Seoul bids for Hong Kong to become Asia’s financial center | Business and Economics

Seoul, Korea– When Alex Short obtained rent-free office space to set up his fintech startup in Seoul’s financial district, he seized this opportunity.

For Short’s startup, PerformID, which helps online shoppers get cash back and other benefits, due to its highly skilled workforce and cutting-edge technology, South Korea feels like an ideal location for his business.

“I think even if we do work with overseas banks, it makes sense to build a team there,” Schott said from his home in Australia. “This means that the two employees in Seoul have a place to work. We plan to significantly expand the size of the office in the next few months.”

“I think the Korean market, especially the digital market, is far ahead of Australia and the United States,” Short added, his startup operating in a wooden work area in Seoul’s Yeouido district where the Seoul Fintech Lab operates. , An accelerator program funded by the Seoul Metropolitan Government since July.

While PerformID is betting on Seoul, the South Korean capital once again promotes competition with Hong Kong and Singapore to become Asia’s premier financial center.

As part of its efforts to become the “Asian Financial City,” the city government announced earlier this month that it plans to spend 241.8 billion won (US$204.4 million) in incentives such as employment subsidies and rent support over the next five years to attract overseas companies. Seoul Mayor Oh Se-hoon pledged to transform the city into one of the world’s top five financial centers by 2030, with the goal of doubling foreign direct investment to US$30 billion and attracting at least 100 foreign financial institutions.

Seoul’s ambition to become a major financial center can be traced back to the early 2000s, when former South Korean President Roh Moo-hyun proposed the vision of turning the capital into a commercial and financial center in Northeast Asia.

However, due to doubts about the future of the major commercial and financial centers in this region of Hong Kong, the introduction of Strict national security laws and strict “Zero Covid” policy have forced most entrants to undergo a 21-day hotel quarantine.

“This was an idea before the 2008 global financial crisis,” said Kim Hansoo, a researcher at the Korea Capital Market Research Institute, a think tank. “The Korean government sees it as a source of future growth, because South Korean manufacturing is being challenged by other developing countries.”

Yeouido district is a zero place for Seoul to attract foreign companies’ efforts [File: Woohae Cho/ Reuters]

However, Seoul faces many obstacles in realizing its vision. Compared with Hong Kong or Singapore, South Korea faces a strict labor market, cumbersome regulations, relatively high taxes and a lack of spoken English.

“South Korea still has foreign exchange control policies, and no other major financial cities or countries control their foreign exchange,” Kim said. “Hong Kong and Singapore have objectively better tax levels. South Korea is on par with major cities such as New York or Sydney.”

In the latest global financial center index compiled by Z/Yen Group, Seoul ranks 13th, up three places from last year, but lags behind cities such as Hong Kong, Singapore, London, New York, Paris, Shanghai and Beijing.

The South Korean financial regulator responsible for promoting the city’s financial center, Yang Jiying, the support director of the South Korean Financial Center, said that Seoul hopes to take advantage of the uncertainty of traditional financial centers such as Hong Kong.

“Other hubs are currently experiencing turmoil, taking Hong Kong and China as examples,” Yang said. “Some companies are considering leaving.”

Yang said the city has “bright prospects” and regards its strength in innovation as one of its greatest strengths, especially in the combination of traditional finance and technology (ie, financial technology).

“We are in the fifth plan to cultivate the financial industry. We focus on asset management and financial technology, and we have invested a lot of energy in financial technology,” Yang said.

“Perhaps about 25% of the plan is focused on financial technology, which is one of the main areas we want to cultivate. The concept of a financial center will change.”

‘Best of both worlds’

Others wonder how much chance Seoul has to compete with Hong Kong.

Andrew Collier, managing director of research firm Orient Capital Research, said that Hong Kong is close to China and has a legal system inherited by the UK, so it offers the “best of both worlds”.

Although a controversial national security law was introduced last year, Collier said that as long as the contract continues to be maintained, banks and financial institutions will insist on using the city.

“In Hong Kong, you don’t even need the rule of law, you only need contract law,” Collier said. “I don’t think Seoul has a big chance to get a share of the pie through competition.”

In short, Seoul’s future looks promising—especially because it is at the forefront of technologies such as smartphones and 5G.

The oval glass building where PerformID is located has recently added two floors of office space, allowing the Seoul Fintech Lab to accommodate more startups.

When the incubator was launched in 2018, there were only 14 startups, helping companies find suitable lawyers, fundraising and providing office space. It now supports nearly 100 companies from 10 countries. These startups span a range of traditional and emerging fields, from asset management and financial investment to crowdfunding, insurance technology and blockchain.

“When you look at what is happening globally and the integration between technology and finance, I think it is logical that they are positioned as the hub of Asia,” Schott said.

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