Will KIC Be Enabled to Invest Locally?
By Jane Han
The Korea Investment Corporation (KIC) may soon be allowed to buy domestic assets as the government is seeking to lift a ban that prohibits the sovereign wealth fund from making local investments.
The latest move is part of the government's bigger plan to boost the efficiency and profitability of KIC, which is still dealing with the ripple effects of suffering huge losses from investing in Merrill Lynch in 2008.
The Board of Audit and Inspection is currently investigating KIC's $2 billion investment in the U.S. firm, which reportedly led to losses totaling $900 million.
``We're looking for ways to put state assets into better and smarter use,'' a government official said Monday, adding that allowing domestic investments is one measure that is being considered.
``Local investments are necessary in order to diversify KIC's investment portfolio,'' said the official of the Ministry of Strategy of Finance, ``but we need to first discuss with related government offices before approaching the National Assembly again.''
Last April, KIC and the strategy and finance ministry submitted a revision bill to the National Assembly. But lawmakers rejected the plan, citing concerns of overheated competition between KIC and private investment companies.
The wealth fund currently manages $26.8 billion in assets, including part of the country's foreign currency reserves and assets of the finance ministry.
The amount is expected to increase this year as the government plans to inject an additional $5 billion from the foreign exchange stabilization fund with hopes for a stronger return.
If KIC is enabled to buy domestic assets, it plans to team up with overseas sovereign wealth funds to participate in local infrastructure businesses, according to government sources.
KIC has shied away from making bold investments after the Merrill Lynch fiasco, but officials of the wealth fund said alternative investment options are being considered to resume activity.