Where does public money go? Who use it?

The government held a cabinet meeting with President Kim Dae-Jung on Tuesday and resolved to raise additional public funds of 40 trillion won and set up a cooperative management committee with civic groups for the administration of public funds.

Moreover, the government would submit to the national assembly a bill enabling the Korea Deposit Insurance Corporation to issue 40 trillion won worth of bonds to additionally raise public funds.

6.1 trillion won would be used to improve financial conditions of 6 target commercial banks that submitted management restoration plans such as Hanvit, Cho Hung, Korea Exchange Bank, Peace Bank, Kwangju and Cheju Bank.

Moreover, 5.9 trillion won would be set aside for offsetting losses incurred by Korea First Bank, 1.2 trillion won for restoring the management of the fisheries cooperative union, and 500 billion won for compensating losses incurred by the Association of livestock cooperation from the merger with the agricultural cooperative.

In addition, 2 trillion won would be injected for normalization of 4 merchant banks such as Yongnam, Haans, Korea and Central Merchant Banking, 3 trillion won for Nara Merchant Banking, and 4 trillion won to repay call loans used during liquidation processes of insolvent merchant banks. Consequently, a total of 9 trillion won would be used to consolidate merchant banks.

Apart from the aforementioned, 5.3 trillion won would be injected for Seoul Guarantee Insurance, 6.9 trillion won for an additional restructuring of insurance, mutual financing companies, and credit unions, 5.2 trillion won for repaying loans to be used for the equity investment in Korea Investment Trust and Daehan Investment Trust, 1 trillion won for the appropriation of allowances by banks, 1.5 trillion won for the additional equity investment in Korea Life Insurance, 1 trillion won for compensating losses to be incurred from the liquidation of Hanarum Merchant Bank at the end of this year, 1.9 trillion won for purchasing Korea development Bank and Industrial Bank of Korea¡¯s equity stakes in Korea Investment Trust and Daehan Investment Trust, and 1.5 trillion won for repaying KDIC loans due next year.

The government would set up a public fund committee in the Ministry of Finance and Economy to be co-managed by a civilian expert in economy and the finance and economic Minster as dual directors. The committee would be temporarily operated until the end of 2002, as long as the government makes the decision to dispose of its equity stakes in financial institutions.

Apart from two directors, the committee would have ten members including the budget minister, the FSC director, presidents of KDIC and KAMCO, directors of management evaluation committee for banks and financial review committee, and a civilian expert in economy.