In the 1980's the Korean public enterprise sector still
generates a 10% share of GDP, accounts for about 30% of the
nation's investment, and operates in highly strategic industries.
Therefore, the managerial inefficiency of public enterprise would
lead to spill-over inefficiency in other industrial sectors.
However, the performance of Korean public enterprises
turned out to be poor in terms of low rate of return on capital
and number of deficit enterprises. The government introduced a
new public enterprise policy which allows a lot more autonomy
in the operational management of public enterprises. The new
Korean public enterprise policy was designed to lessen the a
prior government intervention, and to implement the ex post
performance evaluation program.
The impact of the new Korean public enterprise policy on
the efficiency improvement of public enterprises was found to be
substantial. A questionnaire survey for the qualitative
measurement of the policy effectiveness showed positive signals
in general. An econometric analysis for the quantitative
measurement of the policy effectiveness also supported the fact
that the management efficiency has been improved at least
during the first 3 years period under the new policy.
The replicability of the Korean system into other developing
countries in order to enhance the efficiency of their public
enterprises requires a careful assessment of the country specific
circumstances such as the relationship between government and
public enterprise, and administrative or bureaucratic coordination.
The technical framework of the Korean system could be
replicable. The most critical element of public enterprise
renovation is the political support of the high government
The political support is not only critical for a replicability
into other countries, but also crucial for the sound development
of the Korean system itself in the future.