Not a financial hub yet? Go overseas
AN HYO-SEONGThe author is a stock market news reporter of the JoongAng Ilbo.
Every three years, the government sets up a basic plan it has been pushing for 20 years. But there has not been a substantial outcome. Every time, similar measures are presented. Should this policy be scrapped? Or should there be more drastic measures?
There are many tasks for Korea, but this time, I want to discuss the financial hub policy that started in the Roh Moo-hyun administration and continues in the Yoon Seok Yeol administration.
It has been two decades since the government presented the “Northeast Asia Financial Hub Roadmap” in 2003. It is true that various infrastructures have been expanded, but the problem is that there are no specific results.
Global financial firms’ entry into Korea have been stagnant for a long time. At a recent meeting on the financial hub, Kim Joo-hyun, chairman of the Financial Services Commission (FSC), confessed, “It is still difficult to say that the originally planned financial hub has been established.”
Becoming a financial hub was a challenging task from the beginning if you compare Seoul and Busan to Singapore, which established itself as an Asian financial center following Hong Kong. There is hardly any element that Seoul and Busan can say it is ahead of Singapore in for requirements for a financial hub, such as abundant business opportunities and capital market-friendly laws.
The same is true for corporate and income taxes. Singapore provides tax haven-level benefits, such as exempting various taxes on financial capital. As a latecomer, Korea becoming a financial hub is an unlikely dream unless the country provides similar tax benefits.
But it is hard for the government to offer drastic tax benefits like Singapore. Korea has other important areas that require more urgent assistance than the financial sector, such as semiconductors.
As the dream to become a global financial hub has been sluggish, the policy has turned into a game of moving financial institutions to cities other than Seoul. Busan is demanding additional relocation of policy banks such as the Export-Import Bank of Korea following the Korea Development Bank.
In addition, many cities drool over the Korea Investment Corporation. It is a difficult fight even if they are together, but as the argument to spread them around for balanced regional development gains more support, the dream of a financial hub is getting more distant.
Within this month, the FSC will announce the “6th Basic Plan for Financial Hub” to outline government support for digital financing, improving regulation and systems, and boosting overseas expansion of Korean financial companies.
It is not much different from the fifth basic plan announced three years ago. If there is any change, it has put more weight on domestic financial firms’ overseas expansion. At the request of President Yoon Suk Yeol, even the head of financial authorities comes forward to do overseas sales. Financial companies are also eager to expand abroad.
It would not be a bad idea to count on the performance of major Korean financial companies if Korea cannot attain drastic regulatory innovation, including tax reform, or cannot attract financial companies. As K-pop and K-dramas made Korea a cultural hub, a BTS may emerge from the financial industry.
with the Korea JoongAng Daily
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