By Kim Yon-se, Lee Hyo-sik
Staff Reporters
The incoming administration will raise 20 trillion won to finance small- and medium-sized companies through privatizing the state-run Korea Development Bank (KDB) and its brokerage subsidiary Daewoo Securities.
The investment-banking (IB) unit of the state-run bank will be transferred to Daewoo Securities for sale through privatization. The KDB will continue to work as a policy-lending arm of the government, according to President-elect Lee Myung-bak's transition team.
``The transition committee and the Ministry of Finance and Economy agreed on the need to privatize the KDB.
The bank will first hand over its IB unit to Daewoo Securities and then the securities firms will be sold,'' Kwak Seung-joon who is in charge of the privatization said.
He said the sale will take place in three major steps over the next ``five to seven years.''
Kang said revision bills will be pushed as the first step, and the government will sell a 49 percent stake as the second step. ``The bank's privatization will be completed via sale of the remaining 51 percent stake in five to seven years.''
He said the sale of the KDB will generate about 60 trillion won, and with the money the next government will set up the so-called Korea Investment Fund to provide about 20 trillion won to small businesses.
The KDB owns a 39.09 percent stake in Daewoo Securities.
The move signals a big bang in the financial sector as well as putting the state-run Industrial Bank of Korea and the Export-Import Bank of Korea on notice.
The committee's plan is somewhat different from that of the Ministry of Finance and Economy (MOFE) which wants to privatize the KDB after spinning off some of the bank's units.
During the presidential campaign, President-elect Lee made remarks against state-run companies on several occasions, pointing out that public firms are operating without proper supervision and that their size has become excessively large.
Opinions are divided over the KDB privatization. Advocates said the bank has outlived its chartered purpose of financing Korea's economic growth. But opponents defend it, saying the KDB should remain as a state-run bank for a rainy day such as the financial crisis in 1997.
During the currency crisis, it rescued many troubled companies, including LG Card.
The committee also said the next government will crack down on real estate speculation by restricting housing loans, not by imposing taxes.
Kang Man-soo, chief architect for the President-elect's economic policy said, ``Real estate problems should be solved by limiting cash flows, with a tax plan playing a supplementary role.''
He said the current policies to crack down on land speculation were somewhat wrong, saying that cash liquidity control is the basic remedy in other nations.
Choi Kyoung-hwan, chief of the committee's construction policy division, made it clear that priority will be placed on stabilizing housing prices.
``The new government plans to deregulate housing policies within a framework of not rekindling speculation,'' he said.
In 2005, the Roh Moo-hyun administration introduced a ``comprehensive property tax,'' which levies additional taxes every December on households whose combined home prices exceed 600 million won.