The mayor says Seoul’s appeal as a financial hub is hampered by tight regulations

The mayor of Seoul has acknowledged that South Korea’s reputation for unclear and heavy-handed regulations has hindered the city’s ability to attract businesses and investors to leave Hong Kong.

Oh Se-hoon told the Financial Times in an interview: “It is a pity that companies and financial institutions leaving Hong Kong prefer Singapore as an alternative to Seoul.

“The biggest factor is the tax system – the tax in Singapore is only half that of ours. But our laws and systems also seem to be making companies hesitate about entering Seoul,” he said.

Oh added that he was “embarrassed” that South Korean managers were seen by some financiers in the region as more difficult to work with and communicate with than their mainland Chinese counterparts.

The mayor’s proposals to make Seoul a leading financial hub in Asia include turning the city into a “deregulation special zone”, cutting corporate income taxes, and providing affordable housing. more foreign employees and create more foreign schools.

Oh said he represented Yoon Suk-yeol, South Korea’s conservative president-elect, on the need for new incentives. Yoon will be inaugurated in May, although the National Assembly is still controlled by the leftist Democratic Party.

“I have requested systematic support to promote Seoul’s competitive advantage over Tokyo, Shanghai and Singapore, and have received some positive responses; I expect a lot of changes to be made,” Oh said.

Seoul's financial district
Seoul Mayor Oh Se-hoon has proposed turning the city into a ‘deregulation special zone’ © SeongJoon Cho / Bloomberg

South Korea’s financial market, including capital markets and short-term financial markets, has grown from 777.6 billion won in 2000 to 5,662.3 billion won ($4.6 billion) in June 2021 , according to the Central Bank of Korea.

Foreign investment banks have been attracted to leading South Korean companies in fields ranging from semiconductors and electric vehicle battery manufacturing to entertainment and e-commerce.

But investors have been burned by short-selling bans and regulatory crackdowns on market makers, while the ban on overseas trading of the Korean won continues to do so. harming the country’s aspirations to achieve MSCI index maker recognition as a developed market.

Observers say South Korean regulators and political leaders remain sensitive to public suspicions about foreign capital, stemming from the perception that foreign investors have exploited the land. after the Asian financial crisis in the late 1990s.

Lyndon Chao, head of equities and commerce, said: “With Hong Kong on the defensive amid recent expatriate migration, China is slowing down due to its Do Not Livelihood policy and capital flows out of Europe, this should be the time for Korea to shine.” at the Asian Securities Industry & Financial Markets Association, the banking industry association.

“But South Korea’s regulatory environment is challenging, with investors receiving fines and warning letters without clear evidence or explanation. As a result we have big players sitting on the sidelines.”

Chan Lee, managing partner at Petra Capital Management, a Seoul-based hedge fund, said foreign investors often find themselves tripped by the political power of chaebolthe country’s leading corporations lobbied against protections for minority shareholders.

“There are too many systems and regulations against foreign investors, not to mention the language barrier. The idea of ​​turning Seoul into a financial center is nonsense, he said.

However, that has repelled skeptics, who say that Seoul’s strengths include “world-class ICT infrastructure, highly educated workforce, and friendly infrastructure.” digital finance, combined with a real economy based on manufacturing and services”.

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