Korea to foster Seoul, Busan as global financial hubs over 3 years

[Photo by Lee Seung-hwan]

The Korean government has decided to promote Seoul and Busan as new global financial centers over the next three years based on a regionally tailored strategy that considers the characteristics of each city.

The move comes as specialized financial centers have emerged as an alternative as the competitiveness of traditional financial centers such as London and Hong Kong has weakened.

For example, San Francisco and Los Angeles in the U.S. focus on venture capital and fintech companies based on the development of future high-tech industries and human resources, while Paris in France is leading the way in sustainable finance by legislating environmental, social and corporate governance (ESG) investments.

According to the basic plan (2023-2025) the Financial Services Commission shared with the National Assembly on Monday, the government has set four key priorities – financial center internalization, financial innovation for global competition, international financial infrastructure establishment, and capital market globalization.

The plan is expected to be approved as early as this month during the FSC’s regular meeting.

The FSC has been working on various initiatives to create financial centers every three years since 2008, starting with the Northeast Asian Financial Hub Roadmap in 2003.

However, with the reflection that the achievements were insufficient, it has set a direction to focus on the internalization of financial centers for the next three years.

The authority has established a strategy that meets the conditions and characteristics of Yeouido in Seoul, and Munhyeon in Busan.

Yeouido financial district, in Seoul [Photo by Lee Chung-woo]

Yeouido will provide step-by-step support for the discovery and development of fintech companies. Seoul Fintech Lab will support scale-up of growth companies within seven years of establishment, and the second Seoul Fintech Lab will be dedicated to incubating early-stage companies within three years of establishment.

In addition, to cultivate digital finance professionals, there will be a program to offer graduate degree programs and foster practitioners in conjunction with Seoul’s startup base facilities.

To attract global financial firms to Yeouido’s Financial Special Development Zone, tax breaks will be provided and projects to improve the settlement environment for foreign employees will be carried out.

Munhyeon will focus on strengthening its capabilities in digital finance and maritime finance. It will build a financial district data center around Busan International Finance Center (BIFC) and create a Busan-type scale-up mother fund to support startups in Busan, Ulsan, and Gyeongnam.

The BIFC Phase 3 space, to be completed by the end of 2025, will house digital finance companies and expand infrastructure to foster the blockchain industry.

A private-led graduate school for digital finance will also be established to foster fintech and digital finance talent.

In addition to the internalization strategy, the FSC will also focus on attracting foreign financial firms to Korea and supporting domestic financial firms to expand overseas.

The number of foreign financial firms operating in Korea did not change much from five years ago - 165 in 2017 and 167 last year.

The overseas performance of domestic financial firms is also not satisfactory. The share of overseas branches in total assets of domestic banks has only increased slightly from 4 percent in 2010 to 6.7 percent in 2021.