[Exclusive] FSC says “Start with the Southeast Investment Corporation” in response to ruling party proposal for “a Mega Investment Corporation in every region”

[Financial News] The Financial Services Commission (FSC) has drawn a line in response to the Democratic Party’s proposal to establish mega investment corporations in each region, saying the establishment of the Southeast Investment Corporation should be prioritized. The decision was based on the view that the fiscal burden, including capital contributions, and the impact on the existing policy finance system should be assessed first before setting up investment corporations in every region nationwide.
A review of Financial News reporting on the 1st found that the FSC effectively put the brakes on the Democratic Party’s proposal to establish mega investment corporations by region during a report on ministry-specific mega-growth strategy plans held at the National Assembly on the 26th of last month. This revealed a difference of opinion between the government and the ruling party over the scope of establishment and the order of implementation. The Democratic Party had previously conveyed to the FSC its position that regional mega investment corporations were needed so that local businesses could secure financing for their operations locally.
The FSC assessed that establishing mega investment corporations by region would have a significant impact on fiscal management, local communities and the policy finance system. In particular, it appears to have given priority to considering that the central government and local governments would have to bear the capital contributions required to establish the corporations. The point is that, before setting up investment corporations in multiple regions, the funding and the division of responsibilities among contributors must first be reviewed.
The FSC is understood to have reported that it would prioritize pursuing the establishment of the Southeast Investment Corporation, one of the key national policy tasks of the Lee Jae Myung administration. It cited the fact that this is a government policy task and that discussions are already underway at the working level.
The establishment of the Southeast Investment Corporation was discussed at a State Council meeting in September last year, after which the Presidential Committee for Local Autonomy and Balanced Development and the FSC announced specific plans in October of the same year. It was discussed once again at a State Council meeting in May this year, and in September the committee reported on the progress of the initiative.
Related bills are already pending before the National Assembly. Starting with Democratic Party lawmaker Min Byeong-deok in June last year, lawmakers including Kim Jeong-ho and Hong Bae Park introduced bills to establish the Southeast Investment Corporation as lead sponsors. The bills designate Busan as the corporation’s location and require it to provide full support for key industries in the southeast region.
The bills also specify the amount of capital contributions, a key point of contention, and who would contribute them. Depending on the bill, the capital contribution is set at between 3 trillion and 5 trillion won. Proposed contributors include Korea Development Bank (KDB), the Export-Import Bank of Korea (KEXIM), banks headquartered in Busan-Ulsan-Gyeongnam (PK), the central government and PK regional governments. The FSC’s cautious stance is thought to have been influenced by the possibility that expanding the plan to investment corporations in multiple regions could create a similar funding burden in other areas.
However, differences between the ruling and opposition parties over establishing the Southeast Investment Corporation also need to be narrowed. The People Power Party maintains that the initiative should take the form of an investment bank, larger in scale than an investment corporation. A People Power Party lawmaker whose constituency is in PK stressed, “We shouldn’t think we can just fob this off with a corporation,” adding, “An investment bank should be established to settle the debt left by the failed relocation of KDB to Busan.”
The Democratic Party is proposing to expand investment corporations across regions, the FSC favors starting with the southeast, and the People Power Party is calling for an investment bank. With the government and the ruling and opposition parties at odds over the scope of establishment and organizational form, debate is expected to continue during the legislative process over the corporation’s specific role and scale, as well as how to secure its capital contributions.
[email protected] Kim Hyeong-gu Reporter