Heo Jang, the Deputy Minister of Finance, stated on September 7 that the reform involving the consolidation of 109 public institutions is focused on strategic resource reallocation rather than immediate cost savings. He emphasized that the goal is not to weaken the public sector's role or merely cut costs, but to prepare for the future by implementing a system that curbs the habitual expansion of public resources.
Heo noted, "In the long run, this will enhance productivity in the public sector and help control rising costs. Please focus on how much we can strengthen functions and reallocate resources to contribute to the future economy, rather than just the number of institutions reduced."
On September 3, the government announced a plan to reduce about 20% of the public institutions under its management, totaling 109. This includes 15 institutions through strategic restructuring, 11 through the unification of similar and overlapping functions, and 83 through the integration of subsidiaries and smaller institutions.
Heo reaffirmed the principle of guaranteeing job security for employees of the institutions being consolidated. He stated, "It is a clear principle that employees should not suffer disadvantages in terms of salary or welfare due to the consolidation. We will also prepare support measures, such as adjusting the salary system and increasing the limits on selective welfare expenses." The government plans to reflect the integration results in public institution management evaluations to provide incentives.
However, executives, including heads and directors, will not be guaranteed job security. Heo explained, "If a new institution is created or an existing one is abolished, there may be changes in the status of executives. Each ministry and institution will devise efficient personnel allocation plans."
In response to criticism from labor groups about insufficient consultation during the planning process, Heo emphasized that more than five rounds of discussions with labor representatives have taken place. He added that future consultations will involve the Ministry of Finance, the Ministry of Employment and Labor, and higher-level labor unions, alongside discussions between relevant ministries and individual institution unions.
Addressing concerns that the debt of the Korea National Oil Corporation could be transferred to the Korea Gas Corporation during their merger, Heo proposed managing the oil corporation's debt and non-performing overseas assets through a separate subsidiary. He stated, "We are considering managing the oil corporation's debt and problematic overseas assets through a separate subsidiary and gradually selling the assets based on market conditions."
He also assured that measures would be put in place to protect the interests of gas corporation shareholders, explaining that the purpose of the merger is not merely to improve financial structures but to enhance the capabilities and negotiation power of energy public enterprises.
Regarding the approximately 26 trillion won debt of the Korea Coal Corporation, which is set for liquidation, Heo stated that the government will secure liquidation funds through consultations with relevant ministries. The government plans to amend related laws, including the Korea Coal Corporation Act, to initiate the liquidation process, with specific funding allocation plans to be determined later.
Heo addressed concerns that existing regional headquarters may be relocated due to the institution consolidation, stating, "The government will not unilaterally decide on the location of headquarters."
He clarified that the plan to separate the Korea Land and Housing Corporation (LH) into development and housing welfare and asset management sectors is not a return to the previous system of land and housing corporations. He explained that the aim is to strengthen LH's public nature by establishing a structure that allocates a portion of development profits to a separate account for the housing welfare sector.
The merger of Incheon International Airport Corporation and Korea Airports Corporation will be postponed, with an initial focus on functional collaboration. The government plans to establish an airport strategy council to develop cooperation plans for international flight allocations and facility and personnel operations before reviewing the long-term merger of the two entities. Security operations, currently divided by airport, will be consolidated into a separate specialized aviation security agency.
Heo concluded, "This announcement is not the end but the beginning," stating that as each ministry develops a roadmap for institutional function reforms and organizational adjustments, the public institution reform promotion team, involving relevant ministries, will regularly monitor the implementation status.
* This article has been translated by AI.
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