[EDITORIALS]Come together on reserves

The Ministry of Finance and Economy and the Bank of Korea are at odds over the establishment of a company to be called Korea Investment Corp. Korea’s foreign exchange reserves are more than $150 billion, and the Finance Ministry and the Blue House are pushing for a plan to set up the public corporation in 2005 to manage some of Korea’s foreign exchange reserves and foreign currency-denominated assets of pension and other funds in overseas markets. The Bank of Korea opposes that plan, saying the current reserves are not high enough to tide Korea over an emergency and that nothing risky should be done with the money.
It is not clear what the optimal level of foreign exchange reserves is ― whether it is about $121.1 billion, as the Finance Ministry believes or whether we need still more reserves. They are 21 times higher than the low point during the financial crisis in 1997, and they could be managed productively to raise Korea’s stature in the international investment community.
But what is more important is that the national economy should not be subject to another experiment that would expose the public to unhedged risks. The government should not forget that overestimating our economic strength and foreign exchange reserves and liberalizing foreign currency transactions too far were the reasons that the International Monetary Fund had to bail out Korea in 1998.
If it is clear that the foreign currency reserves are being wasted, the Bank of Korea and the administration should talk more. Now, it appears that the Finance Ministry is pushing the plan unilaterally to create jobs for its employees. The Blue House wants to use the foreign exchange reserve and public pension funds to promote a poltical goal: Korea as “the financial hub of Northeast Asia.”
The Finance Ministry should not expose our public savings ― the final defensive line of the economy ― to high-risk investments with the argument that yields would be high. The Bank of Korea must give up the idea that foreign exchange reserve management is exclusively its business and cooperate with the administration.