Seoul bids for Hong Kong’s crown as Asia’s financial hub 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 jumped at the chance.

For short, whose startup PerformID helps online shoppers claim cashback and other benefits, South Korea felt like the perfect location for its business due to its highly skilled workforce and cutting-edge technology.

“I think it makes sense to build a team there even if we work with foreign banks,” Short said from his home in Australia. “This meant that the two employees based in Seoul had a place to work. We plan to significantly expand that office in the coming months.”

“I think the Korean market, especially digital, is far ahead compared to Australia and the US,” said Short, whose startup operates out of a wood-lined workspace run by the Seoul Fintech Lab in Seoul’s Yeoido district. , an accelerator 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 Asia’s major financial hub.

As part of a campaign to become the “Financial City of Asia”, the city government earlier this month spent $241.8 billion ($204.4 billion) over the next five years on incentives such as employment subsidies and rental support to attract firms from abroad. m) announced spending plans. Seoul Mayor Oh Se-hoon has pledged to transform the city into one of the world’s top five financial centers by 2030, aiming to triple foreign direct investment to $30bn and woo at least 100 foreign financial institutions .

Seoul’s ambition to become a major financial center dates back to the early 2000s, when former South Korean President Roh Moo-hyun promoted the capital’s vision as a business and finance center for Northeast Asia.

But recently the city’s aspirations have gained new momentum amid questions over the future of Hong Kong, the region’s main business and financial hub. A stringent 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, a research fellow at the think-tank Korea Capital Market Institute. “The Korean government saw this as a source of future growth as the Korean manufacturing sector was challenged by other developing countries.”

Yeoido district is ground zero of Seoul’s efforts to attract foreign firms [File: Woohae Cho/ Reuters]

However, Seoul faces many obstacles in realizing its vision. When compared to Hong Kong or Singapore, South Korea suffers from a rigid labor market, cumbersome regulations, relatively high taxes, and a lack of spoken English.

“Korea still has a foreign exchange control policy, no other major financial city or country controls their foreign exchange,” Kim said. “Tax levels in Hong Kong and Singapore are objectively better. Korea is on par with major cities like New York or Sydney.

In the latest Global Financial Centers Index compiled by the Z/Yen Group, Seoul is 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 such as Hong Kong.

“Other hubs are going through turbulence at the moment, take Hong Kong and China,” Yang said. “Some companies are looking to quit.”

Yang said the city has “bright prospects” and counts its power in innovation 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 nurture the financial sector. We are focused on asset management and fintech, and we have put a lot of effort into fintech,” Yang said.

“Maybe around 25 percent of the plan is focused on fintech, this is one of the key areas we want to nurture. The concept of financial hubs will change.”

‘best of both worlds’

Others suspect that Seoul has more chances to compete with Hong Kong.

Andrew Collier, managing director of research firm Orient Capital Research, said Hong Kong offered the “best of both worlds” with its proximity to China and a British-inherited legal system.

Even with the introduction of the controversial national security law last year, Collier said banks and financial institutions would remain with the city as long as the contracts were upheld.

“You don’t even need the rule of law in Hong Kong, you only need contract law,” Collier said. “I don’t think Seoul has much of a chance to compete to get a piece of that action.”

For short, Seoul’s future looks promising – not least because of its position at the forefront of technologies, including smartphones and 5G.

The oval-shaped glass building that houses Performid recently added two additional floors of office space to allow the Seoul Fintech Lab to establish more startups.

From just 14 startups at the time of its launch in 2018, the incubator, which helps firms find the right lawyers, fundraise and provide office space, now supports nearly 100 firms in 10 countries. Startups span a range of traditional and emerging areas, from asset management and financial investment to crowdfunding, insurtech and blockchain.

Short said, “When you look at what’s happening globally and with the convergence between technology and finance, I think it just makes logical sense that they are positioned as a hub in Asia. “


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