Public funds injected by the Korean government in order to save national economy from last couple of big-time financial crisis deserve to be noted. Recently the Financial Services Commission released a report on two public funds. To make it easier to compare, we call them, Public Funds I(‘PF I’) and Public Funds (‘PF II’).
PF I was created during the Asian financial crisis in 1997; which Korea checked into the IMF bailout program. Major financial institutions were severely damaged and the default on banks could have brought total economic meltdown. To respond this economic crisis, PF I was made guaranteed by the government and aggregated amount of 168.7 trillion from 1997 to 2013 of fund was injected. As of December 2013, PF I was successfully retrieved to approximately 106.7 trillion out of total investment(63.2%). Most of it came from returns from capital investment, allocation from insolvency, private/public asset sales and bonds. Considering a dire situation the entire Korean economy was in, swift action and implementation by PF I took a critical role to recover from the crisis as well as maintain national credit rating.
Sub-prime mortgage failure reignited another financial crisis all over the world. For fear of adverse impact to national economy, PF II was created in order to invest in non-performing loans owned by financial institutions and distressed assets from companies which were in restructuring procedures. From 2009 to 2013, approximately 6.2 trillion won was injected and 4.7 trillion won was successfully retrieved( 76.2%). Main sources of return were re-sold non-performing loans and returns from capital investment on assets.
Undoubtedly public funds did and still do a highly crucial role to sustain overall economy as a last resort. And we expect to continue to do so.