Ministry of Finance and Economy at the Government Complex in Sejong, South Korea. [Photo by Kim Yoo-jin]
The South Korean government has decided to significantly relax investment regulations for the Korea Export-Import Bank (KEXIM). This initiative aims to enhance support for small and medium-sized enterprises (SMEs) looking to expand overseas through increased direct and indirect investments by the bank.
During the 26th Cabinet meeting held on June 16, the government reviewed and approved a partial amendment to the Enforcement Decree of the Korea Export-Import Bank Act.
This amendment follows the revised Korea Export-Import Bank Act, which will take effect on June 24. The new law eliminates the requirement for KEXIM to link loans and guarantees to its direct investments and expands the scope of indirect investments.
Under the amendment, the scope of indirect investments by KEXIM will now include venture investment associations under the Venture Investment Act and new technology investment associations under the Specialized Credit Finance Business Act, in addition to existing collective investment schemes under the Capital Market Act. The previous limit on investment amounts, which restricted investments to 25% of the collective investment assets for each investment vehicle, has also been removed.
Regarding direct investments, specific criteria have been established to ensure adequate profitability. For KEXIM to proceed with a direct investment, the expected return on the target project must exceed a benchmark return set by the bank. In cases of equity investments in overseas construction projects, investments can only proceed if the return requirements are met and there are years within five years after project completion with positive net cash flow.
The exceptions to the previous limit on acquiring shares with voting rights, which was capped at 15%, have also been expanded. The new exceptions now include venture companies as defined by the Special Measures Act for Promoting Venture Businesses and small enterprises as defined by the Framework Act on Small and Medium Enterprises.
The government anticipates that this amendment will lay the groundwork for revitalizing investments by KEXIM, thereby strengthening support for SMEs in their overseas expansion efforts. Additionally, it is expected to contribute to enhancing industrial competitiveness and securing economic security.
During the 26th Cabinet meeting held on June 16, the government reviewed and approved a partial amendment to the Enforcement Decree of the Korea Export-Import Bank Act.
This amendment follows the revised Korea Export-Import Bank Act, which will take effect on June 24. The new law eliminates the requirement for KEXIM to link loans and guarantees to its direct investments and expands the scope of indirect investments.
Under the amendment, the scope of indirect investments by KEXIM will now include venture investment associations under the Venture Investment Act and new technology investment associations under the Specialized Credit Finance Business Act, in addition to existing collective investment schemes under the Capital Market Act. The previous limit on investment amounts, which restricted investments to 25% of the collective investment assets for each investment vehicle, has also been removed.
Regarding direct investments, specific criteria have been established to ensure adequate profitability. For KEXIM to proceed with a direct investment, the expected return on the target project must exceed a benchmark return set by the bank. In cases of equity investments in overseas construction projects, investments can only proceed if the return requirements are met and there are years within five years after project completion with positive net cash flow.
The exceptions to the previous limit on acquiring shares with voting rights, which was capped at 15%, have also been expanded. The new exceptions now include venture companies as defined by the Special Measures Act for Promoting Venture Businesses and small enterprises as defined by the Framework Act on Small and Medium Enterprises.
The government anticipates that this amendment will lay the groundwork for revitalizing investments by KEXIM, thereby strengthening support for SMEs in their overseas expansion efforts. Additionally, it is expected to contribute to enhancing industrial competitiveness and securing economic security.
* This article has been translated by AI.
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