South Korea Public Agency Reform: 109 Organizations Cut

The government’s public institution functional reform plan calls for reducing the number of institutions and subsidiaries by 109 through consolidation. The five power generation companies and the port authorities will be consolidated, the oil and gas corporations will be merged, and LH will be divided into development and asset management organizations. The implementation schedule, costs, and headquarters locations will be determined through follow-up procedures.

Based on the “Public Institution Functional Reform Plan” announced by the relevant ministries (the announcement date can be verified in the original government policy briefing)

What Will Be Reduced by 109

The figure 109 represents the scale of reductions achieved by reorganizing similar or overlapping functions. It includes both institutional consolidation and the restructuring of subsidiaries. It does not mean that all affected entities will close or cease operations.

The scale of the reduction was described as approximately 20% of the organizations included in the count. This does not mean that only 20% of the current organizations will remain. Nor does it mean laying off 109 people or closing 109 office buildings.

The exact wording of the announced plan should be checked in the original document. The document is titled the relevant ministries’ “Public Institution Functional Reform Plan.” The government policy briefing and press releases from the responsible ministries are the sources for verification.

Reform Plans by Sector

The reform is structured around consolidating overlapping functions and separating conflicting ones. The energy and port sectors will be expanded in scale through consolidation. LH will separate its development role from its housing welfare role.

Consolidation of the 5 Public Power Generation Companies

The 5 public power generation companies are scheduled to be merged into a single corporation. The entities are Korea South-East Power, Korea Midland Power, Korea Western Power, Korea Southern Power, and Korea East-West Power. The tentative name is Korea Power Generation Corporation.

The 5 companies spent approximately 50 billion won annually on similar research and development. They have also pursued renewable energy projects separately. The government intends to pool their investment capabilities through consolidation.

The consolidated corporation is expected to have more than 14,000 employees. Annual revenue was projected at approximately 30 trillion won. The headquarters location and organizational structure have not yet been decided.

Consolidation of the Oil and Gas Corporations

The two public resource corporations are planned to be merged into the tentatively named Energy Resources Corporation. The purpose of the consolidation is to handle oil and gas together. Greater bargaining power in external negotiations was also cited as a reason for the plan.

Korea National Oil Corporation’s debt at the end of the previous year was approximately 22 trillion won. Its assets at the same point were reported at approximately 19.4 trillion won. Its weak financial structure is a key variable in the consolidation.

Approximately 55% of Korea Gas Corporation’s shares are held by the public sector. The remaining approximately 45% is held by the National Pension Service and private investors. Shareholder interests may be affected depending on the merger structure.

Separation of LH Development and Housing Welfare

A plan was proposed to divide LH into two institutions. The tentatively named Housing and Urban Development Corporation will handle development. The Housing and Urban Asset Corporation will be responsible for rental assets and welfare.

The existing LH used development profits to offset losses from rental housing. The government intends to maintain this funding link even after the separation. A portion of development profits will be deposited into a separate account within the Housing and Urban Fund.

A structure under which these funds are transferred to the asset corporation is being considered. Debt exceeding 170 trillion won was also cited as part of the background to the reform. The debt figure should be verified again using official financial data.

Ports, Medical Foundations, and the Coal Sector

The 4 port authorities are also planned to be consolidated into a single institution. The allocation of regional authority after consolidation has not been disclosed. Investment priorities for each port also remain a follow-up task.

The advanced medical industry promotion foundations in Daegu-Gyeongbuk and Osong are also subject to consolidation. The plan is to combine the research functions of the two foundations into one organization. Details regarding office locations and the allocation of regional functions still need to be confirmed.

Liquidation was proposed for Korea Coal Corporation. Liquidation follows legal and financial procedures different from consolidation. Plans for handling remaining operations and debt must be verified separately.

Schedule for Relocating Government Ministries to Sejong

The relocation of government ministries is being pursued separately from the reduction of public institutions. The announced plan gave priority to institutions involving large-scale relocations. Ministries and law enforcement institutions will move to Sejong in stages.

It should not be assumed that ministry relocations are included in the reduction figure of 109. The two policies were presented in the same announcement but are separate initiatives. Their scope should be compared once the final tally is released.

Summary by Circumstance

The impact of the reform will vary depending on a person’s workplace and whether they are an investor. The announcement alone does not finalize changes for individuals. Follow-up plans can be reviewed with a focus on the items below.

Calculation Examples

The announced figures can be used only to understand the scale. They do not represent actual savings or corporate value. Simple calculations must be distinguished from the scope of their interpretation.

Simple Average of R&D Spending by the 5 Power Generation Companies

Annual R&D spending of approximately 50 billion won can be divided among the 5 companies. The simple average per company should be verified using detailed R&D spending data from the relevant institutions. This does not mean that each company actually spent the same amount.

Approximately 50 billion won ÷ 5 companies = an annual average of approximately 10 billion won per company

Actual savings after consolidation should be verified using the relevant institutions’ budget and settlement data. Necessary research and personnel will remain with the consolidated corporation. Savings must be calculated after identifying overlapping projects.

Simple Difference Between Korea National Oil Corporation’s Assets and Debt

The reported debt is approximately 22 trillion won. The reported assets are approximately 19.4 trillion won. The difference between the two amounts should be verified in Korea National Oil Corporation’s financial statements.

Approximately 22 trillion won - approximately 19.4 trillion won = approximately 2.6 trillion won

This is not a calculation of a confirmed capital impairment amount. This is because the two figures have been rounded. An accurate assessment requires audited reports prepared on the same basis.

Consolidation Costs and Implementation Tasks

Fiscal savings cannot be calculated solely from the reduction in the number of institutions. Integrating systems and office buildings may generate one-time costs. The method used to transfer debt and assets will also affect the outcome.

Net savings cannot be determined from the announced figures alone. The following items must be disclosed before cost effects can be compared.

• One-time costs of corporate consolidation and liquidation
• Costs of integrating IT networks and accounting systems
• Costs of relocating headquarters and disposing of unused office buildings
• Method for assuming debt and guaranteed obligations
• Criteria for discontinuing or retaining overlapping projects
• Changes in labor and procurement costs before and after consolidation

Matters requiring legislative amendments may be subject to National Assembly procedures. Consolidations involving listed companies must also address shareholder issues. Labor-management consultations and regional coordination will also affect the speed of implementation.

Common Mistakes

The reform announcement is not the final organizational chart. Tentative institution names have not been confirmed as their official names at launch. The following misunderstandings should be avoided when interpreting the figures.

• Do not interpret an approximately 20% reduction as meaning that only 20% of the current organizations will remain.
• Do not view the reduction of 109 as the immediate closure of 109 institutions.
• Do not count all R&D spending by the 5 power generation companies as savings.
• Do not conclude that the difference between Korea National Oil Corporation’s assets and debt is a merger loss.
• Do not interpret the separation of LH as the termination of rental housing contracts.
• Do not add the Sejong relocation schedule to the reduction figure of 109.

Order for Checking Follow-Up Announcements

Implementation should be verified through official documents issued at each stage. The announced plan and the actual structure at launch may differ. The order for verification is as follows.

1. Check the table of institutions covered by the relevant ministries’ functional reform plan.
2. Check follow-up plans from each institution’s board of directors and responsible ministry.
3. Check legislative amendments and their status in the National Assembly.
4. Check plans for the succession of assets, debt, and personnel.
5. Finally, check the implementation date and new customer service contact.

Frequently Asked Questions

Will All 109 Public Institutions Close

It does not mean that all of them will close. Consolidation, separation, subsidiary restructuring, and liquidation are all included. Some institutions will have their functions transferred to new organizations.

When Will the Consolidation of the 5 Power Generation Companies Be Completed

A specific completion date cannot be determined from the information currently available. Plans for establishing the corporation and transferring assets and personnel must be released first. The follow-up schedule from the responsible ministry should be checked.

What Should Korea Gas Corporation Shareholders Check

They should check the merger method and asset valuation standards. The merger ratio and debt succession structure are also key. Shareholder-related procedures can be assessed after a detailed plan is released.

What Will Happen to LH Rental Housing Contracts

The announcement alone does not terminate existing contracts. The responsible institution and customer service contact may change. Existing guidance should be followed until contract succession guidelines are issued.

How Much Will Be Saved by the Reduction of 109

Net savings cannot be calculated from the figures currently available. Consolidation costs must be deducted from savings generated by eliminating overlapping work. Cost estimates and plans for each institution must be released before comparisons can be made.

Is the Sejong Relocation Included in the Consolidation and Abolition of Public Institutions

They were addressed in the same announcement but are different in nature. One is an organizational reform of public institutions. The other is the relocation of government ministries and national institutions.