Privatization of a public enterprise?

Recently, there are many issues rising up regarding an objection of a privatization of a public enterprise. Above all, an opposition party of the privatization of Incheon International Airport has sprung up. Citizens of Korea are making an outcry over an incomprehensible disposal of the few remaining national key industries.

Privatization?

Privatization is: ‘to hand over a public owned company to a private sector in order to increase the effectiveness of a business and productivity.’ According to the government, privatization of the International airport means economic effectiveness, an ease of financial burden through a sale of stockholdings, and a promotion in market economy through an expansion of investment opportunity. Moreover, 49% of the shares will be sold in order to keep the status of major shareholder (51%) and exert a valid management.

Why insist on a disposal of Incheon International Airport?

The government claims a change in the structural control in order to reform the ineffectiveness, to increase competitiveness, and to apply market principle in the public sector. And, in the case of Incheon International Airport, a strategic partnership with world Hub airport is needed to maximize the value of a corporation. A creation of jobs can be expected through an increase of management effectiveness and smoothness in the facility investment. Moreover, it is true that it made outstanding progress, but it’s not sufficient to develop as a hub in Northeast Asia just yet. In these circumstances, if the airport is to remain in the public sector, it will be tied to several regulations. Furthermore, many people assert that the airport might show the strong mind of the private sector and result in an increase of facility use fees. But 49% disposal of the shares just means a sale, thereby letting the government have the power over decisions-making.

Lacking Logic?

President Lee Mung-back said “For the management of a public sector, 20 trillion won of tax is utilized for support.“ However, is it really the airport that is so unprofitable that the government regards it as a waste of tax?

NO. First, citizens are having difficulty when just trying to understand the privatization of a public corporation, which was established for the society. Second, according to The Ministry of Strategy and Finance (MOSF), the pure profit of Incheon International Airport earned from 2007 and 2011 reaches up to a trillion and 5billion won. Third, from 2005, Incheon International Airport has been awarded consecutively for the last 7 years, the Airport Service Quality Awards hosted by The International Air Transport Association (IATA). Facility and service are as well the best, and the profit earned by tax free shops is ranked 3^rd in the world. Lastly, from 2004 the income increased, though there were some setbacks in 2005 and 2008. The difference of pure profit between 2004 (1.495 billion) and 2009 (2.667 billion) was surprisingly 1.82 billion won.

The Future

1. Macquarie

Macquarie is an international financial institution established in 1969, from Australia that provides various financial services. Korea is listed as the second most invested country by Macquarie and it owns the shares in various infrastructures such as highways, tunnels, bridges, etc (a total of 17). This conglomerate recollects the invested money for 20 to 30 years. This method can be regarded as a collection of tax. So in other words, tax is what fulfills the greediness of the corporation. Moreover, if the sharing of Incheon International Airport is sold over to Macquarie, their possession of Korea infrastructure will be increased enormously.

2. Tax Free Business

A huge part of Incheon International Airport is accounted for in the tax free shops. Recently, they have reached a total yearly profit of a 149.87 million dollars and most of it is reinvested in the promotion of tourist sector forming a cyclical structure. However, a M.P Yun Gwan-suk commented “tax free business is for the public purpose by throwing up the right of tax collection, but as Lee Mung-bak administration took over the power, 80% of tax free businesses are occupied by multinational corporations. The current reinvestment of profit earned by tax free shops shows a strong public color, but if privatization occurs, it will allow the privileged to fill their overflowing cups.” Moreover, whether the profit earned by famous brand shops will actually be a help to the domestic economy is another factor to consider about. It is true that privatization will allow a job creation and an activation of domestic economy, but the question is, can’t the public owned company?

The negative outcome that privatization of a public company will bring doesn’t just result in a change in the management structure through an expansion of capital. Public corporations should not forget that their focus is not on the profit of its organization, their focus should be on the “public”.