It was 2003, with South Korea still clinging to the euphoria of the 2002 World Cup, when the official road map to making Seoul Asia’s financial centre was first announced. Hope was in the air and it quickly became a key task for current Mayor Oh Se-hoon, who previously served as the city’s mayor from 2006 to 2011.

But the hurdles were too high. Global financial institutions were put off by Korea’s rigid labour market and tight, yet somewhat vague regulations, despite the geopolitical advantage Seoul could offer. They quickly turned their eyes to Singapore, which lured them with lucrative tax benefits and warm weather.

Today, Seoul is more determined than ever to walk the road map and catch the eyes of investors and institutions leaving Hong Kong. The time is ripe, the Seoul Metropolitan Government’s point man on its financial hub project says.

“Hong Kong has been Asia’s leading financial centre, but with China tightening its grip on the city, it is dealing with new risks and challenges such as an exodus of investors,” Hwang Bo-youn, Seoul’s deputy mayor for economic policy, told the Korea Herald in an interview on April 14.

“Seoul is a few steps behind Singapore and Tokyo timewise, but our capital can provide financial institutions and investors with the best environment for the state-of-the-art technological development. It has the full potential to become Asia’s next financial centre.”

That includes a commercialised 5G network service – which is already moving onto 6G – alongside customers who are early adapters and strong infrastructure for information technology (IT) and artificial intelligence- (AI) related technologies in the era of pay apps and digital banking, he added.

A major step toward becoming a leading financial centre would require easing regulations and improving tax benefits for businesses, according to Hwang.

At the moment, Seoul’s benefits are restricted to handing out discounted office spaces to international firms seeking to enter Korea. The five-year benefit subsidises 70 per cent of the rent and maintenance fees for select businesses at the International Finance Centre located in Yeouido, the nation’s financial hub. This is because Seoul is bound under the Restriction Of Special Taxation Act, making it unable to give tax benefits to businesses due to the authorities’ intention to balance the city’s power with other regions.

This is about to change, says Hwang, with President-elect Yoon Suk-yeol pledging to lift such restrictions on Yeouido, allowing the financial district to entice global businesses with tax benefits.

“The incoming president has vowed to designate Yeouido a special economic zone, which will change everything,” Hwang said.

“We plan to create a virtuous cycle of business for the financial institutions, where tax benefits, housing and education for children can be available in a single package for employers and employees.”

Hwang also addressed the nation’s rigid labour market and laws including the 52-hour work week introduced in 2018 to reduce long working hours. According to the policymaking Financial Services Commission in 2020, the 52-hour law was a major complaint shared by the CEOs of 17 local branches of global financial institutions to then-chairman of the regulator Eun Sung-soo.

“I support the 52-hour work week, but the law was revised without consideration of different sectors – it needs to become more flexible,” he said.

The Korean law requires all labourers regardless of their positions and sectors to abide by the 52-hour limit, except fund managers and analysts. On the contrary, Hong Kong doesn’t have such labour restrictions at all, while Singapore makes exemptions depending on the person’s position within the firm or their income.

On the intensifying rivalry with other cities seeking to earn the title of “Asia’s financial hub” such as Busan and Incheon, the deputy mayor expressed concerns.

“The government has been relocating key financial institutions to other areas such as Busan for balance, but the result was that both Seoul and Busan lost their competitiveness as financial hubs.”

Busan is currently in the process of building a mega 140,000sqm financial town, while Incheon is trying to attract more clients to its Songdo International Business District.

“Major economies have only one city that works as a financial hub – it’s New York City for the US and London for the UK. To make Korea flourish in the global society, the issue needs to move beyond a local rivalry between our cities.”

Hwang highlighted Seoul’s geopolitical advantage, strong infrastructure and the city environment itself, which was reflected in this year’s Global Financial Centres Index. Seoul ranked a record number 12 as of March this year on the index, which evaluates competitiveness of financial centres based on surveys and 150 factors, with quantitative measures from the World Bank, the Economist Intelligence Unit, the OECD and UN.

First published in 2007 from think tank Z/Yen Group in partnership with the China Development Institute, the index named New York the world’s top financial centre.

“In this year’s ranking, Beijing is ranked number eight, with Tokyo and Shenzhen each coming at number nine and number 10 – it means that Seoul came at number 12 despite the regulations that have worked as a handicap for Seoul from growing as a financial hub,” Hwang explained.

“There is no other city like Seoul. It’s geopolitically close to other capitals in Asia and a cluster of future technology – it can help financial institutions make headway into the future.”