Gov't Invests 780 Bln Won in Exim Bank

Bank joins Aramco in Islamic Sukuk financing in Saudi Arabia, a first for a Korean bank

Korea Export and Import Bank has decided to participate in Sukuk bond issuing with Aramco to finance the Sadara Project, the largest petrochemical plant project ever undertaken in Saudi Arabia.
Aramco is slated to issue $2 billion worth of Sukuk bonds in the fall and Exim Bank will guarantee anywhere from $500 million to $1 billion of the bonds issued for the petrochemical project.
Exim Bank will be the first Korean bank to be involved in Sukuk bond issuance, which is based on the project itself as collateral. Many Korean construction companies are expected to participate in the construction of the largest petrochemical plant construction project ever undertaken at the Jubail Chemicals Complex in the oil-rich Arab country.
Sukuk bonds pay no interest in respect for Islamic law, but instead share in the profit from the project. Last year, $32.6 billion worth of Sukuk bonds were issued globally, but none in Korea due to objections of the National Assembly.
However, Chong Wa Dae, the presidential office, has been pressing for Sukuk issuance in Korea with the second construction boom about to sweep the Middle East and many Korean construction companies rushing to win some of the large projects in the region. No legal problems are seen in using the Sukuk funds overseas, including the Middle East, and Exim Bank’s participation in the Sukuk project will be a test case for raising Sukuk funds in the Middle East by Korean companies, especially as a means to diversify overseas funding sources for them.
The Sadara project is worth $18.3 billion, the second largest in the Middle East after the nuclear power plant construction project in the United Arab Emirates (UAE).
Seven Korean builders are trying to secure parts of the project including Samsung Engineering, Hyundai Construction, SK Construction, GS Construction, and Daewoo Construction. Exim Bank and Korea Trade Insurance Corp. are ready to issue financing and guarantees worth $5 billion in total.
Exim Bank has made a great contribution to Korea’s reaching $1 trillion in total trade last year. The state-run trade financing bank has been giving huge support to Korean firms, especially to increase exports by extending loans and credit since its launch in 1976.
Last year, the bank provided 67 trillion won in loans and credits to trading firms and construction companies overseas, which were possible after the bank reformed its financial terms from short-term finance to medium and long-term.
The bank announced its Vision 2020, which will turn Exim into an export credit agency (ECA) model providing a broad range of financial services including financial advisory services on diverse matters including M&As, investments, and others.
The government will invest its stake in Korea Asset Management Corp. and Korea Expressway Corp., worth 780 billion won, in Korea Exim Bank to increase its capital by about 200 billion won less than what the bank requested. Last year, the government invested 1.1 trillion won in the bank to increase its capital to boost the bank’s BIS rate.
Chairman and CEO Kim Yong-hwan has been leading those changes in the bank’s operations. Kim, a former bureaucrat working for the Ministry of Finance and at the Financial Services Commission, stresses trust, jobsites, speed, and communication to the employees at the bank.
The CEO feels that this year is the initial year to boost international trade toward the $2 trillion level. The bank has set aside 70 trillion won for loans and credit to lay the foundation for Korea to reach the $2 trillion level in the future.
The 70 trillion won includes 16.5 trillion won to finance plant construction projects overseas and 19.6 trillion won for green businesses and shipbuilders to make daring investments in their business areas. The bank provided $1.2 billion in loans and credit to POSCO’s steel plant project in Indonesia, the largest financial support ever provided by the bank to overseas plant construction projects involving Korean firms.
The bank plans to give support to Korean builders to win large overseas projects by setting up a special office for financial counseling.

Chairman and President Kim Young-hwan of Korea Export-Import Bank.