Reform Efforts Toward New
Public Management in Korea

June 21, 2000

Shin-Bok Kim(Dean & Professor,
Graduate School of Public Administration,
Seoul National University)* A Paper presented at IIAS / Japan Joint Panel on Public
Administration, in Bologna, Italy.

1. Relevancy of "New Public Management" Model
Since the late 1970s, Anglo-American English-speaking nations have beenleaders in advocating and practicing "New Public Management" (NPM) as anadministrative reform model.

The pursuit of New Public Management-styled

government innovation has not been unique to America.

The so called "New

Liberalist Regimes" in Western capitalist states during the 1980s clearlypursued this course under the heading of NPM (OECD 1995).

NPM orentrepreneurial government, acting as a "small and efficient" organization,
became the dominant concept in Japan as well.
Korea has also followed a similar course in government reforms. The
ministry in charge of designing reform programs, the Ministry of Planning andBudget, in the Kim Dae-jung's government has declared entrepreneurial or
business-like government as the major direction in reforming government.
There is no single NPM model of public sector reform.

Countries have

responded to reform demands and challenges differently.

Nevertheless,common reform trends can be identified.

Three vital elements of new publicmanagement stand out: (i) an emphasis on restructuring and downsizing, (ii) a
closer focus on customer and result-oriented approach, and (iii) replacement ofrigid traditional hierarchical government structure with competitive, autonomous,
decentralized ones.
Concerning the institutional development of the Korean state apparatus,
NPM has some positive policy implications for administrative reform in Korea(Jung 1999).
A first positive implication comes from the idea of the so-called "small
government" of the NPM. This is relevant for administrative reform in Korea,
where transition to and consolidation of political democracy and a free market
economy should continuously be pursued while also curbing excessive stateintervention in the civil society.
Second, the idea of employing 'corporate governance' models into public
administration is also appropriate in Korea. This is likely that excessive
bureaucratic mode of governance will be shelved by emphasizing the notions ofclient orientation or competition.
Third, the idea of providing front-line workers with more discretion in returnfor increased accountability is appropriate in remedying the problems

associatedwith

Korea's

top-down

approachtopolicy-making

andimplementation. Such reform measures like downsizing, decentralization andthe contract-based recruitment will contribute to the pluralizing of state
apparatus and decision-making process in Korea.
Following the global reform trend, Korea has also adopted many reforms
toward new public management, especially the Kim Dae-jung government.
Economic crisis, telecommunication revolution, as well as globalization seem
have steered the government towards NPM style of reform. Like many Westerngovernments, the Korean government has been adopting such reform
measures as reorganization and downsizing, deregulation and more discretion,and performance management, customer satisfaction administration, etc (Kim
1999).

2. Reforms of Restructuring Public Sector in Korea(1) Reorganization and Downsizing of the Government
The Kim Dae-jung government has stipulated the values of "a small andefficient government" for all aspects of the public sector. The government ischanging its role from that of a leader to a guide in the process of national
development.

Central government reorganization has already occurred twicein less than 2 years. First, following President Kim Dae-jung's inauguration in
February 1998, the current Administration abolished the posts of two deputy
prime ministers and reduced the number of cabinet ministries from 22 to 17.
While the number of ministries and government officials has been decreasing in
general, it sought to strengthen some civil service-related agencies such as the
Ministry of Labor and the Food and Drug Administration through the reallocationof resources.
From October 1998 to February 1999, with its total cost amounted to 4
million US dollars, all central government ministries and agencies underwent
performance evaluation with an eye towards a drastic reorganization.

The

goals of the management review and restructuring program were to enhance
productivity and improve the quality of service and the operating system.

Atotal of nineteen private consulting companies, including consulting firms suchas AT Kearney and Anderson Consulting, reviewed the government
management. Just after the publication of the final report, a public hearing on
government reorganization was held to collect public opinions.
The management review clarified the roles and division of responsibilities
among and within ministries. The consultants then analyzed the civil sector
jobs and recommended the introduction of an open career system andsubsequently developed various performance indicators.
In May 1999, the government announced its second round of restructuring
measures by trimming 120 separate departments and offices, eliminating 241
senior positions.

It would ultimately lead to cut backs in 8,358 government

positions as a result of the second phase of restructuring.

When this is added

to the first phase, the total personnel will be reduced by 14,861, or 10 percent of
the total of 142,209 government employees.

By 2001, the civil service

workforce will be reduced by sixteen percent, or 25, 955 positions.

(2) Restructuring Quasi-governmental Organizations
In order to alleviate problems of redundancy Korea restructured 131
quasi-governments.

Greater autonomy was given in return for greater

managerial accountability. Through this restructuring process, nineteen
organizations have been merged or consolidated, and twenty-eight businessactivities were privatized or contracted out. Such efforts resulted in a reductionof 9,947 workers.

(3) Rationalizing Government-funded Research Institutes
The Korean government has rationalized government-funded research
institutes in order to eliminate inefficiencies in these organizations. The
excessive interference and control by supervising ministries were reduced andthe supervisory role was transferred to five independent committees composedof experts from relevant fields.

Through this restructuring, the government

realized a total reduction of 3,099 staff (-16.7%) and 106 billion won (US$134
million) in budget savings.

(4) Privatization & Restructuring of State-owned Enterprises
In order to rationalize the operations of state-owned enterprises (SOEs), a
privatization plan was finalized.

Greater autonomy was given to the

management while they were subject to more rigorous performance evaluation.
Twenty-six SOEs plus eighty-two subsidiaries were reviewed for restructuring.
Their total gross revenue amounted to U$50 billion, and total net profit were
U$1 billion.

The total number of employees was summed up to 214,000

persons. Those SOEs, which were engaged in commercial activities and haveno justifiable reasons to stay as an SOE were all subject to privatization.
The government sold its shares in five SOEs (Korea Technology Banking
Corp, National Text Book Co., Ltd., Pohang Iron & Steel Co., Ltd., Korea Heavy
Ind. & Construction. Co., Ltd., and Korea General Chemical Corp.) Six others(Daehan Oil Pipeline Corp., Korea District Heating Corp., Korea Electric Power
Corp., Korea Gas Corp., Korea Telecom, and Korea Tobacco and Ginseng
Corp.) will undergo a phased privatization.
including

Korea

National

TouristAn additional thirteen SOEs,

Organization

and

Korea

Petroleum

Development Corp., were restructured.

3. Reforms for Performance Enhancement(1) Creating Executive Agencies
In order to improve efficiency, the heads of executive agencies were
granted greater autonomy in budget and personnel decisions.

Agencies wereallowed to introduce open, competitive recruiting processes for chief executive
positions.

Selected through this open system, chief executives are required todevelop three-year medium-term plans as well as annual strategic plans.

A

three-year plan specifying the goals and tools for the management is to benegotiated between the chief executive and the minister.

Agency chief

executives are required to renew their contract every three years.

Thegovernment designated ten pilot agencies including the Driving and Vehicle
Licensing Agency, National Science Museum, National Central Theater,
National Medical Hospital, etc.

(2) Outsourcing
In order to increase efficiency, the Korean government contracts out those
activities which are thought to be better performed by the private sector. The
government selected eighty eight activities for outsourcing including works on
setting up the Administration Information System, the Library Information
System, and building management, to name a few.

(3) Deregulation and More Discretion
The government created a new systematic mechanism to carry out
regulatory reforms. The Framework Act on Administrative Regulation, which
took effect in December 1997, systematically reviewed various regulations.

Allregulations lacking a legal basis were subject to abolition or were replaced byregulations based in law. The duration of the regulations also must be clearlyprescribed.

President Kim Dae-jung recommended each department reduce

more than 50 percent of regulations under their jurisdiction.

This rapid

deregulation strategy caused some apprehensions regarding negative social
costs such as crime or pollution problems.

The Korean government

decentralized recruitment authority for lower-level officials from the central
personnel agency to the ministries.

The government also opened 30% ofsenior government positions to outside candidates.
In addition, a plan for a "total government workforce control system" isunder way.

The system aims at enabling each ministry to efficiently andeffectively cope with changing administrative demands and to contain the
expansion of the government workforce.

The new system will limit the total

number of employees of the whole central government in advance.

(4) Performance-based Personnel System

To strengthen the civil servants' competitiveness, the Korean Government istrying to develop a new personnel system. The government has introduced 'a
yearly remuneration system' for assistant ministers and bureau directors in thecentral government. Under this new salary system, the level of compensation
will be differentiated within each pay grade band depending on performance.
The pay structure of Korean government employees has been based onseniority in the past. Employees were paid according to their years of service
with automatic salary increases every year. Additionally, they were given aseniority allowance and a long-career allowance.

Employees received

automatic raises regardless of job performance.
This has now changed. The Ministry of Government Administration andHome Affairs (MOGAHA) established a performance-related pay programme forall government employees, which took effect on January 1, 1999.

A

performance award is given in form of a salary increase or lump sum award,
depending on the rank of the employee in the public service.
For performance-based pay, performance appraisal is critical.

Thus thegovernment has set up a kind of Management by Objective (MBO) system,
focused on using appraisal to raise performance levels and to develop
employees to their full capacity, eventually to achieve organizational goals.

Allgovernment employees should establish their own objectives in accordancewith the annual goals of each ministry. Performance appraisal should occur ona regular basis, normally once a year (Kim 1999).

(5) Citizen's Charters of SOEs and Public Agencies
In order to improve the quality of public services and to achievecustomer-oriented government reform, citizens' charters were established in
SOEs and Public agencies.

Nineteen SOEs and ten pilot agencies, including

local health service organizations, police departments, the subway system, and
the Passport Office have also established service quality standards which has
specified the quality of services clients should expect and hence a more specificform of citizen charters.

4. Challenges and Future Tasks

The reform idea of so-called "results-oriented management" needs to be
examined carefully while reviewing the case in Korea. In the case of advanced
nations, the legislative branch has established its autonomy from the executive
branch while a "Weberian bureaucracy" and a robust tradition of procedural
legitimacy have been established. Unlike these nations, Korea is at a stage
where these traditions are still developing. Thus, the emphasized assertion ofautonomy and discretion in the administrative organizations may go against
securing administrative responsibility, which is one of the most needed criteria
in Korea.

Direct control by the "consumer," rather than by representative

institutions, as the control measure over administrative agencies andbureaucrats has, in fact, many shortcomings. This is true in Western nations
as well (Garvey 1995).
Also, customer-oriented reforms do not assume that each customer's
demand may contradict one another.

Since there are numerous suppliers in amarket, the customer for expensive goods with high quality and the customer
for cheap goods with low quality can meet their needs without conflicts.
this is not the case for government.

Yet,

Different people's demands for better

environment with high taxes and more pollution with low taxes cannot avoid
coming into conflict.

These conflicts, after all, must be solved in the politicalprocess. In a private market with multiple suppliers, the use of specific goods
may be abandoned.

On the other hand, the governmental market has amonopolistic character which makes that kind of abandonment impossible (Kettl
1995).
Next, the ideology of "small government" is not as simple in Korea as is thecase in the Western nations. The latter has conducted welfare state policies
for several decades which seems to have distorted incentives of recipients andas a result, are engaged in reducing the inefficiencies caused by these policies.
But Korea not only has little relevancy with regards to the pursuance of welfare
state policy. It, in fact, has actively required more state involvement in dealing
with social problems, brought on by rapid industrialization (Jung 1999).
As seen in the United Kingdom, it is in the social welfare areas where
governmental reductions have mainly occurred.

However, in Korea where thescope of government is relatively small, especially in the sector of social welfare,
it is necessary to increase personnel in this sector.

The main focus of the government reform must be shifted from the
hardware reform like restructuring and downsizing to the software reform suchas the behavior in public service and the government operation system (Lee1999).
First of all, each and every individual government employee must moreclearly understand the importance of the "customer first" concept. The
government has so far focused simply on whether an action has been given andhow much money and labor was disbursed rather than the quality of service
provided.

In the future, however, focus should be put on the what extent theservice rendered would satisfy the customers.
In addition, personnel management must embody a merit-based incentive
system more extensively. We should change the existing practice that assigns
more weight to seniority as oppose to merits.

In this relation current

performance appraisal system must be improved by including more objective
and rational indicators.

Furthermore, recruiting specialists from outside thecivil service system is necessary to enhance the quality of those in service ofthe government.
In the process of reform we should strengthen and encourage the training
and self-development of civil servants. Given rapid changes in the society,changes in the lifetime career concept, and the greater involvement of outsiders,
there is a need for a comprehensive program of attitude and cultural
reinforcement as well as training to strengthen civil service values and toprepare civil servants more adequately for their new roles in the changing
environments.
Lastly, marketing strategies for implementation of reform programs isneeded as well in order to effectively deal with the resistance of interest groups.
Ministry of Planning and Budget has not been always successful in gaining
public support in its reform efforts.

Widespread government distrust of the

public seems to have portrayed all those reform efforts redundant.

Thegovernment should spend more time in gaining the public support throughestablishing cooperative relationship with civil society organizations.

ReferenceOECD, 1995, Government in Transition: Public Management Reforms in OECDCountries.
Kettl, Donald F. 1995. "Building Lasting Reforms: Enduring Questions, Missing
Answers," in Inside the Reinvention Machine: Appraising Governmental
Reform, edited by Donald F. Kettl and John J. Dilulio, Jr. Washington, D.C:
Brookings Institution.
Garvey, G. 1995, "The NPR in Historical Perspective," in Inside the Reinvention
Machine: Appraising Governmental Reform, edited by Donald F. Kettl andJohn J. Dilulio, Jr. Washington, D.C: Brookings Institution.
Jung,

Yong-duck,

1999.

"Administrative

Reformin

Korea:A

Historical-Institutionalist Perspective," Koera Journal, UNESCO/Korea,
Summer 1999.
Kim, Byong-Seob, 1999.

"Government Reforms in Korea: Entrepreneurial

Government or Democratic Government?," Korea Journal, UNESCO/Korea,
Summer 1999.
Lee, Kye-Sik, 1999. "Public Sector Reform in Korea: Achievement and Plans,"
A Paper presented at the International Seminar of Korean Association for
Public Administration, held at Seoul National University, on October 22,
1999.