Improperly-Run National Pension of 90 Trillion Won

The national pension fund, whose operation asset will pass 100 trillion won in 2003, has a lot of problem ranging from the fund operation to the supervising system.

Since the participant democratic system was employed in the decision-making process regarding the investment of a huge amount of national fund, it has been hard even to convene the fund operation committee comprised of 21 committee members. And because of the excessive worries about the loss of the original fund, the committee has inclined toward the stable investment strategies. The National Pension Corporation (NPC) requested to purchase the 70 percent of the national bonds which will be issued next year. Because of this, it is forecasted that there will be much distortion in the financial market such as the tumble of bond market.

▽ Improperly Operated Supervision System

The national pension law stipulates that the national pension fund operation committee (chairperson Minister of Health and Welfare) holds a meeting four times yearly. Among 21 committee members, there are 5 vice-ministers of the governmental departments. And the employer group and the labor group dispatch three representatives respectively, and there are also 6 representatives from regional pension member group. The problem is that the agreement can hardly be obtained in the meeting because the committee consists of a lot of non-experts.

The fund has been operated by the three-step system such as △ the policy decision-making of the Minister of Health and Welfare, △ the consultation and agreement of the national pension fund operation committee, △ the investment management of the fund operation head office. However, because the committee is not the permanent organization, it lacks the responsibility and the professionalism.

▽ Ill-Organized Fund Management

The absence of the long-term fund management policy is also a big problem. The investment strategies have been set up annually. But the too conservative portfolio formations have brought about much conflict within the governmental departments. The NPC announced the next year`s investment plans to purchase the national bonds of total 17 trillion won, combining 10 trillion won from the public sector and 7 trillion won from the financial sector. The amount is equivalent to the 70 percent of the total national bonds to be issued next year (25 trillion won).

An official of the Ministry of Finance and Economy said, ``The scale of the national pension will reach 90 trillion won next year, and it will increase up to 250 trillion won in 2010. But the national bonds will be issued annually in 25 trillion won level. Thus, the fund management will face the difficult phase from 2003.``

yhchoi65@donga.com