KOREA - Funds managed by Korea's National Pension Fund Corporation, which currently equal 14% of GDP, may rise to equal 100%, says a new country report by the Organisation for Economic Cooperation and Development.
The National Pension Scheme added the self-employed in urban areas in 1999.
However, the Ministry of Planning and Budget argues that the social security surplus should not be counted in the budget balance since it largely represents the creation of a reserve to meet the public pension system’s future liabilities, which will increase sharply as a result of rapid population ageing.
Population ageing is projected to be exceptionally rapid in Korea, boosting the demand for greater spending on pensions and health.
But the small role of domestic pension funds and other institutional investors in the Korean stock market contributes to its volatility. For example, besides the government, the other players in the venture capital investment sector are large companies, which own 11% of the equity of VCFs.
The roles of institutional investors, such as pension funds and business angels, are minor.
However, this proportion may increase given the recent decision to abolish the requirement that foreign investors obtain approval for investment in venture business and to treat it instead as regular direct investment.
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