Rep. Ahn Do-geol of the Democratic Party of Korea proposed an amendment to the National Pension Act on Monday to diversify funding methods for the National Pension Service's overseas investments. The bill aims to address exchange rate risks that cannot be managed by relying solely on the domestic foreign exchange market as NPS overseas investments continue to expand.
The amendment proposed by Rep. Ahn, a member of the National Assembly's Strategy and Finance Committee, includes allowing issuance of foreign currency bonds as a medium-to-long-term funding instrument, permitting foreign currency borrowing and activating currency swaps to meet short-term foreign currency demand, and establishing grounds for creating a subsidiary dedicated to stable foreign currency procurement. The bill also clearly stipulates that foreign currency procured without going through the domestic forex market shall be used only for overseas investment purposes, blocking the possibility of funds flowing back into the domestic forex market.
"As of the end of last year, the NPS's asset management scale stood at 1,473 trillion won, of which 867 trillion won has been invested overseas," Rep. Ahn said at a press conference held at the National Assembly Communication Center. "Overseas investment is expected to increase by 60 trillion won annually over the next 10 years."
He added, "If the NPS continues to procure foreign currency needed for overseas investment intensively from the domestic forex market as it does now, the foreign currency demand will put upward pressure on exchange rates and increase investment costs in won terms."
The amendment was drafted following consultations between Rep. Ahn's office, the Ministry of Health and Welfare, and the National Pension Service.
"I expect this amendment will minimize the impact on the domestic forex market by meeting a significant portion of NPS's foreign currency demand for overseas investment from abroad, while also contributing to price management and business stability for exporters and small and medium-sized enterprises," Rep. Ahn said.