Recovery, returns of gov’t funds see falls

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Recovery, returns of gov’t funds see falls

Published: 24 May. 2016, 20:20

Amid the ongoing controversy over the size of the bailout for the struggling shipbuilding and shipping sectors, government reports showed on Tuesday that the recovery of special public funds shrank in the first quarter of this year while returns on state-run funds fell on average last year.

According to a report by the Financial Services Commission, the public sector provided a total of 168.7 trillion won from state-run funds during the period between November 1997 and March 2016.

The funds have recovered 111.6 trillion won ($141.5 billion) as of March, and the recovery rate stood at 66.2 percent. The amount recovered in the first quarter of the year was just 34.5 billion won because of lower dividend incomes than the previous quarter and the absence of additional stake sales, according to the FSC.

The Korean government has created special public funds twice.

In 1997, the government raised funds through government-backed bonds offered by a number of financial institutions, including the Bank of Korea, to help bail out troubled financial institutions in the wake of the Asian financial crisis.

In 2008, it created a fund for the restructuring of financial institutions after the U.S.-triggered financial crisis.

The controversy over the recapitalization of the Korea Development Bank and Export-Import Bank of Korea, which are the main creditors of the shipbuilders and shippers that are on the brink of collapse, is ongoing as the Bank of Korea remains indecisive about creating a fund for them.

“There has been some progress in the discussion between the central bank and the Finance Ministry that reached an agreement that there needs to be a policy mix to help recapitalize the state-run banks,” said Yoo Il-ho, deputy prime minister for economy, at a meeting with senior officials on Tuesday. “Details should be discussed further through consultative bodies, which I hope to be finished by June.”

According to another report by the Ministry of Strategy and Finance, the average return on government-operated public funds dropped to 2.41 percent in 2015, from 3.04 percent in the previous year, due to record-low interest rates.

“The earnings of the 44 public funds reviewed fell on-year due to low interest rates and deteriorating conditions for investment,” the ministry said in a press release.

BY SONG SU-HYUN [song.suhyun@joongang.co.kr]