Seoul, Busan struggle to attract foreign businesses

Only one Chinese VC firm seeking to come to capital city

By Kim Bo-eun

The cluster of buildings comprising the IFC on Yeouido, Seoul / Korea Times file

The local governments of Seoul and Busan have failed in their attempts to attract foreign firms to raise their cities' profile as financial hubs.

Incentives have been offered as a way to draw financial institutions from Hong Kong amid the continued unrest there.

Applications for Seoul's rent-subsidized offices at the International Financial Center (IFC) on Yeouido closed last month with only one new company, a Chinese venture capital firm, seeking to open a new office there, according to the Seoul Metropolitan Government, Wednesday.

The Chinese firm is seeking a base in Seoul, but insisted on anonymity as it needs to receive approval from the authorities to operate here.

Two other firms also applied, but they already have a presence in Seoul. Sources said the U.S.-based investment firm Celenian, and Singapore-based KCA Capital Partners, which have already opened offices in Seoul after acquiring licenses for business operations here last year, are seeking to move into the IFC.

This stark fact is that Seoul has only managed to attract “one foreign firm,” despite offering a subsidy of between 70 percent and 100 percent to pay for rent and utility fees for five years depending on the scale of a firm's planned investment. The government has office secured space at the IFC for 10 companies.

A local government official blamed the continued spread of COVID-19 as the primary reason for the lukewarm response. "We will extend the application time for companies possibly interested in coming here,” he said.

The situation isn't much different from Busan, which has offered more generous incentives. The country's second-largest city, has sought to foster an image as a financial center, with a focus on maritime finance.

A number of state-run institutions, including the Korea Exchange, have relocated to the southern port city.

Busan is offering rent free offices for 25 years for three firms that are looking to move from Hong Kong to the Busan International Finance Center. The local government said the companies would be able to save $1.25 million, based on calculations of $50,000 in annual rent for 25 years.

The regional government also guaranteed an exemption from corporate and income taxes for three years. It has aggressively been promoting its program overseas, through various media. But no businesses have applied.

"We have not set a deadline for applications,” a Busan government official said.

The Korean government designated Yeouido as a financial district in 2009. Yeouido is home to 640 financial institutions. This is also where the Seoul Fintech Lab, housing 70 startups, is located.

The city said offering tax incentives would not be easy, considering this would need to be discussed with the Ministry of Finance.

The government is seeking to develop Korea as a center for asset management, considering the size of the National Pension Service's assets. The NPA is the third-largest public pension fund in the world with 700 trillion won in assets.