[2022 National Audit] KDB Sells All Shares of Korea GM... Public Institutions to Sell 22.6 Trillion Won in Assets Over 5 Years

Plan to Sell Within 5 Years... Timing Seems Accelerated

[Image source=Yonhap News]

[Asia Economy Reporter Moon Chae-seok] KDB Industrial Bank is beginning the process of selling its 17.02% stake in Korea GM. This marks the first time in 20 years since GM Daewoo was launched in 2002 that the stake is being liquidated. In addition, public institutions have decided to dispose of assets worth 22.6 trillion KRW over the next five years.

On the 21st, Go Yong-jin, a member of the National Assembly’s Planning and Finance Committee from the Democratic Party of Korea, analyzed innovation plans submitted by 350 public institutions to the Ministry of Economy and Finance. According to the analysis, these institutions plan to dispose of assets worth 22.585 trillion KRW over five years from this year through 2027.

Among the assets scheduled for sale are prime real estate properties owned by public institutions located in key areas such as Gangnam, Seocho, and Yongsan in Seoul.

The Korea Racing Authority announced plans to sell land in Seocho-dong, Seocho-gu for 138.5 billion KRW in 2024, and the office building in Hangangno-dong, Yongsan-gu for 98 billion KRW in 2025. Korea District Heating Corporation submitted a plan to the Ministry of Economy and Finance to sell land near Suseo Station in Gangnam-gu for 50 billion KRW in 2025. Korea Railroad Corporation plans to sell idle land located in the Yongsan station area and other locations from the second half of this year through the second half of 2026, with the sale amounting to 7.9977 trillion KRW. Korea Land and Housing Corporation (LH) also reported to the government that it will sell the Gyeonggi Regional Headquarters building for 460 billion KRW in the second half of 2025 and dispose of idle land held in areas such as Yeon-dong, Jeju City.

Additionally, many innovation plans include the sale of equity stakes in investee companies held by public institutions.

Notably, the Industrial Bank of Korea revealed plans to sell about 17% of its stake in Korea GM. This is the first time the bank has announced a plan to sell its Korea GM shares. Initially, the bank had postponed the sale of Korea GM shares as a government policy and intended to pursue the sale after 2028. However, the innovation plan submitted this time is interpreted as effectively advancing the sale.

The Industrial Bank and the American automobile company General Motors (GM) agreed during the major restructuring of Korea GM in 2018 to maintain their stakes at least until 2028. The Industrial Bank secured a 29.9% stake when GM acquired the former Daewoo Motor’s passenger car business and launched GM Daewoo in 2002, but its stake has since decreased to 17.02%. GM holds a 78.41% stake.

However, the bank stated that the specific timing of the sale has not been decided. The decision to sell is seen as a measure taken due to the deteriorating financial condition, with accumulated losses reaching 5 trillion KRW despite 800 billion KRW of public funds invested over the past 20 years.

Other institutions, such as Korea National Oil Corporation, have also decided to sell investee companies in the oil development sector.

The assets planned for sale by public institutions, including land and buildings, amount to 13.891 trillion KRW, and equity stakes in investee companies total 8.694 trillion KRW.

By ministry, the scale of tangible and intangible asset sales is largest among public institutions under the Ministry of Land, Infrastructure and Transport at 8.9384 trillion KRW, followed by the Ministry of Oceans and Fisheries (1.5571 trillion KRW) and the Ministry of Trade, Industry and Energy (1.0428 trillion KRW).

Among ministries, the largest scale of equity stake sales is by public institutions under the Financial Services Commission, totaling 6.8736 trillion KRW.

This asset sale plan was autonomously prepared and submitted by each institution in accordance with the Ministry of Economy and Finance’s public institution innovation guidelines. Assemblyman Go Yong-jin emphasized, "Selling prime real estate or stocks with growth potential could cause long-term losses to the public. We should learn from the case of the Korea National Oil Corporation, which sold an essential office building for its public institution business and ended up paying tens of billions of won annually in rent to lease the same building again."