SOUTH KOREA'S PERFORMANCE EVALUATION SYSTEM: Some issues further considered

ABSTRACT * : The South Korean 1983 reform of government invested enterprises has been commonly regarded a success. In particular, the core element of the reform - the Performance Evaluation System (PES) - has been recommended as a model. This paper contributes to the existing understanding of the PES by arguing that it is strained by three inherent defects: measurement leniency vis-à-vis'diminishing rate of improvement: indicator complexity and excessive weight assignment to the qualitative criteria; and incentive divergence. These defects are interrelated and can work to joint affect - introducing perverse incentives, and therefore eroding the credibility of the system and, further, the reform. The causes of these defects should be identified either with inherent contradictions in the system itself or with inadequate institutional support, or both. Thus, there emerges from the discussion unlearned lessons from the Korean experience. Such unlearned lessons, however, should be considered in a much wider, public policy-making context .