KDB, K-Growth to earmark W400b fund for supply chain autonomy

South Korea‘s state-owned lender Korea Development Bank and state-led fund-of-funds management company Korea Growth Investment (K-Growth) are looking for partners to earmark a combined 400 billion won ($344.9 million) to support materials and components sectors here and ensure national self-sufficiency in manufacturing supply chains.

With the state backing 220 billion won, the funds are intended to foster the growth of Korean firms dedicated to materials components and equipment and ultimately create a “self-sufficient” ecosystem in the export-driven economy, KDB Executive Director Chang Byoung-don said at an investor event at the KDB headquarters in Seoul on Thursday.

“Since 2001, the government endeavor to nurture Korea’s materials and components industry for manufacturers has borne fruit, with production rising threefold and exports jumping fivefold, but the efforts faced limitations, as the manufacturers still relied on imports of key parts and the industry failed to create added value,” Chang said.

“With sufficient funding, we are sure that Korea can become a self-sufficient manufacturing powerhouse with the ecosystem covering the whole cycle, from materials to finished goods.”

According to the plan, KDB will name two partners by February to close blind pool funds worth 200 billion won by July this year. The funds, with 10 year time horizon, must complete the investment within four years of the fund closing. Of the total, 60 percent will be backed by the state and KDB. Fund vehicles may apply for a partnership by Jan. 31.

K-Growth plans to create project funds – in which K-Growth accepts applications from fund vehicles on a rolling basis -- investing with the same purpose. Worth 200 billion won in total, half of the funds will be provided by the government.

The funds will support fundraising efforts of companies devoted to materials, components and equipment, as well as their cross-border mergers and acquisitions.

Korea’s lack of independence in materials, components and equipment came to the fore since its trade feud with Japan last year posed a threat to a sustainable production of manufactured goods in Korea, including semiconductors. Korea and Japan removed each other from their export control whitelists in 2019.

By Son Ji-hyoung (consnow@heraldcorp.com)