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Politician fund announced ahead of Dec. 19 pres. election

Politician fund announced ahead of Dec. 19 pres. election

Posted November. 02, 2012 08:10,   


Candidates for the Dec. 19 presidential election have announced the launch of a “politician fund,” which experts say means more than earning money for an election.

The fund implies the effect of “consistency theory” in which one seeks psychological harmony between one’s attitude and actions. If a voter who has no favorite candidate participates in a politician fund, he or she begins to support the politician.

The frame effect of the fund is also major focus. A case in point is Moon Jae-in, the candidate of the main opposition Democratic United Party who announced the launch of his fund by saying “I’ll owe to the people only.”

Lee Jang-hyeok, a business administration professor at Korea University in Seoul, said, “(What Moon said makes) voters believe other candidates who do not launch a politician fund finance their campaigns with black money.”

A politician fund is hard to define from the perspective of a product for investment. The Moon Jae-in Fund, which raised 20 billion won (18.3 million U.S. dollars), recently promised investors a return of 3.09 percent per year based on the interest rate of certificates of deposit.

Experts say in unison, however, that a politician fund is not a mutual fund that makes money by investing in stocks or bonds after raising money. Kim So-yeong, an economics professor at Seoul National University, said, “Politician funds in structure are very close to bonds issued by a blue-chip company and draw a comparison with a financial investment product.”

A politician fund is not attractive for investment. According to the Bank of Korea, a term deposit of less than six months in a bank paid interest of 3.04 percent per year on average as of September this year. Korea Development Bank pays the highest interest rate for deposits among Korean banks with 3.25 percent for a money market deposit account. This is higher than the rate Moon promised. Kim Yeong-ho, head of the private banking department at Hana Bank and an investment advisory expert, said, “It’s not attractive if you consider the interest rate only. But if you’re a supporter, it’s worth the risk.”

There is room for controversy, however. If the interest rate of a politician fund is lower than that of the market, a fund member would automatically donate an amount equal to the market interest rate. In addition, the fund allows the participation of government officials and teachers, and this is tantamount to a donation to a politician.

Yet another problem is that no protection plan such as a deposit insurance system is in place should the candidate fail to reach the rate of set valid votes and the fund falls into junk status.