The Ministry of Strategy and Finance said Sunday that Korea would increase its current 0.221 percent stake in an investment unit of the Inter-American Development Bank to 4 percent.

This will make Korea the seventh-largest global shareholder, and the second-largest nonregional shareholder after China at 4.5 percent, of NewCo., a soon-to-be launched development finance institution under the Washington-based IDB for private sectors. 

“We could secure larger stakes than we had expected, thanks to the support from various member countries, including those of the Latin America and Caribbean, the U.S. and Europe,” South Korean Ministry said in a press release. Starting next year, it will contribute a total of $125 million as paid-in capital over the next seven years, the ministry added.

Korea’s share expansion, decided at a board meeting on Dec. 1 of IDB, resulted from a fierce competition with China, Spain and Canada.

NewCo is set to launch on Jan. 1, 2016, to promote economic and social development in Latin America and the Caribbean, or LAC, through the private sector. With 48 member countries and $2.73 billion in initial capital, the development financer aims to additionally collect $2.03 billion, which includes $725 million of capital transfer from the Inter-American Investment Corporation and $1.31 billion contributed by IIC member countries.

Following the stake expansion, the Korean government expects to secure NewCo’s board positions, which is given in proportion to the members’ level of contribution. The government said it would shortly begin discussing the matter with the IDB members.

The South Korean government expects that gaining a larger voice within NewCo will increase Korea’s influence in the IDB. In present Korea holds only 0.003 percent of IDB stakes, 47th out of the 48 members of the development finance organization, with little weight in IDB’s decision making.

With NewCo’s goal to expand join investment projects with private entities, the Korean Finance Ministry seeks to strengthen cooperative ties with NewCo to stimulate Korea exporters’ inroads to Latin America and the Caribbean, or the LAC region.

Korea’s international trade and investment in the LAC has increased rapidly since the country joined the IDB in March 2005. Trade volume increased from $22 billion in 2005 to $54.2 billion in 2014. During the same period, Korean investment in the LAC soared $600 million to $3.5 billion.

By Chung Joo-won (joowonc@heraldcorp.com)