Since 2012, the government has established a medium- to long-term financial plan for public institutions with an asset size of KRW 2 trillion or more for the rolling period of five years and submitted it to the National Assembly in order to enhance the financial soundness of the institutions. This year, the 2015-2019 Medium- to Long-term Financial Management Plan of Public Institutions for 39 state-owned corporations and quasi-governmental institutions was submitted to the National Assembly.

   Recently, the soaring debts of public institutions have fueled concerns that the burden on the government’s financial situation may rise. Under these circumstances, securing the financial health of public institutions has emerged as an important policy goal, and in particular, it is essential to identify and strictly manage the root causes of their rising debts.

   This report analyzed the adequacy and feasibility of the medium- to long-term financial management plan, focused on the debt status and issues of those institutions that are subject to an increased level of control among 39 public institutions as included in the Public Institution Normalization Plan.

   The “comprehensive analysis” points out that the connection between the medium- to long-term financial management plan and budgets needs to be enhanced, thus strengthening debt management in accordance with the initial intention of the plan. It also suggests that for the public institutions that are subject to enhanced debt controls with significant increases in their dependence on loans, their financial soundness needs to be more stringently managed, including through a plan to repay the loans.

   In terms of public institution normalization measures, since the related debt reduction plan overestimated the projected results as it was developed based on an optimistic perspective, the competent ministries and the Ministry of Finance and Strategy need to strictly manage the implementation of the plan. Furthermore, the financial health of government-owned enterprises has worsened as public utility charges are cheaper than production costs. Therefore, a measure is needed to maintain public utility fees at a proper level through enhancing the transparency in cost structure and addressing the cost burden owing to inappropriate investment.

   According to the “institution analysis,” Korea Land & Housing Corporation needs to review the adequacy of the plan to sell 10-year rental houses at an earlier time, which will lower the inventory level of long-term rental houses. Korea Expressway Corporation has shown poor performance in shedding its debts as a part of the public institution normalization measures, and its interest coverage ratio is less than 1. Therefore, the competent ministries should develop a policy package to reduce its debts, including adjusting the ratio of state funds and utilizing the proceeds of selling railway assets. For the Korea Student Aid Foundation, as increases in student loans and subsequent default amounts pose a financial risk while the number of student loan defaulters is rising, the Foundation is advised to come up with a countermeasure to substantiate the credit recovery scheme for borrowers linked to their employment. It is essential for Korea Rural Community Corporations to forge a measure to secure the profitability of the development program of the Rural Development Administration’s previous real estate.