Gov't needs to lessen its hand in envisioned fund
As part of a plan to finance its New Deal projects, the government unveiled a 20 trillion won ($17 billion) Korean New Deal fund to attract retail investors to massive projects and support investment from the private sector. The government and state institutions will invest 7 trillion won, while the private sector will put up 13 trillion won. The Korean New Deal fund is part of a 190 trillion won plan to draw 100 trillion won from public finance and 70 trillion won from private institutions to finance the country's transformation to a digitized and greener economy.
With excess money in the market estimated at around 1,100 trillion won, the fund can serve as a conduit to absorb the liquidity away from the red-hot real estate market. The ambitious plan by President Moon Jae-in evokes reminiscence of the state-controlled funds in previous administrations. There was the Green Growth Fund during the Lee Myung-bak administration and the Unification Fund in the Park Geun-hye government, which largely fizzled out in tandem with those administrations. Despite the good intentions, the economic fallout from the COVID-19 pandemic poses a challenge in providing quality destinations for investment. Also losses that the state-sector sustains will invariably be shouldered by taxpayers.
The initial public offerings by Kakao Games this month, and SK Pharmaceuticals in June show that any glut of money will flow to promising investments, however, irrespective of government prodding.
The key to success for the fund will depend on how innovatively the government lessens its "hand," accordingly with its pledge to "boldly" reform regulations so that private investors including individuals are ensured of sustainable returns.
As part of a plan to finance its New Deal projects, the government unveiled a 20 trillion won ($17 billion) Korean New Deal fund to attract retail investors to massive projects and support investment from the private sector. The government and state institutions will invest 7 trillion won, while the private sector will put up 13 trillion won. The Korean New Deal fund is part of a 190 trillion won plan to draw 100 trillion won from public finance and 70 trillion won from private institutions to finance the country's transformation to a digitized and greener economy.
With excess money in the market estimated at around 1,100 trillion won, the fund can serve as a conduit to absorb the liquidity away from the red-hot real estate market. The ambitious plan by President Moon Jae-in evokes reminiscence of the state-controlled funds in previous administrations. There was the Green Growth Fund during the Lee Myung-bak administration and the Unification Fund in the Park Geun-hye government, which largely fizzled out in tandem with those administrations. Despite the good intentions, the economic fallout from the COVID-19 pandemic poses a challenge in providing quality destinations for investment. Also losses that the state-sector sustains will invariably be shouldered by taxpayers.
The initial public offerings by Kakao Games this month, and SK Pharmaceuticals in June show that any glut of money will flow to promising investments, however, irrespective of government prodding.
The key to success for the fund will depend on how innovatively the government lessens its "hand," accordingly with its pledge to "boldly" reform regulations so that private investors including individuals are ensured of sustainable returns.
