongmok. 2000. Limitation and logic of government reform. In government of the

people, the interim evaluation of government reform. Seoul: Korea Institute of Public

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Civil Service Commission of Korea, White Paper on Personnel Affairs, 2005.

E-government Special Committee. 2003. E-government white paper. Seoul: E-government

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Government Reform Institute. 2001. Evaluation result of public sector. Seoul: Government

Reform Institute.

Han, Jeongkon. trans. 1999. Leading change. Seoul: Gimm-Young Publishers.

Kim, Byoungsub. 2000. Evaluation of government organizations reform: Limitation and

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Kim, Myoungsoo. 2002. Policy evaluation and government reform. Seoul:

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Koh and et al. 10 Years after Economic Crisis: Evaluation and Tasks, KDI, 2007.

Lee, Kyesik, and Hyoungpyo Moon, coed. 1995. Government Reform: Strategy and precept of

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064

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Appendix & Reference

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066
