This study identifies issues with the Korean policy on investment in public corporations and makes suggestions for possible improvements.
Public corporations play an important role in the economic growth of developing countries. As the government carries out most of its economic policies via public corporations, they promote economic development. However, the government’s oftentimes heavy fiscal involvement in the market via public corporations also causes inflation. Careful consideration and caution are required in determining the appropriate amount of government investment to be made in these corporations and also responsible structure in financing them.
The main forms of fiscal support for public corporations include investment, subsidies, and fiscal loans. In general, new public corporations mostly receive investment and subsidies, and the government transitions to fiscal loans once public corporations are established in their operations and markets. Like other developing countries, Korea implements an economic policy centered on public corporations.
Should the government decide to create more jobs by investing fiscal resources into the public sector, the government should channel its investments into sectors with greater job-inducing potential. Should the government, on the other hand, wish to restore the business cycle and stimulate growth, it should invest in sectors with higher added values. The investments that the Korean government made in the public sector in 1981 and 1982 suggest that economic stimulation took priority over job creation. The Korean government invested most heavily in the construction industry, which offers greater added values than any other industry.
The current policy on public sector investment, however, has the following issues: The fiscal resources for public sector investment are being depleted, while the large number of channels through which effective investment decisions must pass adds to administrative inefficiency. The majority of government investments are also concentrated on the manufacturing sector and other fundamental industries, and little attention is paid to public corporations that handle social services.
공기업과 재정(Public corporations and national finance)
[서울] : 한국개발연구원
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy
Industry and Technology < Entrepreneurship
|Holding||KDI; KDI School|