Seoul’s slow but enduring push to be Asia’s premier financial hub

It is a long-cherished dream of Seoul, the capital city of South Korea, to present itself to the world as Asia’s prime financial hub, but the process to realize this vision has been slow.

Now the city with a population of nearly 10 million, about one-fifth the entire population of Asia’s fourth-largest economy, is scrambling to lure foreign investors and businesses to its financial district Yeouido with a slew of foreigner-friendly living and business incentives in hopes of rivaling Asia’s leading financial hubs Hong Kong and Singapore.

The Youngdeungpo borough in March got the nod from the Seoul city government for its plan to promote Seoul’s financial district Yeouido as a special financial zone.

The borough oversees Yeouido, already home to Korea’s financial watchdog Financial Supervisory Service and 28 large securities and financial investment companies.

The five-year plan is earmarked with a total investment of 59.4 billion won ($44.4 million), of which 25 billion won will be spent to build a digital financial center slated to open in 2027 and 18 billion won to improve the living infrastructure.

ENGLISH-FRIENDLY, BUT HIGH TAXES

To create a better living environment for foreign workers in the district, the borough will provide medical consultation forms, real estate lease documents, information signboards for tourists and restaurant menus in English, with plans for most of these to be available by the end of the year.

The move comes as the high language barrier is blamed for making Seoul less attractive as an international financial center than Hong Kong and Singapore where English has been adopted as an official language.

But Seoul faces a host of other hurdles, including a higher tax burden than other financial centers in Asia.

To court foreign financial companies and investors, the capital city has been seeking to revise the tax law to grant greater tax benefits to foreign companies setting up financial businesses in Yeouido.

Seoul has proposed the tax law revision as part of its efforts to realize the capital’s vision to transform Yeouido into an international financial hub, unveiled during Seoul Mayor Oh Se-hoon’s visit to London in March.

The National Assembly is currently considering a bill revision to exempt firms operating in Yeouido from all income and corporate taxes for three years and reduce the taxes by half for an additional two years.

The discussion is, however, stalled because some oppose the revision, citing the growing regional imbalance in the country.

MORE CHALLENGES

Seoul’s bid to become a major international financial center date back to the early 2000s when former South Korean President Roh Moo-hyun promoted a vision of the capital as North Asia’s business and financial hub.

Yeouido was designated as a financial hub by the Financial Services Commission in 2009, which has led local financial firms to nest in the district now crowded with fancy skyscrapers. 

But it has not succeeded in bringing in more foreign financial firms as Seoul faces a host of obstacles on top of the language and tax barriers.

Korean businesses grapple with its rigid labor market and a slew of regulations that deter foreign businesses.

It remains to be seen whether Seoul’s renewed push to rival Hong Kong and Singapore as Asia’s financial center will succeed.

Write to Sang-Eun Lee at selee@hankyung.com

Sookyung Seo edited this article.