What Seoul has to offer as financial hub?
Seoul ranked 25th out of 110 cities in the Global Financial Centers Index
/NOVOSTIVL/ Seoul may not share all of the elements of competitiveness financial centers such as Hong Kong or Singapore possess. Downsides inevitably exist, such as strong labor regulations and militant unions.
Yet the government is still seeking to attract foreign firms based on the advantages the country and capital city are able to offer.
The first factor firms will consider is whether there is sufficient business opportunity in the market they are considering entering.
Demand for asset management, financing
Prudential Life Insurance Company's recent departure from the Korean market and talks of more insurers pulling out has left foreign entities questioning business opportunities here.
The government has been promoting the country's public pension fund, the National Pension Service (NPS), and the demand for managing its assets. The NPS is the third largest public pension fund in the world with over 700 trillion won ($600 billion) in assets under management.
"Korea's market for asset management services has grown rapidly over the years, and Korea has also seen an influx of foreign entities in the sector," an official of the Financial Supervisory Service (FSS) heading the international affairs department said.
"The portion of the market here that foreign firms occupy is still small, which illustrates that there are still ample business opportunities for them," the official said.
Korea also has a lot to offer as one of the world's largest economies with fast-growing new industries, the official said.
"The rapidly-growing new industries indicate that new demand for financing continues to emerge," the official said.
"This means Korean businesses in these sectors are in need of a greater scale of financing and more diverse means and entities to provide such financing."
Dynamic fintech industry
Korea also boasts an advanced IT infrastructure, and a dynamic fintech industry, which could create synergy with foreign firms seeking to come here.
The Seoul Metropolitan Government (SMG) last October opened a fintech lab on Yeouido, which currently houses 70 startups ― 46 local and 24 foreign entities. They have collectively attracted over 30 billion won in investments, and made 27.6 billion won in sales as of the end of 2019.
"Korea has been acknowledged as an IT testbed in Asia - this is based on the development and penetration rate of mobile-based services," an official of the SMG's economic policy team said, referring to the success of local digital lender KakaoBank.
"Many foreign startups want to test their mobile-based services here first and then take them to other countries, as is illustrated by the foreign firms stationed at Seoul Fintech Lab."
The lab hosts startups from various countries including Singapore, the U.S., Canada and Hong Kong.
Among the 70 firms, 17 have also made progress in overseas expansion - either by setting up an overseas office or subsidiary, or signing agreements to make inroads into overseas markets. The countries they are entering include the U.S., Japan, Singapore and Vietnam.
The local government has stated it would increase the lab's scale to be able to accommodate up to 100 firms.
This is part of the SMG's plans to create a fintech hub on Yeouido. A graduate school on digital finance opened in the latter half of this year, offering related MBA courses.
The local government is seeking to foster experts in the sector to enhance Korea's competitiveness as a fintech center.
Effective COVID-19 containment, gov't subsidies
Finally, Korea has become recognized for its effective containment of the COVID-19 pandemic, based on a number of factors including transparency, robust screening and quarantine, as well as testing.
Governments around the world have drawn their attention to Korea's methods, as the country has managed to control the spread of the virus without taking draconian measures. This has minimized the economic fallout.
In the most recent projections by the OECD, Korea's GDP is forecast to contract by only 1 percent. This ranks the country as the second-best performer among major economies, after China.
The country's IT infrastructure is also attributed to as a key factor in its effective tracing, testing and treatment of COVID-19.
"We hear from offices around the world that Korea has shown a world-class response to COVID-19," the head of a foreign bank said. "Also, the consensus among foreign firms here is that Korea has become transparent in financial statements and that the government has made efforts to ease regulations, such as on the firewall."
SMG's official also said local government subsidies for foreign entities could be an additional attractive factor.
Seoul continues to accept applications for rent subsidies available for foreign financial firms. The government is offering up to 70 percent in subsidies to rent office space and pay utility fees at the International Finance Center on Yeouido, for up to five years.
One Chinese venture capital firm is known to be preparing to come to the IFC.
Yeouido is home to 640 local and foreign financial institutions.
Seoul ranked 25th out of 110 cities in the Global Financial Centers Index published by the London-based think tank Z/Yen on Friday. This is up from 33rd out of 108 cities in the index published in March. The index evaluates the cities on business environment, human capital, infrastructure, financial sector development and reputation through surveys.
Currently, 163 foreign financial firms are operating here, according to the FSS.
Korea hosted 163 foreign financial firms in 2018, 168 in 2016 and 164 in 2014.
The FSS official said the number of foreign financial firms appears to have fallen because a number of entities integrated their banking and brokerage units here, such as UBS.
Source: Korea Times