Proposed state-run bank for southeastern Korea gains ground

President Lee Jae Myung presides over a meeting with senior presidential aides at the presidential office in Seoul's Yongsan District, Thursday. Yonhap

President Lee Jae Myung’s plan to establish a state-run bank in Busan is gaining momentum as the new administration pushes ahead with two issues concerning national interests — balanced regional economic development and newly opened Arctic shipping routes, according to experts on Monday.

Roughly translated as “Southeast Investment Bank,” the envisioned financial institution is considered an alternative for the state-run Korea Development Bank (KDB) that has been embroiled in a years-long debate over whether to relocate its headquarters from Seoul to Busan.

“The establishment plan of the new bank is likely to pick up pace, given the agile and action-driven work style of the president that we’ve witnessed for the past month,” Shin Yul, a political science professor at Myongji University, said, referring to Lee’s first 30 days in office since June 4.

Busan, despite being the country’s second-largest city after Seoul, joins other regions in southeastern Korea facing economic and demographic risks as young people leave the region in search for jobs that are heavily concentrated in the nation’s capital.

In that regard, Lee asked to “accelerate efforts” in setting up the proposed Southeast Investment Bank during a meeting with senior presidential aides last Thursday.

The corresponding plan aims to raise 3 trillion won ($2.19 billion) with contributions from the central government; municipal governments in Busan, Ulsan and South Gyeongsang Province; and the KDB, the Industrial Bank of Korea and the Export-Import Bank of Korea.

The president said Southeast Investment Bank is expected to foster the finance sector in relation to maritime and manufacturing industries, which are big in Busan, Ulsan and other southeastern coastal regions.

He suggested that revitalizing these industries could help tackle dwindling populations in the targeted areas by creating more jobs for young people.

The president believes Southeast Investment Bank is crucial to expanding Busan’s role as a port city and in navigating the Arctic shipping routes, which are newly open due to climate change and diminishing sea ice.

These routes make shipping and trade faster and more efficient compared to taking the Suez Canal and other traditional routes. The United States, China, Russia, Japan and other major economies have been rushing to occupy the routes.

“Securing competitiveness in the Arctic shipping routes definitely requires a race against time and that’s where a need for the Southeast Investment Bank comes in,” Shin Se-don, a professor emeritus of economics at Sookmyung Women's University, said.

Additionally, the president brought up the controversial relocation of the KDB to justify the need for Southeast Investment Bank.

The contentious issue first emerged in 2009 during the Lee Myung-bak administration and faced severe protests from KDB employees, even throughout the 2022-25 presidency of Lee’s predecessor, Yoon Suk Yeol.

“It would be more effective to open a new state-run bank that can serve as an alternative for the KDB, instead of spending more time to argue whether the KDB should be moved to Busan,” Shin said.

Meanwhile, some critics preferred the relocation of the KDB, arguing that spending trillions of won to set up a KDB-like financial institution is a waste of money.