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S Korea to merge or close 41 additional state-owned firms

“We will make further announcements on the reform and try to find ways to make management more efficient.”

— Bae Kook-hwan, South Korean vice finance minister

South Korea said it will merge, restructure or close a further 40 state-owned companies, the second phase of President Lee Myung-bak’s plan to make government-run businesses more competitive.

The government will close three state-run companies, rejig operations at seven businesses and undertake a series of mergers to reduce another 29 firms to 13, the finance ministry said in a statement yesterday. The government aims to sell provincial airports owned by Korea Airport Corp, it said.

Lee has pledged to boost economic growth by improving efficiency at state-run firms that have been criticized for paying relatively high wages and benefits while posting losses amid low productivity. The government announced the first phase on Aug. 11, with plans to sell or merge 41 companies, including stakes in Incheon International Airport Corp. and Industrial Bank of Korea.

“We will make further announcements on the reform and try to find ways to make management more efficient,” Vice Finance Minister Bae Kook-hwan told reporters in Gwacheon.

There are 319 firms in which the government has holdings or that have been bailed out with taxpayers’ money.

Today’s announcement includes merging Korea Software Industry Promotion Agency and Korea Institute for Electronic Commerce into one organization and combining Environmental Management Corp. with Korea Environment & Resources Corp.

“There have been some issues raised about overlapping of the functions of some state-run firms since an average 10 new public firms have been established every year from 2003,” the ministry said.

The government will close KORAIL ADcomm, which is an advertising arm of the railway corporation, Resolution & Finance Corp and Korea Labor Education Institute.

Authorities will change or cut back on functions at seven companies including Korea Asset Management Corp and Korea Deposit Insurance Corp. Seoul will also try to sell some of 14 provincial airports which Korea Airport Corp owns.
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