Foreigners skeptical of 3rd finance center plan

The North Jeolla provincial government's blueprint for a third finance center in the city of Jeonju / Korea Times file

By Kim Bo-eun

The government is currently reviewing the viability of a third finance center in Jeonju, North Jeolla Province, but foreign individuals in the sector here are skeptical.

The plan is among President Moon Jae-in's election pledges, to develop and invigorate provincial areas.

However, the plan has come under criticism, as the country's first and second finance centers in Seoul and Busan are considered to lack competitiveness.

Meanwhile, the North Jeolla provincial government has already started planning for the 250 billion won ($220 million) project, but no businesses have applied to relocate to Jeonju. The provincial government has been contacting businesses, requesting them to make the move. The local government will have to use its own budget to create the center if no businesses end up relocating. The only finance-related state-run institution in Jeonju is the National Pension Service.

Regarding the plan to create a third finance center, James Rooney, vice chairman of the Seoul Financial Forum, said "It does not make any sense. I do not see any similar case like this in any other country in the world of Korea's scale.” Rooney was a professor of international finance at Sogang University.

"Even Busan can only be justified as a financial center if it focuses on a very specialized set of financings related to its international trade and marine engineering context."

Jeffrey Jones, chairman of the board of the American Chamber of Commerce, said the location in Jeonju would pose a challenge, considering it is a provincial city, a distance away from the capital.

“The plan is nice in terms of trying to decentralize, trying to alleviate concentration in Seoul. But it would be difficult to attract people to Jeonju," he said. Jones is also a lawyer at Kim & Chang.

"The government might try to do this through subsidies but this doesn't help the businesses to be successful. An incentive the government could provide for businesses to come to Jeonju is to create a deregulatory environment there," he said.

“Korea lost a lot of foreign asset, securities firms because they felt government restrictions were too tough.”

Korean professionals also hold a negative view of the project.

“The key to creating a financial hub is having professional personnel. It is different from the manufacturing sector, where you can build a factory in a provincial area and hire locals there to work for the factory,” said Kim Sang-kyung, chief executive of the Korea International Finance Institute.

“Even for the Busan International Finance Center, the focus was only on the hardware ― bringing financial institutions to the city ― and not the software ― the people.”

The government designated Busan as the second finance center in 2009 and relocated a number of state-run financial institutions, including the Korea Exchange, to the city.

Focus on Seoul, Busan

She added that it would be better to concentrate on existing financial hubs, rather than trying to create more.

"It will bring down the overall standard of all of the finance centers ― it is a zero-sum game."

Yun Chang-hyun, an economist at the University of Seoul, said, “The plan to create a finance center is not supposed to be a plan for provincial development.” Yun is also a former president of the Korea Institute of Finance.

“Accessibility is important if you want foreign businesses to come. It would be better to concentrate on the existing two centers in Seoul and Busan, which offer high accessibility in terms of transport,” Yun said.

The decision on the finance center is set to be made within the first half of this year. It is seen to have been delayed due to opposition from Busan, over concerns regarding its finance center losing competitiveness if a third one opens.