By Lee Hyo-sik
Staff Reporter
The planned privatization of the state-run Korea Development Bank (KDB) will likely face a bumpy road ahead as investors at home and abroad have become unwilling to acquire shares in the wake of the global credit crunch, turning to cash and shunning equities and other riskier assets.
The demise of Lehman Brothers and other U.S. investment banks has raised doubts about the privatization of the KDB, which aims to turn the bank into a global investment bank. There have also been increasing calls for public financial institutions to play a greater role in stabilizing the financial market, including the provision of credit to businesses and financial firms, in the face of a worsening liquidity shortage.
Against such a backdrop, the government has hinted that it may suspend the privatization scheme until financial market conditions improve. It reportedly called off the initial plan of selling part of KDB to foreign investment banks before taking the bank public.
Strategy and Finance Minister Kang Man-soo told lawmakers Tuesday that the government is considering postponing privatization as it has become harder to sell government stakes in the bank at a higher price as a result of the global financial market turmoil.
``The market situation has worsened over the past few months and it has become impossible to dispose of KDB shares at the price we want. We are rethinking the initial privatization schedule. Strengthening the competitiveness of the KDB and receiving a fair price for its shares are more important than the privatization itself,'' Kang said.
Additionally, opposition parties are calling on the government to scrap the KDB privatization plan, citing a series of U.S. investment bank failures. ``The plan was to turn the KDB into a U.S.-style investment bank. But these banks either went bankrupt or were taken over by commercial lenders. We should reconsider the privatization plan,'' Rep. Kim Hyo-seok of the Democratic Party said.
Under the plan, the KDB would be divided into the Korea Development Fund (KDF) and a shareholding company. The shareholding company would be privatized by 2012, and KDF would specialize in financing small businesses. KDB subsidiaries KDB Capital and KDB Asset Management would also be privatized.
But it has become harder to draw higher bids amid the global stock market downturn. Also, the role of state-run banks has become more important recently as a policy-lending arm of the government in the wake of the deepening credit shortage.
But the KDB has not been able to effectively bring dollars into the country this year as international investors have become reluctant to purchase its bonds because of the upcoming privatization.
Bank officials, however, are saying that the National Assembly should pass a revised bill during the ongoing plenary session as planned, saying the privatization timetable can be adjusted in accordance with the market situation.
A KDB executive said the KDF will do its public role of stabilizing the financial market, while the holding company will also carry out its part as the government will still own a substantial stake.
``Once the bill is passed this year, the bank will be split into two units early next year. We plan to take the holding firm public in the latter half of 2009. But such a timetable can change in line with the market situation,'' he said.
The KDB was launched in 1954 and has been responsible for supplying and managing industrial capital to help develop local industries and fuel economic growth. Following the 1997-98 Asian financial crisis, the lender has taken a leading role in the court receivership and restructuring of companies that received public bailout funds.