Korea investment corporation: its origin and evolution

Kim, Woochan (2011): Korea investment corporation: its origin and evolution. Published in: Journal of the Asia Pacific Economy , Vol. 2, No. 17 (6 May 2012): pp. 22-36.

Abstract

In this paper, I give a detailed account of the creation and the evolution of Korea Investment Corporation (KIC) – a sovereign wealth fund established in 2005 by the Korean government. In doing so, I highlight three of its unique features. First, the case of KIC effectively shows the problem of having an unclear mission statement, which allows the mission to evolve over time and multiple missions to coexist that may contradict each other. Second, it effectively reveals the typical conflicts that may arise between the central bank and the ministry involved when setting up a reserve-based sovereign wealth fund. Third, it effectively shows how a sovereign wealth fund can be operated in a way that favors the bureaucrats and the politicians.

• Item Type: MPRA Paper
• Language: English
• Keywords: Sovereign Wealth Fund; FX Reserve; Currency Crisis; FX Swap; Korea
• Subjects: F - International Economics > F3 - International Finance > F34 - International Lending and Debt Problems; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation; F - International Economics > F3 - International Finance > F31 - Foreign Exchange; P - Economic Systems > P1 - Capitalist Systems > P16 - Political Economy

References

Behrendt, Sven (2011), “Sovereign Wealth Funds and Their Commitment to the “Santiago Principles” GEOECONOMICA Briefing April 2011

Clark, Gordon and Ashby Monk (2011), “Nation-state Legitimacy, Trade, and the China Investment Corporation” mimeo

Clark, Gordon and Ashby Monk (2010a), “Government of Singapore Investment Corporation (GIC): Insurer of last resort and bulwark of nation-state legitimacy,” The Pacific Review 23(4): 429-451

Clark, Gordon and Ashby Monk (2010b), “The legitimacy and governance of Norway’s sovereign wealth fund: the ethics of global investment,” Environment and Planning 42(7): 1723-1738

Clark, Gordon and Ashby Monk (2010c), “The Norwegian government pension fund: ethics over efficiency,” Rotman International Journal of Pension Management, 3(1):14-19

Jeong, Young-Sik and Dae-Sun Jung (2010), “Korea’s External Credit and Debt Imbalance,” SERI Economy Focus No.304 (in Korean)

Kim, Woochan (2010a), “Structural Issues in the Korean FX Market during the 2008 Global Financial Crisis: Empirical Investigation of FX Risk Management by Nonfinancial Public Firms,” KDI Policy Study Series No. 2010-06 (in Korean)

Kim, Woochan (2010b), “The Governance of Public Institutions in Korea,” mimeo (in Korean)

Parrado, Eric (2004), “Singapore’s Unique Monetary Policy: How Does it Work?” IMF Working Paper 04-10.

Song, Chi-Young (2010), “Excessive Foreign Capital Inflows and Pro-Cyclicality,” mimeo (in Korean)

Truman, Edwin (2011), “Sovereign Wealth Funds: Is Asia Different?” Peterson Institute for International Economics Working Paper 11-12

Yang, Yang-Hyeon and Haerim Lee (2008), “An Analysis of the Attractions of Arbitrage Transactions and of Domestic Bond Investment by Foreigners and Korean Branches of Foreign Banks,” Bank of Korea Monthly Bulletin, August (in Korean)

Yi-Chong, Xu and Gawdat Bahgat (2010), The Political Economy of Sovereign Wealth Funds, Palgrave MacMillan