Privatization Policy in Korea: A Theoretical and Empirical Consideration

Abstract

Executive SummaryIn this paper, we discuss the effectiveness of the past ‘conventional’ state-owned enterprise (SOE) reform measures used and institutional and politico-economic factors that led to the adoption of particular SOE reform strategies in Korea since 1984. We found that partial SOE reform measures that fail to depoliticize the relationship between SOEs and government are difficult to Implement and maintain in the long run. Furthermore, the piecemeal and cash flow rights privatization approach to the SOE sector reform in Korea conferred little credibility to government policies. To improve SOE performance through conventional means, implementation of a full reform package is required which affects both internal and external incentive of SOE managers. However, these measures are too numerous and too difficult to coordinate and hard to maintain in the long-term. We believe that the state needs to adopt more fundamental reform policy of disengaging its interventionist practices in the SOE sector an...