National Pension Service (NPS), South Korea’s largest institutional investor, will be studying feasibility of backing the new administration’s plan to increase spending on public welfare infrastructure such as child and senior care centers and rental homes for the low-income class as promised by new President Moon Jae-in through purchase of public debt created for the purpose.

According to the briefing to the advisory committee for state affairs planning that also acts as a presidential transition team on Monday, the NPS will be positively reviewing investment in bonds designed for government-led social infrastructure projects. The Ministry of Health and Welfare, which oversees the pension fund, already vowed to support the new administration’s plan to increase social infrastructure last week.

The new administration hopes that NPS takes a greater role in social responsibility investment, said Kim Yeon-myung, head of the advisory committee for state affairs planning’s subcommittee on social issues.

The pension operator came under fire after its former chief was charged for backing Samsung Group’s merger plan that in turn allowed the conglomerate’s founding family to tighten their control over the group.

The NPS investment in social infrastructure projects could also be challenged as the world’s third largest pension fund with more than 500 trillion won assets under management faces the likelihood of running out of money in the next 30 or 40 years. Investing in nurseries and public housings would not reap big returns.

Kim said that new government does not mean to interfere with free market economy, but is requesting the NPS to actively look into the option.

The NPS has already embarked on the process to study its possible investment in social infrastructure projects. Its research institution projected that NPS would gain annual return of 1.5 trillion won ($1.3 billion) on 20 trillion won investment in public facilities over a 10-year period in February 2015 report prepared by outside consultants on its request. The report projected that the infrastructure investment would create 71,000 new jobs, in both direct and indirect ways and proposed the pension operator to invest between 820 billion won and 2.4 trillion won in social infrastructure projects annually.

The welfare and finance ministries have also started reviewing the infrastructure investment using NPS’s funds. The welfare ministry in its report to the presidential advisory committee last week promised to finish reviewing investment in government bonds for such infrastructure projects within this year. The finance ministry is expected to set up details like the amount of government or municipal bonds that NPS can commit to invest and how to secure returns for the pension fund.

By Chun Jung-hong

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]