[Edaily Marketin KIM SUNG-SOO Reporter] The Korea Investment Corporation (KIC) strategic sovereign wealth fund, backed by 16 trillion won in capital, is facing a “funding controversy” ahead of its launch.

Park Il-young, President of the Korea Investment Corporation (KIC), stated that once KIC launches as a strategic sovereign wealth fund, “the initial available funds that can be used for investment immediately amount to approximately 1 trillion won.” He explained that the approximately 16 trillion won in stakes held in policy banks—which are being discussed as potential funding sources for the strategic sovereign wealth fund—are far from being cash that can be immediately deployed for actual investments.

President Park replied that if the scale of newly identified investment projects exceeds the available funds (approximately 1 trillion won), KIC would consult with the government to secure additional capital contributions or receive funds under management.

“Initial available funds of 1 trillion won… including cash contributions and dividends from state-run banks”

On the 23rd, during a parliamentary audit held at the National Assembly in Yeouido, Yeongdeungpo-gu, Seoul, Kim Sang-hoon, a lawmaker from the People Power Party, pointed out—based on a written response previously submitted by KIC—that the investment funds for KIC’s strategic investment account and the annual execution plans were unclear.

Rep. Kim stated, “The written response ultimately failed to present the amount available for investment or the annual plans,” adding, “It appears that plans to secure investment funds remain unclear and have not yet been finalized.”

Rep. Kim questioned the feasibility of the sources cited for funding the strategic sovereign wealth fund: approximately 16 trillion won in stakes in policy banks, approximately 4 trillion won in shares paid in kind, and 500 billion won in cash.

In particular, he pointed out, “Shares in policy banks cannot be disposed of without government approval under the proposed amendment, which limits their convertibility to cash, and the shares in NXC, the holding company of Nexon, offered as in-kind contributions have already failed to sell at auction four times, so there are limitations to their convertibility into cash,” adding, “It is a weakness that (KIC) proposed these assets as funding sources but failed to present the actual investable amount and annual plans.”

KIC President Park Il-young explained the distinction between currently available funds and initial capital. President Park said, “We have a cash contribution of 500 billion won, and dividends from policy banks are expected to be approximately 500 to 600 billion won,” adding, “We consider this to be immediately available funding.”

Regarding shares received in lieu of tax payments, President Park explained, “Since these must be sold off in stages, it is still difficult to provide specific figures.”

He continued, “Our top priority is to identify promising investment projects,” adding, “If the scale of an investment project exceeds our currently available funds, we plan to consult with the government to secure additional capital contributions or entrust the project to a third party.”

However, President Park made it clear that the approximately 16 trillion won in stakes held in policy banks does not constitute cash immediately available for investment. He said, “The 16 trillion won is initial capital and is far from being immediately available cash,” adding, “No specific investment projects have emerged yet.”

“Strategic Sovereign Wealth Fund: Concerns Over a Structure Where KIC Bears the Burden of Government Decisions”

Rep. Kim also pointed out that the process by which

KIC

was selected as the operator of the strategic

sovereign wealth fund

was unclear.

In particular, he took issue with the statement in KIC’s response that read, “It is understood that the plan is to proceed by establishing a new strategic investment account within KIC and expanding and reorganizing it into a sovereign wealth fund to enable swift and efficient strategic investments.”

He said, “Initially, former Deputy Prime Minister for Economic Affairs Koo Yoon-chul took the position that KIC was not suitable as the entity to manage the strategic investment account because it is an organization entrusted by the government and the Bank of Korea to manage foreign exchange reserves,” adding, “However, the explanation regarding how KIC was subsequently selected as the managing entity is insufficient.”

He continued, “Based on the wording in KIC’s response, it appears that KIC was simply notified of the government’s decision and accepted it from a third-party perspective,” adding, “There are concerns that KIC is merely playing a figurehead role—where the government decides which companies to invest in or support, and KIC bears the responsibility.”

In response, President Park explained, “When comparing whether to establish a separate strategic sovereign wealth fund or to manage it through KIC, I understand that the government determined it would be more efficient to entrust the task to KIC.”

Rep. Kim also raised questions about KIC’s capacity to invest in domestic strategic industries. He said, “While KIC possesses expertise in managing foreign exchange reserves and foreign currency assets, it currently lacks expertise in investing in domestic strategic industries,” adding, “The written response effectively acknowledges the need to hire new specialized personnel.”

In response, President Park said, “It is true that new investment personnel are needed,” adding, “However, we believe that KIC can generate synergies given its existing investment network, which is why it was entrusted with this task.”

Ensuring independence between foreign exchange reserves and the strategic investment account was also raised as an issue.

Rep. Kim emphasized, “Although there is an explanation that operational firewalls will be established through the Investment Committee and the Investment Advisory Committee, if the president and the Steering Committee are the same, it may be difficult to block external influence through management,” adding, “I am not trying to criticize, but my point is that the firewall regarding foreign exchange reserves must be strictly maintained.”