Chairman pursues transparent, 'blue ocean' strategies By 2010, the Korea Credit Guarantee Fund (KCGF) will achieve its longcherished dream of self-supporting management by generating net profits, a top manager of the state-run fund, said recently. "Through transparent and blue ocean strategies, we will realize net profits from 2010 and secure a self-supporting management system without the government's contribution," said Kim Gyu-bok, chairman of KCGF. In an interview with the Korea IT Times, Kim said, "KCGF will celebrate the 30th anniversary of its foundation next year. Based on our past 30-year-long experience, we have worked out a management reform program to build a foundation for self-supporting management." "Under the program, we have set the "Realization of Sustainable Hope Fund" as the vision of KCGF until 2008," said the top manager. To build the foundation for selfsupporting management, KCGF plans to reduce the guarantee accident rate to a 4 percent level until 2008 and remove factors causing high costs and low efficiency, as well as pursuing proper harmony of public benefit and commercialism, he said. Firstly, KCGF will actively push ahead with the transparency strategy, which calls for making public major managerial information and activating two-way communication. Secondly, it will make a strong push for a blue ocean strategy by strengthening ebusiness power and developing monopolistic guarantee products, including CBO guarantee. Thirdly, KCGF will adopt a creative destruction strategy, which calls for drastically reorganizing manpower and organization causing high expenses and low efficiency and creating tools suitable for the future, said the chairman. Also, it has established a marketfriendly strategy, which seeks strict application of market principles to the credit guarantee system and proper harmony of public benefit and commercialism. "If we succeed in attaining the managerial targets, including the reduction in the guarantee accident rate to a 4 percent level by 2008, KCGF will completely escape from the liquidity shortage problem, preparing a base for its second inauguration," said Kim. "From 2010, we can produce net profits under the program and manage guarantee business stably without the government's contribution, while exploring possibilities of advancing into new business projects," he said. Asked about the reform plan of the government and KCGF on the credit guarantee system, he said, "Some analysts pointed out that credit guarantees were extended excessively, so it hampers the development of the financial market on a long-term basis. And some guarantees were extended to marginal enterprises, resulting in low efficiency in fund distribution. "To solve these problems, KCGF has mapped out a reform plan for implementation from early next year," he said. First of all, KCGF plans to reduce guarantee assistance to financially healthy enterprises, marginal companies, and those using the KCGF's guarantee for a long period. With the funds coming from the guarantee reduction, KCGF will expand financial support to reform-oriented enterprises with high growth potential and reform-minded venture start-ups based on the principle of selection and concentration. Next, it will encourage private financial institutions to strengthen their screening function on credit loans by lowering the partial guarantee ratio and adjusting the contribution ratio of financial institutions. Also, it plans to adjust the rate of credit guarantee fee shouldered by guarantee companies and seek ways of easing the financial burden of the government. In the process of reforming the guarantee system, however, such plans will be carried out in such a way as to minimize the impact on the financial market for small and medium-sized companies. Noting that KCGF recently received contribution from SKT, he said, "It is the first time for the fund to receive a contribution from a large enterprise in its 30-year history. It has a great meaning in which large and smaller companies can jointly seek cooperation for mutual survival." Large enterprises can improve their image in the society and bolster competitiveness through sound fostering of small-sized business partners, he said. On the other hand, small business partners can secure funds through new guarantee and KCGF is able to diversify its window to mobilize guarantee funds through large companies, other than the government or financial institutions. On the occasion of the SKT's contribution, KCGF will stage active IR activities to attract more contributions from large enterprises and business organizations having keen interest in cooperative activities with small and medium-sized enterprises (SMEs). Related to this, KCGF requested the Ministry of Finance and Economy last August to revise the regulation concerning implementation of the corporate tax law in such a way as to grant tax favors to large companies making contribution to KCGF. If this regulation is revised, large enterprises' contribution will be boosted, he added. On ways for SMEs to enhance global competitiveness, Kim said that smaller companies should exert thorough reform efforts to survive the global competition system characterized by the free trade system and revolution of information & communication and logistics. He said that owners of SMEs picked "core technology power' as the most important factor to improve their competitiveness in a survey of Small and Medium Business Administration. "In reality, however, they did not carry out their will to bolster technology power. In 2003, a mere 19.6 percent of small and medium-sized companies made investment for technology development, and the ratio of their investment to total sales came to just 0.89 percent,' he said. Kim also said that owners of SMEs should possess entrepreneurship. SMEs create employment and value added, accelerate technology reform, and back up the industrial competitive power of the national economy. Accordingly, they have to possess selfconceit as entrepreneurs leading the national economy and bolster ability to stand on their own feet. They are required to have entrepreneurship, which calls for actively coping with environmental changes and strengthening global competitiveness. On the supply results of credit guarantee, Kim said that the credit guarantees extended by KCGF are expected to reach 30.3 trillion won this year, exceeding the year's earlier target of 30 trillion won. Considering such difficulties as high oil prices, sluggish domestic consumption and business polarization facing SMEs, KCGF extended enough credit guarantees to smaller firm this year to ease their financial burden, he said. As for the basic principle for guarantee management in 2006, the chairman said, "KCGF has placed emphasis on expansion of growth foundation of reform-minded enterprises and strengthening of effectiveness of the guarantee business. "We will supply credit guarantees at a proper level and strengthen the guarantee assistance for reform-minded enterprises next year as a means of enhancing the effectiveness of the guarantee policy," he said. "At the same time, KCGF will continuously push ahead with transparent, ethical and customer-oriented management for the second inauguration," he added. KCGF was established in June 1976 under the Credit Guarantee Fund Law to establish sound credit order through effective management of credit information and contribute to the development of national economy by extending credit guarantees to enterprises, which lack collateral. According to an appraisal report on the economic effects of KCGF released by Korea Institute of Public Finance, KCGF received an annual average of 550 billion won in contributions during the 2000~2004 period and brought about 980 billion won in tax revenue increasing effects, 8.8 trillion won in production ripple effects, creation of jobs for 410,000 and 4.5 trillion won in value added creation effects.