Pointless shuffling

13 March 2008 By Martin Hutchinson

South Korea is considering merging stateowned companies into a holding company, modelled on Singapore’s Temasek. However, sovereign wealth funds investing domestically cannot act on the arms length basis that is possible abroad. It is better to privatise where possible.

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The South Korean government is considering merging several government owned corporations into a single holding company similar to Singapore's Temasek. The restructuring would apply only to majority owned companies such as Korea Electric Power, the power generator (79% owned), Korea Development Bank, and Korail, the national railway. It would not extend to the government's minority stakes in such companies as Hynix Semiconductor and Hyundai Engineering.

The plan would conflict with new president Lee Myungbak's pledge to privatise these companies. Lee, supported by the conservative Grand National Party, took office on February 25. However, the legislature remains controlled by the opposition pending elections scheduled for April 7.

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