South Korean unions halt rail sell-off

Workers feared mass lay-offs

South Korean trade unions succeed in forcing President Roh Moo-hyun to scrap the part-privatisation of the railways in exchange for calling off a major strike.

The move has sent shivers through the Korean financial markets, which now fear other privatisations could be delayed or dropped.

"It's worse than having a strike," said Huh Chan-guk, an economist at the Korea Economic Research Institute.

Investors were already suspicious that Mr Roh, a former labour lawyer who took office two months ago, might backtrack on the privatisation plans of his predecessor Kim Dae-jung.

Mr Kim eagerly pursued International Monetary Fund policies for restructuring the economy in exchange for a $58bn (£37bn) bailout in late 1997.

"It does not mean that the government is now cancelling all privatisation plans," government spokeswoman Lee Jihyun told Reuters.

Rail trouble

Trade unions argued that privatisation would result in mass layoffs, fare increases and cancellation of unprofitable routes.

Korean National Railroad, which controls about 3,200 km (2,000 miles) of track, reported a 219.5bn won (£116.6m; $182.2m) in net losses in 2002, which has been blamed on poor management.

The union claims 24,000 members out of the KNR's 30,000-strong workforce.

South Korea's Finance Minister Kim Jin-pyo on Tuesday moved to reassure investors by promising to continue with the privatisation of nationalised banks.

"The government will push ahead with bank privatisation without pause, without failure," Mr Kim said at a meeting with financial industry executives.