Following is an interview with Dir.-Gen. Kim Hak-soo of the Capital Market Bureau of the Financial Service Commission:
Question: What are the major business targets of the Capital Market Bureau of the Financial Service Commission for this year?
Answer: They can be surmised as the reform of the capital exchange structure, vitalization of venture capital investment, effective management of operational funds, boosting effectiveness of transactions and trust in the exchange, and strengthening the competitive power of the financial investment business. We unveiled the Konex market vitalization plan in April 2015; the reform of the exchange structure in July 2015; and the means to strengthen the financial investment business in October 2015. We have been pushing the plans we have announced.
Q: Would you please tell us the plan to boost the venture capital market to help the Creative Economy Drive by the government to flourish?
A: The capital market that youths dream about will be in the form of the capital market we want to establish. There are some problems associated with the capital market as it should expand opportunities for starting start-ups and provide support to business firms to create jobs by supplying funds smoothly.
We have collected many ideas with which to solve the problems for SMEs and start-ups. We came up with the “SME, Start-up Financial Investment Vitalization Plan” after consulting with related government ministries. A key objective of the plan is to build a smooth-flowing ecological structure for SMEs and Start-up Financial Investments to spur the venture market. In order to kick them off, the venture ecological structure will be centered around civilian leadership first; secondly, we will nurture venture capital industries with “the power of influence” to make competition more intense; third, we will foster a “smooth circulation ecological system” to spur the collection market.
The government will do everything to make the capital market a major source of venture capital funds to start-ups and venture businesses with its policies.
Q: What can you tell us about the direction of the reform of the securities market?
A: Our securities market has been lagging others abroad due to a lack of competition, although competition among stock markets and tie-ups has been pushed very actively in the world. The domestic stock market is very much behind its rivals overseas as far as the intensity of its operation is concerned. As is widely known, the exchange will be reformed as a holding company to spur competition among markets, and at the same time the exchange ATS competition system will be built.
The reform plan to strengthen the Korea Exchange is essential for its mid- to long-term growth in the global arena.
Q: Can you please inform us about the plan to expand the price rise limit effective from June, from 15 percent to 30 percent?
A: We took the measure to expand the share price rise limit at the stock exchange from 15 percent to 30 percent effective in June in response to various complaints that the true value of a listed firm and new information have been excluded from the share prices due to the low share price change range. We thought that a 30 percent rise would be enough to reflect the true values of listed firms after a careful study on the movement of the share prices.
Q: what are some of the measures to strengthen the competitive power of the financial investment industry?
A: Our securities industry has been stalling due to sluggish structural reform, time-worn operational format, and uniform earnings structure, to name some.
We plan to boost the competitive power of the securities industry in three major ways. First, we plan to strengthen the function of the capital market’s corporate financing so that business firms can secure their needed funds of the capital market by expanding credit loans to large securities firms and foster the growth of specialized securities firms under a medium-term strategy so that they can have easier access to financial funds. We also plan to turn the private equity fund market into a place for corporations to secure funds and investment and collection of invested funds. Second, we will give support to the financial investors to explore high value-added business areas.
We will allow large securities firms to set up a securities market and also allow them to operate professional investment-type private equity funds.
Lastly, we will also take care of the financial regulations considered to be excessive to allow competition in providing creative financial services.
What we have been focusing on regarding the reform of the capital market was to expand the peripheries of the market so that professional investors can invest more and liberalize the autonomy for the provision of credit financing and collection.
Q: What about your plan for allowing more incentives for the pension system, so that the general public can prepare for their retired lives better?
A: We have not been able to prepare for the retired lives more fully due to low birth rates and a rapid increase in the number of old people and the extension of the average life span in Korea.
There also are limits to what individuals can do to prepare for their retired lives, with most of their assets being in real estate and other real assets, and low household savings rates. The average household savings rate in Korea in 2012 stood at 3.8 percent, compared to 5.8 percent in the U.S., 11.7 percent in France, 10.3 percent in Germany and 10.5 percent in Australia, while financial assets for Koreans came to 24.9 percent, 68.5 percent in the U.S., 59.1 percent in Japan, and 38.7 percent in Australia, according to the statistics released by the Office of Statistics.
We feel that we have to strengthen the incentives for expanding financial assets for the people in Korea so that individuals might be able to be ready for their retired lives well.
In April, the tax exemption rate on pensions for individuals was raised to 13.2 percent, with the rate for those earning 55 million won or more to 16.5 percent.
We think the incentives should be provided to long-term installment savings instead of boosting tax-exemption rates and other diverse ways, which we will seek and come up with in the future.
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