Korea Eximbank aspires to be global investment power

By Kim Jae-won

For Koreans, a genuine moment of national pride came in December 2009 when a consortium led by Korea Electric Power Corp. (KEPCO) won a deal to build and operate nuclear reactors in the United Arab Emirates (UAE) worth a potential $40 billion.

This put government officials and the state-run power company on the receiving end of accolades, but not many of the cheerers would have known it was the country’s export-import bank that worked the details behind the scenes to execute the landmark energy deal.

Kim Yong-hwan, chairman and president of the Export-Import Bank of Korea (Korea Eximbank), said the UAE deal serves as a template for what the bank aspires to become: A formidable player in investment banking that can hold its own against other national players in global markets.

Korea has yet to earn its stripes in investment banking, which often leads to financing troubles for firms here in pursuing big development projects overseas. Kim, a 59-year-old bureaucrat-turned-banker, is confident that Korea Eximbank will be an important part of the solution.

“The paradigms for an export-import bank are changing. In past years, we have been supporting (Korean) companies financially and helped them obtain overseas orders. But now, we are increasingly taking a bigger role, participating in the planning and execution of the investment process as well, and our experience and expertise is crucial to firms as a well-designed financing plan is the key to winning international orders,” Kim said in a recent interview.

Kim, a former deputy governor of the Financial Supervisory Service (FSS), claimed that export-import banks are now well positioned to swoop in as an alternative to investment banks (IBs), which governments have been putting under greater scrutiny since the recent global financial crisis.

“The Korea Eximbank, the Japan Bank for International Cooperation (JBIC) and the Export-Import Bank of the United States (U.S. Eximbank) are ready to take over the roles of global IBs and take advantage of the new opportunities,” Kim said, citing the elevated status of policy financing institutions, which could provide better stability in long-term financing compared to their private competitors.

Deals like the UAE nuclear power project have enabled the Korea Eximbank to get more respect from its competitors, including many foreign IBs that ask whether they could join in projects pursued by their emerging Korean rival, Kim said.

“It’s about time we play a bigger role in global financing. The role of policy financing institutions can only become bigger,” he said.

Kim said the bank seeks to raise the upper ceiling of its capital from the current 8 trillion won to 15 trillion won (about $14 billion) to better support Korean efforts to win big global projects currently planned or underway, such as building a bullet-train system in Brazil.

“We need more capital to get bigger orders — increasing our capital will be crucial for our future. We got an additional 1 trillion won in equities from the government recently and the goal is to raise the cap to 15 trillion won,” he said.

Kim also plans to reshape Korea Eximbank’s organization similar to the structure adopted by IBs. The bank is expected to launch a financial advisory department for its international business next month, and also establish a “control tower” that supervises its entire operations

The bank will host a global conference this week to share information with foreign export-import banks and IBs on the financing of global projects. It will also have a conference with its Japanese counterpart to discuss possible cooperation in financing projects in third countries.

“Global conferences are really important in this business, where human networks are often everything. We invited 100 guests from 50 countries, including those from the Asia Development Bank, Inter-American Development Bank as well as overseas investment banks,” Kim said.

Kim said that the Korea Eximbank is playing a leading role ahead of other Korean government agencies thanks to its wealth of experience and proven track record.

“The role of the Korea Eximbank has become very important. We have done international business for the past 35 years. In fact, we are the only government agency capable of doing the job. We should be at the center of the whole process,” Kim said.