Most state-run companies cannot pay for the paychecks given to their own employees. Their profits and government grants are not enough to cover their payroll expenses in some cases.

Roh has aborted all privatization efforts, however. Experts point out the need to privatize idling state-run companies, along with various initiatives to overhaul their competitiveness.

State-run companies burdened with sloppy control and burgeoning debts–

The Kim Dae-jung administration at least endeavored to streamline the corporate structures of state-run entities through restructuring. On the contrary, Roh Moo-hyun aborted such efforts allegedly to improve internal governance and operational systems. Roh’s approach did not bring any improvements; rather, Roh’s measures led to burgeoning debts and many more employees on the public payroll.

As of 2002, Korea National Housing Corporation had debts amounting to 9.8 trillion won. The amount increased a whopping 258.2 percent to 35 trillion won in June 2007. Despite the disappointing performance, its payroll shot up 35.4 percent from 3,238 to 4,385 for the same period.

Roh’s various development projects, including the construction of a new administrative capital, have also depleted the treasury of Korea Land Corporation, doubling its debts from 11 trillion won in 2002 to 25 trillion won in June 2007. Its payroll, however, snowballed from 2,125 to 2,677 workers over the same period.

Likewise, Korea Minting and Security Printing Corporation watched its debts rise 387.5 percent from 2002 to June 2007, the highest increase among the 24 state-run companies. Its personnel, on the contrary, rose 20.5 percent for the same period.

Korea Coal Corporation constituted another vivid example of Roh’s notorious management. Declining coal demand and poor management have completely eaten up its capital, losing more and more money every year. Now, it pays its employees with loans. In 2002, for example, its debts amounted to 897 billion won, which shot up to 1.2 trillion won as of June 2007.

Worsening profitability –

The burgeoning payrolls of state-run entities have deteriorated their profitability.

A congressional accounting bureau recently reviewed the management conditions of 13 major state-owned companies, including Korea National Housing Corporation, Korea Coal Corporation, and Korea Tourism Corporation. Their net profit margin dropped from 10.63 percent in 2002 to 7.04 percent in 2006. The term “net profit margin” refers to the ratio of net profits to net sales, an important indicator showing how much profit or loss a company generates.

Experts and scholars point to Roh as the epicenter of the problems. Once taking office, Roh aborted all ongoing privatization efforts and egged on public companies toward sloppier management and worse profits.

Yonsei University economics professor Kim Jeong-sik criticized, “Roh has stressed the value and needs of state-run corporations. But he did not mention their problems, such as sloppy management, burgeoning debts, and excessive spending. The bigger they get, the more taxpayers have to cough up to finance their payrolls.”