The South Korean government is creating a 1.5 trillion won (US$1.33 billion) fund to support Korean companies’ exports of smart city technologies. The government is shifting the focus to smart city projects as Korea has lost competitiveness to China in simple overseas construction and plant projects.
In December last year, the government disclosed a plan to set up a 3 trillion won (US$2.67 billion) fund to support exports of plant, construction and smart city projects and run a 6 trillion won (US$5.34 billion) financial support program for companies in these sectors.
Investment banking (IB) industry sources said on Feb. 10 that a fund tentatively named “Construction, Plant and Smart City Policy Fund” is about to be created through Korea Overseas Infrastructure & Urban Development Corp. (KIND) set up last year. It will be initially worth 1.5 trillion won (US$1.33 billion) and then be expanded to 3 trillion won (US$2.67 billion) later. KIND already had a briefing session for fund management companies.
State-run companies under the Ministry of Land, Infrastructure, and Transport are planning to participate in the fund, with KIND responsible for monitoring the fund management companies. In this regard, Korea Investment Corp. (KIC) and the Export-Import Bank of Korea (Korea Eximbank) are in close cooperation as well.
The fund will have the parent fund-child fund structure. It will be a mixture of bind funds and project funds in actual administration. The Korea Eximbank is also considering additional credit support to the project funds.
An official from the IB industry said, “It seems that KIND will focus on its role as a monitor and manager since it lacks track records. In operating the parent fund, it will have to cooperate with private management companies that have experience in operating parent funds.”
It remains to be seen whether the fund will help South Korean companies, which suffer from difficulties because of excessive regulations, improve their competitiveness in smart city exports.
A smart city is based data sharing through 5G networks, unmanned delivery of goods using drones, a car sharing economy linked to autonomous vehicles, a big data system and smart hospitals, including remote medical services. Most part of the areas are still tied up in regulations in South Korea.
An official from the IB industry said, “China, which is the biggest competitor in smart city exports, is seeking to establish a 5G-based high-tech smart city in Hangzhou, the home city of the largest IT firm Alibaba, by 2022. If this project is completed as planned, China may surpass South Korea in smart city exports.”