SEJONG, July 30 (Korea Bizwire) — South Korea plans to allow big companies to have venture capital affiliates as it seeks to encourage them to increase investments, Finance Minister Hong Nam-ki said Thursday.
However, the government will impose some restrictions on such firms in a precautionary measure to prevent big companies from using such financial units as private coffers, Hong said.
A big company’s venture capital unit will be barred from borrowing more than 200 percent of its paid-in capital, according to the finance ministry.
Founding family members of a conglomerate and its financial affiliates will be barred from investing their money into such an entity, the ministry said.
The government will revise related laws by the end of this year to allow big companies to have venture capital units.
Financial markets have been awash with extra liquidity as the nation loosened monetary conditions to combat an economic crisis triggered by the pandemic.
By allowing big firms to have venture capital units, the government hopes that excess liquidity can be pumped into promising startups.
“The venture capital units are expected to boost the “economy’s innovation and dynamics,” Hong said.
Hong said the government will provide 40 trillion won (US$33.6 billion) in financial supports to 1,000 innovative firms over the next three years.
The government will soon begin issuing vouchers to stimulate consumption in the sectors of movies, farm goods, tourism, sports and arts, Hong said.
The vouchers are expected to increase private consumption by 1 trillion won, Hong said.
Hong said the extension of the currency swap deal with the United States is expected to help stabilize financial markets.
The extension is “meaningful because it resolved uncertainty at the time of expiration,” Hong said.
Earlier in the day, the two countries agreed to extend a $60 billion bilateral currency swap agreement by six months in an effort to help ease lingering market uncertainties amid the new coronavirus outbreak.
In late March, the BOK and the U.S. Federal Reserve signed the bilateral currency swap deal to help ease financial market jitters caused by the COVID-19 pandemic. The swap agreement, initially set to end on Sept. 30, will be extended until March 31, 2021.