| An aerial view of Bangkok financial district / gettyimagesbank |
Timidity leads financial control tower to open in Indonesia
By Park Jae-hyuk
The government's plan to open the Korea-ASEAN Financial Cooperation Center in Jakarta, Indonesia, has aroused concerns among financial experts and companies here that the decision will not help the center achieve its intended goal of strengthening Korean firms' foothold in Southeast Asia.
Some experts criticized the decision as it was apparently made with "political reason" ― to boast of the administration's achievements in the country favorable to Korean firms, rather than overcoming difficulties in some challenging markets, including Thailand.
Bangkok, the capital of Thailand, was initially mentioned as the strongest candidate to host the envisioned financial control tower, which is scheduled to be established in 2020.
According to local newspaper Financial News, however, Joo Hyung-chul, a presidential economic adviser and chairman of the Presidential Committee on New Southern Policy, said Oct. 29 that the Indonesian capital will host the center, because of the country's status as the leading country in ASEAN and the Mission of the Republic of Korea to ASEAN's location in Jakarta.
The agenda will be discussed in the Korea-ASEAN summit scheduled in Busan, Nov. 25, according to former Korean Ambassador to ASEAN Suh Jeong-in. Suh leads the team preparing for the forthcoming summit.
The Korea Institute of Finance (KIF) slammed the government for its decision.
The think tank specializing in financial research had been looking for the optimal site for the center since December 2018 at the government's request.
"The original purpose of opening the center was to help Korean financial firms get approvals from foreign authorities, so we suggested the government open the center in Thailand which is the hardest country in which to obtain a banking license," said Suh Byung-ho, the director of the KIF's ASEAN finance research center.
"Korean civil servants were not confident about persuading their counterparts into giving permissions to Korean firms, so the government chose to go to a favorable country, rather than pioneering the market in an unfavorable country. It is true that Vietnam is the most favorable place, but the Financial Supervisory Service (FSS) already has an office there, so Indonesia got the nod."
He feared the center would be able to do nothing but settle complaints from Korean companies that have already settled in the Indonesian market without government support.
In addition, the financial control tower's role is highly likely to be insignificant, considering that it will be under the Mission of the Republic of Korea to ASEAN.
The senior research fellow was also concerned about Korean financial services firms losing their golden chance to re-enter the Thai financial market.
During the 1997 Asian Financial Crisis, a number of Korean financial firms left the Southeast Asian country despite the Thai government's attempt to dissuade them.
Since then, Thailand has built up a higher barrier to entry for foreign financial firms, so there are no Korean commercial banks left.
The only three Korean financial firms there are Korea Development Bank's Bangkok office and local subsidiaries of Samsung Life Insurance and KTB Investment & Securities.
Japan, on the other hand, has continued investing in Thailand, enabling its three mega-sized banks ― Mitsubishi UFJ, Mitsui Sumitomo and Mizuho ― to do business there and dominate the Thai financial market.
Fortunately for Korean financial firms, the Thai government gave licenses to several foreign financial firms recently, as it started developing the Eastern Economic Corridor, or the eastern seaboard of Thailand, and making efforts to reduce its reliance on Japanese capital.
After 2020, Thailand is expected to give additional approvals to foreign financial companies.
Against this backdrop, Korea Federation of Bank Chairman Kim Tae-young signed a memorandum of understanding with Thai Bankers' Association Chairman Predee Daochai, when he accompanied President Moon Jae-in on his visit to Thailand in September.
In November, the FSS also invited Bank of Thailand executives in charge of licensing, to boost ties between the two countries' financial sectors.
Cheong Wa Dae's attitude toward the financial industry, however, may thwart such efforts.
Korean banks have claimed entering the Thai financial market is practically impossible without support from financial authorities, as well as efforts through diplomatic channels.
"Thailand has a high barrier to entry against foreign financial firms, so it is too risky for a company to enter the market individually," a Korean bank official said on condition of anonymity.
The KIF researcher said Korea will unable to expect improvement in the current situation.
"We urged the government to pioneer the new market and compete with Japan, but the government chose comfort, as it was afraid of competition," he said.
The Korea Times tried to reach the Presidential Committee on New Southern Policy chairman several times, but he did not answer.