Korea Medical Holdings (KMH), a public-private joint company founded to promote the export of healthcare system, is performing poorly because of the undue pressure from the government, industry sources said Monday.

Particularly, unceasing pressure from Korean Health Industry Development Institute (KHIDI), the company’s largest shareholder, has led to its poor management, and there are even suspicions that the presidential office of Cheong Wa Dae has meddled in its operation, they said.

KMH has been operating with the yearly subsidy of 1 billion won ($900,000) from the Ministry of Health and Welfare since its inception in 2013. It has failed, however, to show distinct results over the past three years, leading to the controversy over its function overlapping that of KHIDI, and complaints about the waste of taxpayers’ money in the parliament’s audit of administrative agencies.

A senior staff member who used to work for KMH pointed out that the company, established to reinvigorate the export of Korea’s healthcare system, could not play its role because KHIDI attempted to control the new company, by even interfering in its personnel appointment.

For instance, the former KMH official said, the company’s overseas business team successfully pushed for the export of healthcare system to the Middle East. A top official at KHIDI, however, replaced KMH’s vice president who had served as its acting president and his Middle East team, and the export business collapsed soon because the staffs replaced by KHIDI were key players in the company’s overseas business.

“At that time, the Middle East team at KHIDI was in charge of communication and KMH was responsible for planning and paper works, and the leader was a division director at the health-welfare ministry with the initial of “J.” But the project broke up KHIDI replaced all key players, the official said.

KHIDI might have thought it had only to reap fruits as discussion with the Middle East had progressed considerably, the official said. As far as overseas contracts are concerned, however, you can never remain complacent until their actual signing, he added. “Our counterparts in the Middle East countries seemed to feel embarrassed as Korean officials who had built up trust among foreigners were replaced abruptly, interrupting all negotiations,” the official said. “It is not as easy as just shaking hands between government officials.”

In this process, division director J, who had been one of the strong candidates to be promoted to the director-general within the ministry, was all but demoted to a lesser division. “Many raised a question about the transfer, and his coworkers said in union this kind of personnel appointment was unthinkable in the world of government employees,” he added

Even working-group officials within KHIDI’s Middle East team were also replaced in what they called the “violent and abusive” appointment, which nobody could understand.

Others suspected the Blue House was behind the incomprehensible personnel moves. “It was during this period that Kim Young-jae, a controversial figure who secretly provided Botox injections to ex-president Park Geun-hye, frequented Cheong Wa Dae,” said a medical industry executive who invested into KMH said. “In the aftermath (of Park-Choi Soon-shil scandal), I can understand how they made such a strange move.

A ranking official at KHIDI, also with the initial of J, said in the third parliamentary hearing about the Choi Soon-sil scandal in December, he “was aware of” Cheong Wa Dae’s pressure to help the Middle East advance by Y. Jacobs Medical, run by Kim’s wife, Park Chae-yoon.

And a rumor went around among the relevant people excluded from KMH that the government ordered the personnel action.

“Unlike the time of initial investment, our hospital concluded KMH’s management was under the strong influence of the Park Geun-hye administration,” said another industry executive. “I withdrew investment because I felt KMH ran off the expected track.”

People involved in KMH, directly or indirectly, even said KMH has already been reduced to an agency where KHIDI sends their retired officials or became a real nuisance, contrary to the initial expectation of making huge profits with the support of the government.

“Neither the ministry nor the institute has not many interests in KMH any longer. They don’t mind dissolving the organization or merging it into KHIDI, following the National Assembly’s decision, said the former KMF official. “These government agencies have little interests in what’s good for the nation, but are interested in whether there are some ‘places’ to plant their people.”

Recently, KHIDI said it would consider merging KMH after the Assembly called for improving its management by removing overlapping functions at the two different but similar agencies. “As KHIDI cannot make business contracts because of its legal limitations, it needs KMH in the form of a business corporation,” the institute said in its reply to parliamentarians’ questions. “We will, however, push for a functional merger as unifying the two agencies has its advantages.”

‘Let’s transfer KMH to MOTIE’

KMH has recorded net loss of 50 million won in 2015 alone and hasn’t produced concrete results until now. But some experts recognize the necessity of KMH as a business entity.

In some countries where central governments hold sway on much of administration, the governments should pave ways for private companies to do businesses without problems. Because the related law prohibits KHIDI from being a major business organization in making a contract, KMH should exist, they say.

“KHIDI has made a lot of MOU for the export of healthcare system, but there were no remarkable achievements,” said a consulting expert for global expansion. “Because KHIDI can’t make contracts in foreign countries unlike Korea Trade-Investment Promotion Agency (KOTRA) under Ministry of Trade, Industry, and Energy (MOTIE), KMH has its reason to exist.”

“MOHW should have operated KMH by making related laws and drawing agreement from other people. But the ministry did hurry to push for business to get visible results as fast as possible, which caused failure in the project. It needs to continue to operate KMH, but in a different form.” he advised.

He pointed out it would be difficult for KHIDI, which is responsible for research and development of medical devices and pharmaceutical companies as well as their training and educational programs, to also engage in overseas advances of the healthcare system. Accordingly, KMH should either be run by the trade-industry ministry or merge with KHIDI while continuing to play the current role of promoting overseas advances

“MOTIE knows what’s needed and how to approach the goals far better than KHIDI as well as better positioned to develop industry,” he said. “On the other hand, when I went on business trips, KHIDI’s foreign offshoots couldn’t prepare for a meeting with local hospitals. All they can do is just sit there and entertain foreign counterparts.”

“Because the overseas expansion of medical institutions is related to industrial promotion, I think it’s better to hand KMH over to bio health division at MOTIE. If KHIDI is merged with KMH, KMH should be the center of the advance to foreign markets. A business needs risk-taking, but KHIDI is an organization to avoid risk by nature,” he added.