NPS chief-designate says to boost responsible investing in public projects

Former South Korean lawmaker Sung-joo Kim, named as chief executive and chairman of the National Pension Service (NPS) on Nov. 2, stressed the public role of the $500 billion pension scheme and said it would increase socially responsible investment in the country’s public projects such as nursery facilities and rental houses.

The ex-lawmaker of the ruling Democratic Party, 53, also said in a recent interview that he will use his political background to push for an increase in subscriber contributions.

The Ministry of Health and Welfare, overseeing the NPS, picked Kim as head of the pension fund for a three-year term, and requested President Moon Jae-in for final approval on Nov. 2.

“NPS had leant to the role of a trust fund. (I) will strengthen its function as a social fund ... and will increase socially responsible investment,” Kim told the Korean Investors in the interview conducted when he was being speculated as the strongest candidate for the post.

His remarks chimed with President Moon’s campaign pledges that the government will lead the NPS to buy government debt issued to finance public projects, in an effort to boost fiscal spending on welfare.

“NPS had put too much focus on boosting returns through asset management. It is difficult to run the current pension scheme only with money management,” Kim noted.

He meant that generating investment returns only would not further slow down the timeline of the fund’s depletion which is expected to be in 2060, according to the government’s projection in 2013.

Kim called on politicians to put forth efforts to raise the contribution rate that has been set at 9% of the monthly salaries for 30 years.

“Pension is politics. I will start discussion with political circles to change the current system of small contributions, small benefits to bigger contributions, bigger benefits.”

LACK OF EXPERIENCE IN PENSION

His appointment comes as the NPS is preparing to introduce a Stewardship Code, a set of guidelines for institutional investors’ responsible investing, later this year.

Once installed, Kim will select new head of the NPS’ Investment Management department, which requires final approval of welfare minister.

Kim, a native of Jeonju, North Jeolla province where the NPS headquarters is based, had served as a member of the parliamentary committee for health and welfare.

Most recently, he worked as a senior advisor of President Moon’s national policy advisory group and shaped welfare policies.

But because of his political background and lack of experience in pensions, concerns are being raised about his capability as head of the world's No.3 pension fund and whether he will shield the NPS from political influences, or leave it more vulnerable.

Further, given his constituency in Jeonju and strong support for the NPS’ relocation to the city this year, some doubt whether Kim will be able to make a fair decision in case of a conflict of interest between the NPS and the city, according to the Chosun Ilbo newspaper on Nov. 3, citing an unnamed asset management source as saying.

Currently, NPS holds around 140 billion won ($126 million) in welfare investment and the amount could soar to as much as 2 trillion won ($1.8 billion), if it ramps up investment in public projects, the Chosun Ilbo added.

By Ilgyu Kim

Black0419@hankyung.com