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The Lee Myung-bak administration announced plans to privatize the state-owned Korea Development Bank as part of its broader goal to create a smaller government that gives freer rein to corporations.
The plan is to bundle KDB and its affiliates into a holding company, which will in turn form an investment bank. The government will sell 49 percent of its stake by 2010 and sell off the rest before President Lee's term ends in 2012.
The Korea Development Bank was established by the government in 1954 to provide financial support for domestic companies. As the KDB becomes a private entity, its functions both public and commercial are expected to change.
Yoon Man-ho, a KDB director, said, "The public functions will be given to a financial institution Korea Development Fund, which will be in charge of policy financing. The commercial functions will be given to a holding company made of KDB and its affiliates that will form an investment bank."
Experts say privatizing KDB will bring changes to the current financial market, possibly increasing competition among banks. If other banks purchase KDB's shares a competition between banks to increase their size through mergers and acquisitions might be on the way.
But the plan hasn't gone uncriticized. Some say the government's hurry to sell off the bank by 2012 could have negative effects on the bank's value, even pointing to the case of Korea Exchange Bank, which was sold to U.S.-based Lone Star at an allegedly undervalued price.
Whether or not the privatization of KDB succeeds it will be a litmus test for future government privatization projects.
Arirang News
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