Overly grandiose

On Thursday, chairmen of Korea’s 10 major banking groups, including Shinhan and KB, gathered at the Blue House for the first time in history to participate in a Korean New Deal meeting presided over by President Moon Jae-in. After the conclave, the government announced a bold plan to launch Korean New Deal projects amounting to a whopping 190 trillion won ($160 billion) with the goal of investing in infrastructure for digital and green economies — such as data centers and renewable energy plants — and helping existing companies develop the prospective fields.

The government plans to draw 100 trillion won from state-run banks, 70 trillion won from other banks and 20 trillion won from a public fund over the next five years. The ambitious plan is designed to tackle the challenges of the so-called fourth industrial revolution and climate change and pull money with no place else to go into productive areas.

Regarding the 70 trillion won that will come from private sector banks, the government said they came up with the idea on their own. We are suspicious. We can hardly rule out the possibility that the administration pressured them to pledge the money.

Except for their investment fields, no details have been fixed yet on the fund. Would those banks really have volunteered to cough up such huge amounts of money without any insurance? We wonder how the government has arrived at the exact amount — 70 trillion won — without pressing banks. Otherwise, why would Moon summon the heads of 10 large banking groups for a meeting in the Blue House?

When the government made a pitch for a 16 trillion-won New Deal fund for individual and institutional investors, the ruling party promised deposit insurance to them. But soon, it withdrew the promise.

Such state-controlled funds were not so successful in the past, as happened with the “Green Fund” in the Lee Myung-bak administration and the “Creative Fund” and “Unification Fund” under the Park Geun-hye government. A fund established by the Moon administration for materials, parts and equipment is paying off for now, but its future is uncertain after the Covid-19 pandemic.

Amid an oversupply of money in the market, the government does not have to create a gigantic state-led fund on its own. A whopping 59 trillion won rushed to a public offering by Kakao Games, a mobile game behemoth in Korea. The launch of a humongous government-led fund can send a negative signal to the market. What’s most urgent is deregulation. Who would invest in the New Deal fund in the face of stifling regulations that led to the collapse of the Tada van-hailing service?