The Ministry of Land, Infrastructure and Transport will establish a global plant, construction, and smart city (PIS) Phase 2 fund worth 1.1 trillion won to intensify financial support for overseas investment and development projects.
According to the Ministry of Land, Infrastructure and Transport on 4th, the establishment of the PIS Phase 2 fund was completed last month. The PIS fund is a public-private joint overseas construction policy fund aimed at supporting domestic corporations' overseas contracts and exports. It will invest in high-value-added investment and development projects in overseas construction fields such as plants, infrastructure, and urban development.
This fund was established with a total of 1.1 trillion won, with the government and public institutions providing 440 billion won as a master fund, matched by 660 billion won from the private sector. It will invest in overseas investment and development projects through a blind fund (700 billion won) and a project fund (400 billion won).
The blind fund gathers investors to establish a fund of a certain size before discovering and investing in projects. The project fund, on the other hand, recruits investors after project identification and simultaneously decides on investments.
The blind fund was created by matching the 3.18 billion won raised from private investments with the 440 billion won of the master fund established in February. The remaining 1.22 billion won of the master fund will be used to establish a project fund (400 billion won) matched with the 2.78 billion won of private investments that will be sequentially raised for each project.
The blind fund operates as follows: ▲ Strengthening Orders Fund (250 billion won) ▲ Vitality Orders Fund (260 billion won) ▲ Overseas Advanced Fund (190 billion won). Investment methods include equity investment, loans, and revenue securities investment.
The Strengthening Orders Fund primarily invests in transportation and urban development projects involving domestic infrastructure public corporations in countries with a credit rating of middle-lower (BB-) or higher, such as Vietnam and Turkey.
The Vitality Orders Fund focuses on investing in projects that support overseas contracts and exports for Korean corporations in countries with a credit rating of middle (BBB-) or higher, such as Indonesia and the Philippines.
The Overseas Advanced Fund invests in projects that Korean corporations newly participate in in countries with a credit rating of upper-middle (BBB+) or higher, such as the United States, the United Kingdom, and Saudi Arabia. At the same time, it has invested in existing assets to ensure stable revenue for the master fund.
The Ministry of Land, Infrastructure and Transport will operate the project fund targeting all countries. It allows for rapid financial support for investment and development projects in which Korean corporations participate by simultaneously establishing funds and investing in identified individual projects.
The PIS Phase 1 fund (1.5 trillion won) completed investments in 29 projects across 13 countries by June this year. This fund is credited with facilitating approximately $2.2 billion (about 3.1 trillion won) in overseas contracts and exports, marking a turning point for contract-based projects to transition into high-value-added investment and development projects.
Nam Young-woo, head of the Construction Policy Division at the Ministry of Land, Infrastructure and Transport, noted, "Last year we achieved $1 trillion in overseas construction contracts, and the key driver to lead into the 'era of $2 trillion in overseas construction contracts' will be overseas investment and development projects." He added, "To achieve this, securing financial competitiveness is essential, so the Phase 2 fund, following Phase 1, will continue to play a leading role in our corporations' ventures into overseas investment and development projects."