State-run financial protector celebrates 50th anniversary with renewed determination to safeguard financial wellbeing of Korea
Chairman & CEO Chang Young-chul of Korea Asset Management Corp. said the applications for replacement loans have been piling up sky high and KAMCO has been busy setting up an Internet Window for accepting the loan applications starting in July.
KAMCO, which has already celebrated its half century anniversary of its founding, has been busy executing the government policy to help relieve the general public’s suffering from high interest rates charged by loan shark firms; taking care of the sale of firms under workouts when the terms expire in November including Ssangyong Construction; and preparing for the third restructuring of savings and loan banks under financial stress.
Chang said the cyclical period for the global financial crisis has been shortened to three years now and Korea cannot but be affected with its economic growth dependent 100 percent on exports.
To make matters worse for KAMCO, its job has been extended to cover such areas as taking care of financial assets in default, the management of state assets, the streamlining of tariffs, and the extending of support loans for the general public, among others. But Chang said, in fact, the number appears to have increased but the role has not changed for KAMCO, which is turning inactive assets into active ones.
On support loans to people who are struggling under exorbitantly high-rate loans from savings and loan banks, he said 1.46 million people got KAMCO support loans and around 2.47 million borrowers have been under KAMCO surveillance. Those who come to KAMCO for support have been those who have suffered more than 58 months from high-interest loans from loan sharks. They are given about 10 years to repay the loans to get themselves away from the loan sharks. Around 1,035 of them got jobs with KAMCO’s help, with some of them even landing jobs with credit information firms working as loan collectors instead of having to repay loans, a surprising turnaround in their lives.
Chang said KAMCO is in the middle of shaking up the “New Hope Network,” a collection of information for financial support for the financially distressed and expanding it before reopening it. The system will be able to provide small amounts of loans and information on jobs and debt restructuring, reforming it as a financial hub for the general public.
From July, the New Hope Network will be able to provide small loans and restructure debts, which could include loans to replace old loans, as well as change the name of the network, Chang said.
Chang also said KAMCO will take over the defaulted assets of savings and loan (S&L) banks if needed, which will not be an easy job as the situation is worse than expected.
KAMCO has taken over 7.4 trillion won worth of bad assets, most of which are project financings gone sour from S&Ls since 2008 when the financial crisis broke out. Of the bad assets, 1.6 trillion won worth have been cleared with 5.8 trillion won still remaining. It has been difficult to resolve the bad assets as many project financings were made on construction projects in remote areas where the land prices are not high, but Chang is sure that two or three of them can be saved, following the approval of the Public Fund Management Committee. KAMCO is already at work to get ready for the third restructuring of savings and loan banks, which will come soon, Chang added.
KAMCO has been in the process of selling the bad debts of Ssangyong Construction, Daewoo Electronics, and Kyobo Life Insurance, which have been held by the Defaulted Assets Clearance Fund. In the case of Ssangyong Construction, two suitors including M+W and Zion have been selected as final bidders. Chang said the construction company is likely to find its suitor in the third bidding among the two foreign bidders.
Chang also acknowledged that the private sector market for non-performing liabilities (NPLs) has been growing, but the role of the public entities in the sector still remains strong. KAMCO has been playing the role of a multipurpose dam when private investments are made in NPLs.
“It’s like closing the dam during flooding and creating tourist spots along the dam when everything is pleasant, which is comparable to finding new profitable businesses when things are going well,” Chang said.
Chang said KAMCO is better than any financial institution in handling defaulted assets, including the Korea Credit Guarantee Fund, as a company in default not only owes money to banks but also to the tax authorities, which is why KAMCO is often better equipped to handle the case.
The KAMCO chairman also agreed with the government move that assigned the collection of unpaid taxes to KAMCO, by saying that the move was right because the collection of taxes is the duty of the state-run organization and, in terms of effectiveness, KAMCO’s expansive facilities to handle defaulted credits. KAMCO will form a taskforce this year to prepare for the new role of tax collector so that the new duty can be carried out without a hitch.
KAMCO must push forward the construction of buildings and facilities for 12 government-invested research and development institutions that are scheduled to relocate to Sejong City starting the end of this year. Around 71,657 m2 of land must be developed for the projected plan to build four building sections at a cost of 282 billion won.
The chairman said KAMCO would be able to help the 12 state-run R&D institutions finance their relocations, thus boosting the price of land in the area and spurring the development of the local economy.
In order to help the relocation of the 12 R&D institutions, KAMCO will buy their old buildings in the Seoul area and manage them, which is another new job for the asset management firm. KAMCO has now concluded an agreement to buy the real estate from six state-run R&D institutions for 317.6 billion won. The Narakium Building near South Gate in Seoul would make a good case for KAMCO’s moves to turn a state-held building into an active one. The asset management firm will manage the development of the state-held real estate as an owner, which would be used ceaselessly to make money if it were owned by a private person.
KAMCO also created a shipping fund to help shipping firms in financial trouble and bought 33 ships from seven shipping firms through last year at for 466.6 billion won. So far it has recovered 65.5 billion won, although all of the funds should be recovered by 2014 despite the lack of a recovery by the shipping industry to its normal market conditions. Chang said he sees no problems in recovering the entire amount of funds that went into restructuring the shipping industry by 2014 as planned.
The KAMCO Shipping Fund was launched in 2009 and has grown in size since then with the participation of more shipping firms.
