South Korea promotes use of SWF to acquire foreign businesses: reports

A South Korean presidential council has called for support to use the country's sovereign wealth fund, Korea Investment Corporation (KIC), to expand Korean businesses' mergers and acquisitions of foreign companies in a bid to raise national competitiveness.

The Korea Herald, a national newspaper, on Tuesday reported Kang Man-soo, the chief of Korea's Presidential Council on National Competitiveness, as saying to South Korea's President Lee Myung-bak in a report that the council sought to "strengthen Korean companies' global investment capabilities to encourage mergers and acquisitions of competent overseas firms, especially in the energy and resources sector", adding that the scope of asset management by KIC would be expanded to help finance mergers and acquisitions abroad. The report was part of a presidential review of the Seoul G20 summit and discussions about South Korea's post-G20 tasks to become a global leader.

In December, the Bank of Korea said it would hand over $3 billion from its foreign exchange reserves to be managed by KIC, taking the Bank of Korea's total assets under management of the sovereign wealth fund to $20 billion. The government has also handed over a portion of its wealth to KIC. In KIC's 2009 Annual Report it said it had "formulated detailed procedures for valuing potential acquisitions, due diligence and negotiating acquisition terms and conditions" and planned to seek merger and acquisition opportunities as part of the Korean government's promotion of green growth and Seoul's drive to secure natural resources.

KIC was established on 1 July, 2005 and as of end-2009 managed a portfolio of assets valued at $30 billion. It is headed by Chin Young-wook, a former chief executive of the life insurance and securities businesses of Hanhwa, a Korean conglomerate. The sovereign wealth fund's highest decision-making body is its nine-member steering committee, which includes Kim Choong-soo, the governor of the Bank of Korea, and Yoon Jeung-hyun, the country's minister of strategy and finance.