Government moves to cut 109 public institutions amid bloat and overlapping functions

The government's push to reduce the number of public institutions by 109 stems from years of unchecked organizational growth and the inefficiencies created by overlapping mandates. As headcounts, payrolls and debt have mounted, institutions performing similar or duplicate functions have driven up fixed and administrative costs across the board, the government said.

Officials also cited the need to consolidate fragmented capabilities in response to the AI-driven transformation of the economy and the growing frequency of compound crises.

Through the reform, the government plans to redeploy core national infrastructure capabilities, consolidate overlapping functions, and reorganize subsidiaries and smaller agencies. The aim is to sharpen global competitiveness, reorient public services around users' needs, and strengthen fiscal sustainability through cost savings.

Under the "Public Institution Functional Reform Plan" announced Thursday, 109 institutions — roughly 20 percent of all public institutions — are slated for reduction. The cuts break down as follows: 15 through "strategic structural reform" targeting national infrastructure; 11 through consolidation of similar or duplicate functions among mid- to large-sized institutions; and 83 through integration of subsidiaries and small agencies.

In the national infrastructure sector, the reform will concentrate dispersed functions and investment capacity while separating functions that are fundamentally different in nature. The five state-owned power generation companies — Korea South-East Power (KOEN), Korea Southern Power, Korea East-West Power, Korea Western Power and Korea Midland Power — will be merged into a single entity to pool research and development resources and renewable energy investment, pursue joint procurement of fuel and maintenance materials, and eliminate redundant staffing.

Korea National Oil Corporation and Korea Gas Corporation will also be merged to strengthen supply chain resilience and develop an integrated national energy strategy. Functions related to improving retail distribution structures — including the budget fuel station network — will be transferred to the Korea Petroleum Management Institute. Korea Coal Corporation, whose operations have fully ceased following the closure of all its mines, will be dissolved.

In the ports sector, the port authorities of Busan, Incheon, Ulsan and Yeosu-Gwangyang will be merged into a single body to unify policy and planning functions, with the existing authorities converted into regional branches responsible for area-specific operations. The consolidation is intended to strengthen coordination among regional ports and reduce excessive competition between port authorities.

For airports, rather than immediately merging Incheon International Airport Corporation and Korea Airports Corporation, the government will first pursue revitalization of regional airports before revisiting the question of integration, starting with the consolidation of security functions into a dedicated specialist agency.

The reform also moves in the opposite direction in some cases, separating functions of a different nature that have been housed within a single institution. Korea Land and Housing Corporation (LH) will be split into two entities — one focused on development and housing construction, the other on residential welfare and asset reserves. The government said keeping both functions under one roof had slowed housing supply and increased the burden of managing rental housing. A portion of the development entity's profits will be set aside in a dedicated account within the Housing and Urban Fund to finance residential welfare programs.

Similar or related functions scattered across multiple institutions will be grouped by sector. In the livestock industry, the quality assessment, quarantine and environmental management functions of the Korea Institute for Animal Products Quality Evaluation, the Livestock Sanitation Management Service and the Korea Institute of Livestock and Environment Management will be merged into a single agency. Twelve exhibition and visitor institutions — including museums and science centers — will also be reorganized by sector, covering culture, science, maritime affairs, land and agriculture.

Among mid- to large-sized institutions, 11 agencies will be eliminated by consolidating overlapping functions in areas including broadcasting and media, labor-management relations and education, advanced medical care, and small and medium-sized enterprise marketing.

The largest share of the cuts falls on subsidiaries and small agencies, which account for 83 of the 109 total reductions. Subsidiaries performing work similar to or closely related to their parent institutions will be absorbed through "vertical integration," while subsidiaries doing similar work to one another will be merged through "horizontal integration."

Five facility management subsidiaries of financial public institutions will be consolidated into a tentatively named "Policy Finance FMC," and two customer management subsidiaries will be merged into a tentatively named "Policy Finance CS." Five security and facility management subsidiaries of port authorities will likewise be integrated into a tentatively named Korea Port Security and Facilities Corporation. The approach reorganizes subsidiary functions not by institution but by function.

Small agencies with fewer than 100 staff will also be merged based on functional similarity, bringing together dispersed institutions in areas such as food safety, the construction industry, spatial information and traditional Korean music.

Alongside institutional mergers, some agencies and functions will be transferred to other ministries or related bodies. The Comprehensive Support Center for Enterprises of the Disabled will move to the Korea Employment Agency for Persons with Disabilities, and the Korea Institute for Small and Medium Enterprises and Startups will be placed under the Economic, Humanities and Social Research Council. Some institutions currently designated on a provisional basis will be reorganized by resolving the conditions that triggered their public institution designation.

The government will also expand the "K-Maru" initiative, which consolidates the overseas offices of individual public institutions into shared hubs. Pilot operations are currently underway in Los Angeles, Hanoi, Dubai, Brussels and Nairobi, with plans to extend the program to major cities where five or more public institutions maintain overseas offices.

The government has also set out principles on employment and working conditions for staff at affected institutions, whose combined headcount is estimated at about 128,000.

The government said it will guarantee job continuity for all employees — excluding executives — at institutions subject to consolidation. Pay structures will be managed to ensure that working conditions do not deteriorate before or after the mergers, and the government said it is considering temporary flat-rate allowances and higher caps on discretionary welfare benefits, taking into account each institution's existing welfare levels and the reform timeline. Management evaluation incentives for institutions subject to the functional reform will also be reflected in future evaluation guidelines.

The government said it will continue consultations with labor unions through a government-labor consultative body, with parallel talks between individual ministries and their respective union counterparts. Specific functional reform plans for each institution will be submitted to the Public Institution Management Committee for deliberation as they are finalized, and matters requiring legislative changes will be coordinated with the National Assembly. Where regional interests are at stake, the government said it will also communicate with local governments.

Heo Jang, second vice minister of the Ministry of Economy and Finance, said at a briefing Thursday that the government had drawn up a plan "to redesign the functions and roles of public institutions so they can focus on their core mandates — by streamlining similar and overlapping functions, shedding non-essential ones, and organically connecting dispersed capabilities."

He added that the government "will actively work to ensure this functional reform is carried out swiftly — by encouraging each ministry to establish and implement its own reform roadmap, and by immediately proceeding with consolidations that do not require separate procedures such as legislative amendments."