Seoul applies for Hong Kong crown as Asia’s financial center | Business and Economy
Seoul, South Korea – When Alex Short was offered rent-free office space to locate his fintech startup in Seoul’s financial district, he seized the opportunity.
For Short, whose company PerformID helps online shoppers claim cashback and other benefits, South Korea felt like an ideal location for his business due to its skilled workforce and cutting-edge technology.
“I think it makes sense to build a team there even if we work with offshore banks,” Short said from his home in Australia. “This means that employees working in Seoul have a place to work. We plan to expand this office significantly in the coming months.”
“I think the Korean market, especially the digital, is way ahead of what it is in Australia and the US,” added Short, whose startup operates out of a wood-lined workspace in Yeouido in Seoul run by the Seoul Fintech Lab. , which is an acceleration program funded by the Seoul Metropolitan Government since July.
PerformID’s bet on Seoul comes as the South Korean capital makes a renewed push to rival Hong Kong and Singapore as a major financial hub in Asia.
As part of its drive to become Asia’s “financial city,” the city government earlier this month announced plans to spend 241.8 billion won ($204.4 million) over the next five years on incentives such as employment subsidies and rent subsidies to attract businesses from abroad. Seoul Mayor Oh Se-hoon has pledged to turn the city into one of the world’s five largest financial centers by 2030, aiming to triple foreign direct investment to $30 billion and attract at least 100 foreign financial institutions.
Seoul’s ambitions to become a major financial center date back to the early 2000s, when former South Korean President Roh Moo-hyun promoted a vision of the capital as a business and finance hub in Northeast Asia.
But the city’s aspirations have recently gained new momentum amid questions about the future of Hong Kong, the region’s main commercial and financial hub, after the introduction of a strict national security law and a strict “zero-Covid” policy that forces most arrivals to undergo a 21-day hotel quarantine.
“It was an idea before the global financial crisis in 2008,” said Kim Hansoo, research fellow at the Korea Capital Market Institute. “The Korean government saw it as a future source of growth since the Korean manufacturing sector was challenged by other developing countries.”
However, Seoul faces a host of obstacles in the way of realizing its vision. Compared to Hong Kong or Singapore, South Korea suffers from a rigid labor market, onerous regulations, relatively high taxes, and a lack of spoken English.
“Korea still has a foreign exchange control policy, and there is no other major financial city or country that controls its foreign exchange,” Kim said. Tax levels in Hong Kong and Singapore are objectively better. Korea is on par with big cities like New York or Sydney.”
In the latest index of global financial centers compiled by Z/Yen Group, Seoul ranked 13th, up three places from last year, but behind cities including Hong Kong, Singapore, London, New York, Paris, Shanghai and Beijing.
Yang Jeong, head of support at Financial Hub Korea, a department of South Korea’s financial regulator tasked with promoting the city, said Seoul hopes to capitalize on the uncertainty in traditional financial centers like Hong Kong.
“There are other hubs going through turmoil right now, take Hong Kong and China,” Yang said. “Some companies are considering leaving.”
Yang said the city has “bright prospects” and counted its innovation prowess among its greatest strengths, particularly in the marriage of traditional finance and technology, known as fintech.
“We are in the middle of our fifth plan to take care of the financial sector. “We focus on asset management and fintech, and we put a lot of effort into fintech,” Yang said.
About 25 percent of the plan is probably focused on fintech, which is one of the main areas we want to nurture. The concept of financial position will change.”
“The best of both worlds”
Others doubt that Seoul has a good chance of competing with Hong Kong.
Andrew Collier, managing director of research firm Orient Capital Research, said Hong Kong offers “the best of both worlds” with its proximity to China and a legal system inherited from Britain.
Even with the introduction of the controversial National Security Act last year, Collier said banks and financial institutions will stick to the city as long as contracts continue to operate.
“You don’t even need the rule of law in Hong Kong, you just need the law of contracts,” Collier said. “I don’t think Seoul has much chance of competing for a piece of this business.”
In short, Seoul’s future looks promising – not least because of its position at the forefront of technologies including smartphones and 5G networks.
The oval-shaped glass building that houses the PerformID recently added two additional floors of office space to allow the Seoul Fintech Lab to accommodate more startups.
Of just 14 startups when launched in 2018, the incubator, which helps companies find the right lawyers, raise funds and provide office space, supports nearly 100 companies from 10 countries. Startups span a range of traditional and emerging fields ranging from asset management and financial investment to crowdfunding, in-house technology and blockchain.
“When you look at what is happening globally and with the convergence of technology and finance, I think it makes sense that they are positioned as the hub in Asia for that,” Short said.