Over 50 Billion KRW Mother Fund Raised Annually
45 Companies to Undergo Business Transformation Over 9 Years
Investment of 10 to 50 Billion KRW Supplied Per Company
An unprecedented mega project that raises a mother fund of over 50 billion KRW annually for nine years to support the new business transformation of local mid-sized and small enterprises is unfolding in Busan.
Busan City has presented a bold plan on how to transform the industrial structure centered on traditional manufacturing and service industries to welcome a new era. It is attracting attention as the largest local government project ever, supplying more than 450 billion KRW in large-scale investment funds to over 45 companies, with 10 to 50 billion KRW per company annually.
Busan City (Mayor Park Hyung-jun) announced that it will hold a corporate briefing session on the establishment of the ‘Busan Industrial Transition Green Fund’ at 10:50 a.m. on the 10th at the Busan International Finance Center (BIFC) in cooperation with the Financial Services Commission (Chairman Kim Byung-hwan).
This briefing session was organized to announce the fund establishment plan and discuss ways to successfully form the fund.
The event, chaired by Mayor Park Hyung-jun, was attended by Financial Services Commission Chairman Kim Byung-hwan, Jo Yong-byeong, Chairman of the Korea Federation of Banks, Kang Seok-hoon, President of the Korea Development Bank, Heo Seong-mu, CEO of Korea Growth Investment Corporation, and representatives of local companies.
At the briefing, Busan-type financial support measures to promote industrial innovation and new industry development in Busan were announced. Busan City presented the establishment of the ‘Busan Industrial Transition Green Fund,’ the first of its kind by a local government to support carbon neutrality and new business entry of small and medium-sized enterprises and mid-sized companies, listened to various investment cases and corporate voices, and began discussions with the Financial Services Commission and financial institutions and organizations on ways to successfully form the fund.
Busan City requested the Financial Services Commission to support the establishment of a region-led business restructuring corporate support fund as a policy direction and asked for the establishment of a cooperative system to make it a successful local innovation model for Korea’s leap forward. It also called for active interest and participation from financial institutions to strengthen the competitiveness of region-based companies.
Busan City has been seriously considering ways to revitalize regional investment for industrial structure reform and innovation since last year.
The economy of the Southeast region, including Busan, has so far formed the core of economic growth centered on the so-called ‘heavy and chemical industries.’ However, faced with new industrial trends of green and digital transition, existing companies trapped by trade barriers are confronted with the critical challenge of seeking survival.
Busan City ultimately decided that large-scale medium- to long-term venture capital that practically supports business restructuring demand is urgently needed to transform the regional industry, centered on traditional high-carbon-emission manufacturing, into a high value-added industrial structure focused on advanced industries.
For this reason, Busan City has promoted the establishment of an ‘Industrial Transition Fund.’ This fund plans to raise a mother fund of over 50 billion KRW annually for the next nine years and form several sub-funds through matching with private financial capital. It plans to select 4 to 5 local companies annually, totaling more than 45 companies over nine years, and supply business transformation funds of 10 to 50 billion KRW per company.
Commercial banks will contribute 50 billion KRW annually, the Korea Development Bank will contribute 1 billion KRW annually, and Busan City will bear a certain amount each year to actively attract bank funds. A mother fund of over 50 billion KRW will be raised annually, and Korea Growth Investment Corporation will manage the mother fund.
In addition, the Korea Development Bank is reviewing plans to not only invest in the mother fund but also provide additional investments to sub-funds as needed to support smooth formation and various forms of support for investee companies in the future.
Until now, policy funds have focused on startup ventures, and there has been no suitable local government-level funding support plan for prospective mid-sized companies that lead industrial growth. However, if the Industrial Transition Fund is successfully established and invested, it is expected to herald a ‘big bang’ in regional investment and industry.
Busan City plans to stably supply business transformation funds to companies over the next nine years as a medium- to long-term plan to promote corporate growth from small and medium-sized enterprises to mid-sized and large companies. It is also expected to greatly contribute to strengthening industrial competitiveness centered on advanced future industries and increasing the corporate value of key manufacturing industries.
As the first-year project, the city plans to form the mother fund as early as the first half of this year through the Ministry of the Interior and Safety’s central investment review, prior review by the city council, and supplementary budget allocation.
Nam Dong-woo, Busan City’s Financial Startup Policy Officer, pointed out, “Busan has good conditions to develop future industries, but companies are leaving for the metropolitan area due to lack of investment,” and emphasized, “We plan to bring investors from Seoul to Busan more than twice a month.”
Mayor Park Hyung-jun of Busan said, “This is an important time to strengthen industrial competitiveness centered on future growth industries,” and added, “The Busan Industrial Transition Green Fund will be an innovative catalyst that not only provides simple financial support but also leads the growth of companies in Busan and the Southeast region and transforms the regional economic structure into a sustainable growth core engine.”
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