SOE Reform Boosted

 

According to the report, although the State sector makes up a major proportion in the national economy and has recorded certain progress in recent years, it remains in stagnation and low efficiency. Its revenues account for only 9.2 per cent of the State budget. Bad debts, poor management, obsolete equipment, low productivity, and a redundant workforce are the weaknesses of the State sector. However, it continues its dominating role in the supply of main products and services (energy, telecommunication, and airlines). Evidently, a bolder reform is needed to improve the situation and avoid the danger of lagging behind in the process of international economic integration.

 

According to Prof. Sin Il Kang, Hansung University, Korea, there are several causes for the failure of SOE reform such as the absence of strict control of corporations and confidence in the private sector, slow implementation of policies and legal documents (competition law and administrative reform). The equitisation of SOEs is unplanned and poorly performed. The government must accelerate equitisation and generate confidence in the process. A two-tier policy should be carried out: equitisation and evaluation of enterprise performance. In addition, the sale of SOEs must be readjusted to specific conditions, products and capital market. Shareholders of State and non-State enterprises must have equal treatment. Due to the small capital market, the sale of SOEs could not proceed as expected. Foreign investors should be allowed to participate in the process of privatisation to increase business efficiency. It is hoped that the government will adopt appropriate measures in the diversification of ownership to ensure the success of the equitisation.