Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
Planned investment entity for southeastern region triggers interagency tensions
Busan / gettyimagesbank
By Lee Yeon-woo
Despite initiating steps to launch a policy finance institution called "southeast investment corporation" in Busan, the government is facing stalled progress due to clashing institutional interests, industry officials said Wednesday.
At a Cabinet meeting Tuesday, Oceans and Fisheries Minister Chun Jae-soo told President Lee Jae Myung that consensus had been reached on moving forward with the southeast investment corporation rather than the investment bank Lee had pledged during his campaign.
"If we were to establish it as a bank, it would be difficult to secure funding quickly and stably. So we've decided to issue corporate bonds instead to meet the original purpose," Chun said, adding that the bank would be subject to more stringent financial regulations.
After being briefed, Lee said, "Let's do that, then."
Establishing a new investment bank in Busan was one of Lee's campaign pledges, aimed at reviving industrial competitiveness in South Gyeongsang Province. The proposal comes amid internal resistance and continued debate over relocating the Korea Development Bank (KDB).
Busan has long pushed for moving the KDB out of Seoul. While the city has softened its stance by supporting a new investment bank, it has strongly opposed the idea of creating an investment corporation. On Wednesday, Busan Mayor Park Heong-joon denounced it as a breach of campaign pledges.
"The southeast investment corporation cannot compare to KDB in terms of funding scale and flexibility. Its reliance on indirect financing through equity contributions, bond issuance and fund formation limits its ability to provide policy-based financial support and presents clear constraints in attracting private capital," Park wrote on social media Wednesday.
"We’ve consistently stressed that if the KDB relocation is off the table, the alternative must be an institution that plays an equally significant role, such as a full-fledged investment bank," Park added. "Investment corporation is merely a supplementary measure that could accompany the relocation of KDB, not replace it."
The friction extends beyond the central and local governments.
The Financial Services Commission has signaled support for the initiative. However, the Ministry of Economy and Finance remains opposed, warning that the new entity would duplicate the functions of existing institutions, including KDB and the Export-Import Bank of Korea (Eximbank).
Debate is also mounting over the funding. A bill currently at the National Assembly proposes a 3 trillion won ($2.1 billion) capital base, funded jointly by the central government and the municipal governments of Busan, Ulsan and South Gyeongsang Province, along with KDB and Eximbank.
Chun has floated the idea of making the entity a wholly owned KDB subsidiary to accelerate its launch. But Busan reportedly opposed the suggestion, arguing it would marginalize the institution's role. The city has also urged the government to reduce the financial burden on municipal administrations.
"The establishment of the institution could take considerable time, given the wide range of demands and opinions from the various stakeholders involved," an industry official said.
Meanwhile, Park Sang-jin, the newly appointed KDB chairman, recently noted to the bank's employees that it should maintain its presence in Seoul and pledged to push back against the relocation.