Korean SOE Sector Reform and Privatization: Changing Managerial Incentive and the Transfer of Control Rights

Abstract

This article examines the current state-owned enterprise (SOE) sector reform programs used in Korea and suggests an alternative course. Although privatization gained considerable momentum, its privatization policy was compromised due to conflicts in its goals. There is a real need to realign the role of the SOE sector in the economy which involves radical restructuring of its present system through the control rights privatization of state monopolies. We argue that the current internal management reform policies designed to affect internal and external incentive of SOE managers are unlikely to succeed due to the politicized nature of the process. This leaves full divestitures of state monopolies as only viable option rather than soft reform measures that are currently being employed.