The government has revealed plans to reduce the number of public institutions by 109, but it has only just begun estimating the costs associated with this consolidation. While cost reduction is a key goal, specific savings have yet to be calculated. Additionally, the criteria for evaluating the reform's success and the timeline for implementation at each institution need further clarification.
During a briefing on public institution reform held at the Government Sejong Center on September 4, officials announced that they have started investigating labor costs and benefits for designated institutions following the announcement of the reform measures the previous day.
Previously, the government proposed consolidating five power companies with Korea National Oil Corporation and Korea Gas Corporation, as well as separating the Korea Land and Housing Corporation (LH) into development and housing welfare functions. The plan aims to reduce the total number of institutions by 109 through the unification of similar and overlapping functions and the consolidation of subsidiaries and smaller institutions.
Cost Savings Not Yet Calculated; No Guarantee of Debt Reduction from LH Separation
When asked about the initial costs required for organizational and IT system integration and the long-term savings, a government official stated, "Cost reduction is not the primary focus of the policy, so there are no specific figures available."
For the 183 institutions designated as reserved, there is no obligation to disclose information, making it difficult to ascertain specific labor cost structures and benefits. Due to the challenges in publicly announcing the targets for consolidation in advance, the government has begun requesting relevant data from the responsible ministries following the announcement.
There are also questions about whether sufficient review has been conducted to support the expected benefits of the reform. The announcement included a vision to enhance global competitiveness and improve public satisfaction, with "cost reduction to enhance fiscal sustainability" listed as one of the three main goals.
While the government does not deny the potential for cost savings, it emphasizes that the core of the reform is to restructure functions to respond to the AI transformation and complex crises. Although it may reduce redundant executive compensation in smaller institutions, the intention is not to achieve cost savings through forced restructuring of existing staff.
The performance evaluation system also requires further development. The government has reviewed about five key performance indicators (KPIs) but has not disclosed specific details or target figures. An official stated, "We cannot simply conclude that efficiency will improve just because the number of institutions decreases. We need to establish metrics to evaluate the outcomes of collaboration and integration."
Plans for debt reduction will be managed separately. Regarding the separation of LH, a government official noted, "We cannot guarantee that debt will be significantly reduced through the separation," adding that no specific debt reduction targets have been set for this reform. Details on how LH will be separated, including personnel allocation and timelines, will be announced through a separate reform plan by the Ministry of Land, Infrastructure and Transport.
Goal to Maintain New Hires; Wage Gaps to Be Addressed
The government has also stated its intention to guarantee job security for existing employees, excluding executives, and to support new hires to ensure that consolidation does not lead to a reduction in recruitment. While redundant personnel will be reassigned, the government aims to bolster staffing in AI and new technology sectors.
A government official remarked, "Even if we reassign existing redundant personnel, our goal is to ensure that we can actively expand the workforce in AI and new technology areas to prevent a decrease in new hires."
The government is considering applying differential increases to address wage gaps between institutions, with higher increases for those with lower average wages. However, it plans to consult with relevant ministries to establish detailed criteria, taking into account not only average wages by institution but also differences by job and position.
The scope of regular employees as defined by the government includes general and non-fixed contract workers. For temporary contract workers, the government stated that adjustments would need to be considered based on personnel changes and project funding methods.
It is anticipated that the headquarters system will largely remain in existing regions after consolidation. For example, in the case of the oil and gas corporations, one location will serve as the headquarters while the other will function as a branch. The specific location for the headquarters has yet to be determined.
The government plans to utilize branch-specific hiring to address regional talent acquisition. A government official stated, "We will take measures to ensure that there are no issues with hiring local talent through branch-specific recruitment." Changes in regional tax revenue due to the headquarters consolidation will be reviewed further once a specific organizational structure is established.
Reduction May Still Lead to Increased Number of Designated Institutions; Legislative and Union Negotiations Pending
The government clarified that the "reduction of 109 institutions" is based solely on the currently designated public institutions. Including reserved institutions, the total number of institutions is set to decrease from 524 to 415.
In this process, the officially designated number of public institutions may actually increase. After consolidating smaller reserved institutions that perform similar tasks, they could be designated as public institutions and integrated into the management system. The government aims to address gaps in disclosure and management through this approach.
The timeline for the reform depends on the legislative process. The government noted that over 80% of the targeted reforms will require legal amendments. While there are internal target timelines for each institution, it is difficult to provide an official completion date as it is contingent on parliamentary review and the passage of laws. The integration of the five power companies is mentioned as an example that can proceed without related legal amendments.
Negotiations with labor unions remain a challenge. The government has conducted five rounds of discussions with higher-level labor organizations, with the unions' primary demand being meaningful participation in the policy-making process.
However, the detailed briefing scheduled for the morning of the announcement was not carried out. According to the government, the unions raised concerns that the brief explanation provided just before the official announcement was insufficient for meaningful participation.
The government plans to hold additional discussions with higher-level labor organizations next week and will also engage in negotiations between the responsible ministries and individual institution unions. A government official stated, "The announcement of the policy does not mark the end of negotiations; we will continue to engage regularly with labor unions and must consult with them in the process of developing specific implementation plans for individual institutions."
* This article has been translated by AI.
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