The South Korea government is preparing amendments to the Korea Investment Corporation Act to enable KIC to invest in domestic won-denominated assets. The legislative changes will establish a separate domestic strategic investment account within KIC by year-end, transforming the institution into a 'Korean-style Temasek' without creating a new sovereign wealth fund. The government is reviewing funding through state-owned enterprise dividends and capital injection, with approximately 600 billion won in seed money required based on current SOE dividend levels. This approach expands KIC's role from purely overseas asset management to include domestic strategic industry investment, supporting advanced industries while maintaining its existing foreign currency operations under a dual-account structure.
KIC Law Amendment Enables Domestic Won-Denominated Investment
According to investment banking industry sources on the 16th, the government is preparing amendments to the Korea Investment Corporation Act to install a separate 'domestic strategic account' within KIC instead of launching an independent Korean sovereign wealth fund. The structure maintains KIC's existing overseas foreign currency asset management function while operating domestic industrial investment capabilities through a separate account.
Under current Article 31, Section 4 of the Korea Investment Corporation Act, KIC must operate assets entrusted by the government, Bank of Korea, and fund management entities as foreign currency-denominated assets abroad. Article 31, Section 5 stipulates that when KIC exceptionally operates won-denominated assets, it must do so stably and neutrally by depositing them in financial institutions or purchasing government bonds.
These provisions will be amended to allow domestic investment. Once the law revision is completed, KIC will secure the legal foundation to establish a domestic strategic account separate from its overseas operations account and proceed with won-denominated asset investment.
Government Reviews 600 Billion Won Funding via SOE Dividends
Funding procurement plans are under concurrent review. The government is examining utilization of state-owned enterprise dividends and government capital injection. While the nominal capital is 20 trillion won, actual cash available for investment is insufficient, making additional government capital injection a key variable determining project success. The seed money fundamentally required for the Korean sovereign wealth fund is approximately 600 billion won based on SOE dividends.
KIC is a public institution that pays government dividends, determining distribution to investors based on net income. According to the cash flow statement in KIC's 2025 Korean annual report, cash outflow through cash dividends last year totaled 113.8 billion won, a 20.6% increase from 94.3 billion won in 2024.
Amid repeated 'tax revenue shortfalls' in recent years, the government has been requesting active dividends from state-owned enterprises and sovereign wealth funds. Dividends collected from 20 of 40 government-invested institutions reached 2.795 trillion won this year, a record high. KIC's dividend payment reached 83.5 billion won. KIC's dividend payout ratio is 80%, second highest after Korea Pipeline Corporation (90%), approximately double the average payout ratio (40.90%) of government-invested institutions.
Investment Implementation Scheduled After Next Year
The market views KIC facing a new turning point if it secures a domestic strategic account. KIC's role expands from overseas asset management institution to domestic strategic industry investment institution. However, actual investment execution is expected to take time. Since considerable time is required for institutional arrangements including law revision, organizational establishment, investment system construction, and operational standard preparation, the first investment is projected to be possible only after next year.
An official from the financial investment industry stated, "For KIC to make domestic investments, there are many challenges to overcome including Korea Investment Corporation Act amendment, securing additional funding, and establishing investment organization. It will take some time before the Korean-style Temasek enters full-scale investment." The official added, "Since KIC will apply the global standards used for overseas investment to domestic investment as well, the level of the domestic capital market is also expected to improve accordingly."
FAQ
What legal changes is KIC preparing for domestic investment?
The government is preparing amendments to Article 31 of the Korea Investment Corporation Act to allow KIC to establish a domestic strategic investment account and invest in won-denominated assets. Current law restricts KIC to operating foreign currency-denominated assets abroad, with limited exceptions for won-denominated assets restricted to stable investments like bank deposits or government bonds. The amendment will enable active domestic strategic industry investment while maintaining KIC's existing overseas operations.
How much funding does KIC need for domestic investment operations?
Approximately 600 billion won in seed money is required based on state-owned enterprise dividend levels. The government is reviewing funding through SOE dividends and government capital injection. KIC paid 83.5 billion won in government dividends this year with an 80% payout ratio, the second highest among government-invested institutions. While KIC's nominal capital is 20 trillion won, actual available cash for investment is insufficient, making additional government funding a critical factor for project success.
