Government scrutiny of the National Growth Fund's investment review process and conflict of interest management has sparked controversy in the National Assembly. All 30 investment proposals submitted to the Fund Management Review Committee through August this year were approved, despite some dissenting opinions during preliminary reviews. It was noted that there were seven instances where conflicts of interest between committee members and the companies being considered were identified.
During a National Assembly audit of the Financial Services Commission on October 8, Park Jun-tae, a lawmaker from the People Power Party, raised concerns about the investment review process and the operation of the review committee.
Park presented data showing that all 30 proposals submitted to the National Growth Fund Management Review Committee had been approved by August, indicating a 100% approval rate. He questioned whether the committee was merely endorsing pre-determined investment decisions rather than conducting thorough evaluations.
The National Growth Fund is a public-private investment system aimed at funding advanced strategic industries such as artificial intelligence (AI) and semiconductors. The government plans to expand the fund from an initial target of 150 trillion won to 200 trillion won over five years.
Park claimed that there were cases where dissenting opinions were raised during the preliminary review process, yet final approvals were still granted. He specifically mentioned an investment proposal related to the AI startup Furiosa AI, where some committee members expressed doubts about the project's viability, yet the investment was approved.
He also highlighted instances where government funds were allocated before private investments were secured, raising concerns about potential favoritism. Park noted that a 370 billion won investment was pursued even though private funding had not been fully secured.
The issue of managing conflicts of interest among committee members was also brought to light. Park stated that out of the 30 approved proposals, seven involved reported conflicts of interest between committee members and the companies under consideration, leading to recusal measures for those members.
He cited examples where committee members held positions as outside directors in affiliated companies or were representatives of firms with ties to the investment targets. He questioned whether merely recusing conflicted members was sufficient to prevent conflicts of interest, especially when those members had dined with other committee members before and after the reviews.
In response, Lee Ok-yeon, the chair of the Financial Services Commission, clarified that not all committee members opposed the proposals, but rather that dissenting opinions were noted on certain matters. He also stated that most private investments had been secured before the approvals were made. Lee emphasized that the review process includes measures to exclude interested parties and that the committee operates under established decision-making procedures.
Lawmaker Song Eon-seok also focused on the investment decisions and conflict of interest management related to the National Growth Fund. He referenced dissenting opinions raised during the review process for investments in AI companies Upstage and Furiosa AI, noting that the committee chair's firm was a shareholder in Upstage, creating a conflict of interest.
He demanded clarification on how dissenting opinions raised during preliminary reviews were addressed in the final investment decisions and requested related documentation. Lee responded that various opinions could be presented in the review committee, and decisions are made after comprehensive discussions.
Concerns were also raised about the concentration of investments in specific regions and large corporations. Song pointed out that, based on the 11 projects approved so far, 55.4% of the approved investment amounts were concentrated in the capital region, while the Honam region accounted for 28.7% and the Yeongnam region only 7.9%.
In response, Lee outlined plans to increase the proportion of investments in local areas to over 40%. He noted that the relatively high percentage for the Honam region was influenced by a large offshore wind power project in Sinan.
The issue of fund allocation by company size was also raised. Song stated that 86% of the National Growth Fund's resources were allocated to large corporations, while only 2% went to small and medium-sized enterprises, emphasizing the need for improvements to align with the fund's policy goal of fostering SMEs.
The plan to expand investments in the KOSDAQ market using the National Growth Fund also sparked debate. Song pointed out that the Financial Services Commission had announced plans to utilize KOSDAQ investment funds from the National Growth Fund to strengthen the market's supply base, cautioning against using policy funds to artificially boost stock indices. He argued that making the rise of a specific stock index a policy goal was inappropriate, considering potential investment losses and market side effects.
In response, Lee clarified that the policy objective was to supply funds to companies listed on the KOSDAQ market rather than focusing solely on the KOSDAQ index itself. He explained that the investment would involve private matching through indirect investment funds, stating, "The focus is on the companies within KOSDAQ rather than the index itself." He added that out of 7.5 trillion won, 150 billion won would be allocated to KOSDAQ investment funds.
* This article has been translated by AI.
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