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KORAIL to raise stake in new unit to thwart privatization

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(Globalpost/GlobalPost)

SEOUL, Dec. 5 (Yonhap) -- Korea Railroad Corp., South Korea's state-owned railway operator, said Thursday it plans to raise its stake in a new affiliate to 41 percent, in what officials say is designed to thwart a possible privatization.

KORAIL, the operator of the high-speed KTX train service, is scheduled to set up an affiliate in the coming weeks that will operate a separate bullet train service by 2015.

The move is aimed at enhancing KORAIL's management efficiency through competition with its affiliate in running the bullet train service, said KORAIL spokesman Lim Seok-gyu.

The government has been pushing for an overhaul of public organizations accused of lax management and soaring debt.

KORAIL's debt reached 11.6 trillion won (US$10 billion) last year, with the company losing between 400 billion won and 500 billion won annually, according to the Ministry of Land, Infrastructure and Transport.

KORAIL said it will increase its stake in the envisioned affiliate to 41 percent from its previous planned 30 percent while other state-run investors, including the National Pension Service, will cut their stake to 59 percent from 70 percent.

KORAIL plans to discuss details in setting up the affiliate during a meeting of its board of directors on Tuesday.

Choi Yeon-hye, the president and CEO of KORAIL, also said in a message to her employees that she will stop any attempts to privatize the company, "even by lying down on a railway track."

"KORAIL's stake hike is a sign that it will not privatize" the planned affiliate, Lim said.

Still, KORAIL's union said its members will launch a strike on Monday for an indefinite period to stop what they claim is a precursor to privatization.

KORAIL workers suspect that the stake owned by public investors could eventually end up in the hands of private firms, which in turn, could result in mass layoffs and fare hikes.

"The envisioned affiliate is a step toward privatization, and we cannot believe that the affiliate will not be privatized," said union spokesman Baek Sung-gon.

He said some 12,500 out of 21,000 unionized workers plan to walk off the job, beginning Monday, though 8,500 workers -- the essential number of workers required to operate the rail service -- will not join the strike.

Lim, the KORAIL spokesman, warned that those who join the work stoppages will be punished, calling the planned work stoppage an illegal strike.

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http://www.globalpost.com/dispatch/news/yonhap-news-agency/131204/korail-raise-stake-new-unit-thwart-privatization