Privatization and Corporate Governance: Strategy for a Unified Korea

Abstract

This paper will be part of an interdisciplinary Handbook of Korean Unification designed to provide policy makers with a "blueprint" for a unified Korea. Drawing on lessons from privatization experiences in Germany and Central Europe, the paper outlines a step-by-step approach to the privatization of North Korean state-owned enterprises. The strategy is designed to obtain the corporate governance benefits of a sales-only approach to privatization and the social and political benefits of voucher-based mass privatization programs. A central lesson from past privatization experience is that law matters: simply moving ownership from state to private hands in an institutional vacuum does not ensure that adequate corporate governance and supervisory mechanisms will develop spontaneously. Thus, assuming South Korean economic institutions will serve as the template for a unified Korea, continued reform of South Korean corporate and securities laws is a crucial component of any well-devised privatization strategy.

JEL Classification: K22