Misappropriated Development Funds
The natural resources development funds raised by the former Lee Myung-bak administration and invested by the Export-Import Bank of Korea are recording losses of no less than 16.7 billion won (US$15.7 million).
According to the parliamentary inspection data that the bank submitted on Oct. 23, the Troika Fund investing in oil and gas fields posted a loss of 15.9 billion won (US$15.0 million) as of the end of last year, while the loss amount reached 800 million won (US$753,832) for the Global Dynasty Fund.
The previous administration revised the Export-Import Bank of Korea Act in early 2009 so that the bank can invest in funds for certain purposes such as greenhouse gas reduction and mineral resources development. The bank launched a carbon fund in September 2009 and participated in the two funds mentioned above in December 2009 and August 2010, respectively. The carbon fund recorded a loss of 28 billion won and a yield of negative 64 percent at the end of June 2014.
Nevertheless, a total of 21.7 billion won (US$20.5 million) has been paid to those managing the funds. Specifically, the sum is divided into 1.29 billion won (US$1.22 million) for the carbon fund managers at Korea Investment Management, 17.9 billion won (US$16.9 million) for the Troika Fund managers at the Korea Development Bank and SK Energy, and 2.5 billion won (US$2.4 million) for the Global Dynasty Fund managers at Korea Investment & Securities and LG International Corporation.
“This implies that the Export-Import Bank of Korea was unreasonably mobilized by the previous administration,” said Justice Party lawmaker Park Won-seok, adding, “The managers took tens of billions of won in spite of their poor fund management performances.” The Export-Import Bank of Korea showed the lowest BIS capital adequacy ratio as of the end of 2013 among 21 banks in Korea, even though the government had poured 1.7 trillion won (US$1.6 billion) in it for the last five years.
The bank’s President Lee Duk-hoon stressed during his inauguration ceremony back in March this year that he would provide effective financial solutions for the stable procurement of energy sources and mineral resources. “By providing various financial tools, we are striving to help Korean companies get more energy resources abroad and sharpen their competitive edge in related industries,” he also said at the Energy Policy Research Forum held last month.
“It is not sure whether the direction of the support policy for the energy sector will be changed due to the fund investment loss,” an employee of the bank commented, continuing, “In principle though, financial assistance for companies engaged in the industry is likely to be ongoing for a while.”