Project Starts for KDB Privatization
By Na Jeong-ju
Staff Reporter
Korea Development Bank (KDB) is speeding up efforts to strengthen its investment banking (IB) capabilities in line with proposals by the Presidential Transition Committee to make it a global investment bank through a merger and privatization.
The state-owned bank recently set up a task force to seek a smooth transition into a private entity, as proposed by the committee.
Last month, the transition team announced a three-stage roadmap for the next government to achieve privatization of the bank. According to the plan, KDB should create a holding company that will manage its stakes in private firms and direct privatization strategies. Then, the government should reduce its shareholding in the firm to 51 percent, and set up an investment fund with the money from the stake sale. Lastly, it should sell the additional shares in the holding firm to turn it into a private financial service firm.
Based on the roadmap, the next government is expected to take steps to combine KDB's IB unit with its subsidiary, Daewoo Securities, to nurture the merged entity into a global bank.
``The task force is aimed at helping KDB achieve a smooth transition into a private firm, in line with proposals by the transition committee,'' a KDB official said. ``The team includes 11 officials who have developed managerial strategies at the bank. It will closely cooperate with the government to achieve the goal of privatizing KDB.''
Together with the Ministry of Finance and Economy, it will push for revision of laws to enable the government to privatize KDB. In addition, it should set up measures to achieve the merger between KDB and Daewoo Securities in collaboration with the ministry and the brokerage firm.
It will also evaluate the value of KDB's stakes in private enterprises, such as Daewoo Shipbuilding & Marine Engineering, Hynix Semiconductor and Hyundai Engineering & Construction and discuss with other creditor banks to find ways of selling its stakes.
Separately, the bank is hiring global investment banking experts to launch units in China, Vietnam and other developing markets.
``We are now focusing on investment banking capabilities. Our goal is to make KDB a competitive investment bank in Asia,'' KDB Governor Kim Chang-lok said. ``We will consider participating in merger deals in the region, if it is needed to achieve this goal.''
According to the transition committee, the sale of the KDB IB unit and the broker will generate about 60 trillion won. With the money, the next government will set up the so-called Korea Investment Fund to provide about 20 trillion won to small businesses. President-elect Lee Myung-bak has said he will privatize state-run banks to create funds aimed at helping small firms, saying the role of these banks has diminished and their excessive expansion is producing unfair competition with private firms.