By Lee Hyo-sik
Staff Reporter

South Korea will open a commodities exchange similar to the Chicago Mercantile Exchange (CME) as early as 2011 to promote transparent transactions of gold and other precious metals. The exchange will also deal with grains and other raw materials.

The Ministry of Strategy and Finance said it has yet to decide when and where the planned trading venue will be set up. But given the fact that the Korea Exchange (KRX) headquarters is in the southeastern city of Busan, the envisioned exchange is expected to be located in southwestern Jeolla Province, in a region such as Saemangeum or Gwangju, in order to promote balanced regional development.

In a meeting of economy-related ministers at the Gwachon Government Complex, south of Seoul, Wednesday, the government said the Korea Institute of Public Finance (KIPF) has been conducting a feasibility study since April, adding it will hold a series of public hearings to gather opinions before launching the exchange.

The government had initially planned to create an exchange to handle gold and other valuable gems in order to clamp down on smuggling and illegal transactions of precious metals. About 70 percent of gold bars and other gold products traded here are imported and circulated through the black market.

But with prices of crude oil, grains and other imported raw materials projected to rise again, it decided to establish the comprehensive trading venue to deal with all types of commodities, ranging from gold to coal and wheat.

Additionally, the government unveiled a plan to establish a "gold circulation management body" by the end of 2010 to further increase transparency in gold transactions.

leehs@koreatimes.co.kr