KDB calls for doubling limit on capital to fund industrial support program

Economy

Published: 11 Jun. 2024, 18:20

KDB calls for doubling limit on capital to fund industrial support program

Korea Development Bank Chairman and CEO Kang Seog-hoon speaks during a press conference held at the bank's main branch in western Seoul on Tuesday. [NEWS1]

The Korea Development Bank (KDB) chief urged policymakers to double the legal cap on the state-run bank’s capital for a proposed 100 trillion-won ($72.5 billion) industrial support program designed to drive growth in key sectors such as semiconductors and EV batteries.

HMM, the country’s largest shipper, will not be put up for sale for a while, KDB Chairman and CEO Kang Seog-hoon also mentioned on Tuesday, after a 6.4 trillion-won acquisition deal with a consortium led by Harim Group fell through in February.

“The KDB is currently preparing to establish a new 17 trillion-won program to provide loans with significantly low, treasury-bond-level interest rates for capital expenditure in chip facilities,” said Kang in his opening remarks during a press conference commemorating the second anniversary of taking office.

The program was first announced by President Yoon Suk Yeol on May 23. Further details will be announced within June, according to Kang.

“In addition to that, we are preparing to launch a ‘Korea Rebound’ program worth 100 trillion won in order to fulfill the KDB’s role in this historic turning point.”

The Rebound program aims to provide funding in key areas, including semiconductors, EV batteries and biotechnologies, in which the private sector plans to invest over 550 trillion won through 2027.

As the KDB has provided funding for 18.4 percent of the total capital expenditure in the domestic manufacturing sector over the past three years, the bank is expected to be responsible for financing about 100 trillion won of the planned 550 trillion won in investment.

Kang stressed that “a new era has dawned in which industrial policies have become a central piece in advanced economies’ economic strategies” amid accelerating economic fragmentation and a heated U.S.-China tech race.

“In order for the 100 trillion-won Korea Rebound program to be launched, it is essential to expand the KDB’s capital,” said Kang.

The legal limit for the KDB’s capital currently stands at 30 trillion won under the KDB Act. The bank's chief called for the cap to be upped to 60 trillion won through a revision on the law, while also floating the idea of deferring its annual dividend payments to the government for a certain period, citing a previous example involving Germany’s KfW Development Bank.

Moreover, Kang said that the KDB currently has no plan to resume the bidding process to sell the 57.9 percent stake of HMM held by the KDB and the Korean Ocean Business Corporation (KOBC).

HMM currently remains under the management of its creditors, the KDB and KOBC, as the previous takeover attempt by the Harim-led consortium failed in February due to a disagreement over management rights.

“If the sale [of HMM] begins anew, we will need to come up with a new plan based on various factors including the government’s policy for the shipping industry, but I doubt it will come anytime soon,” said Kang, adding that the KDB “will need to engage in additional discussions” on the decision.

Another controversial issue for the bank is the government’s planned relocation of its headquarters from Seoul to Busan, which is facing strong opposition from the liberal Democratic Party-controlled legislature as well as bank employees.

Kang said that he will continue to attempt to persuade the National Assembly to push ahead with the relocation through a revision of the KDB Act, but noted that the institution's labor union is strongly opposing the move with legal maneuvers and rallies.

Addressing the resistance, Kang said that “the relocation is to drive a new growth engine for our economy through regional growth,” suggesting that “approaching the issue by rejecting the government’s decision is not appropriate.”

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]