|Busan International Finance Center is seen in this file photo. Korea Times file|
ATS, Yozma, Jeonju seen as obstacles to city's ambitious plan
By Park Jae-hyuk
Busan's ambitious plan to become one of Asia's financial centers has been facing multiple unfavorable factors lately, despite its declaration last year that it would try to replace Hong Kong by attracting multinational financial firms leaving Asia's premiere financial hub due to turmoil following the mainland Chinese government's implementation of a national security law there.
Korea's second-largest city has been more aggressive than Seoul in terms of attempts to take advantage of the political turmoil in Hong Kong, as it has being using online investor roadshows, web conferences and ads in foreign business news outlets, such as the Economist and Bloomberg, to raise global financial companies' awareness of Busan.
However, its efforts have been undermined by recent controversies involving the alternative trading system (ATS), Yozma Group and Jeonju's own financial hub vision.
Dilemma over ATS
As the city that accommodates the Korea Exchange (KRX) headquarters, Busan has maintained a negative stance about a plan to establish an ATS in Seoul to better enable the trading of unlisted stocks, which is being pushed by the Korea Financial Investment Association (KOFIA) and six securities firms ― Mirae Asset Securities, KB Securities, Samsung Securities, NH Investment & Securities, Korea Investment & Securities and Kiwoom Securities.
|Korea Financial Investment Association (KOFIA) Chairman Na Jae-chul speaks during an online press conference at KOFIA headquarters in Seoul, July 15. Courtesy of KOFIA|
By the end of this month, KOFIA will unveil the results of Bain & Company's review of the feasibility of establishing an alternative exchange platform in Seoul. The consulting firm reportedly expressed a positive view about its feasibility in its interim report for April.
"There is sympathy for the notion that the Korean capital market should grow further, based on a competitive system," KOFIA Chairman Na Jae-chul said in a press conference, July 15.
In response, business leaders in Busan, such as Nexen Group Chairman Kang Byeong-joong and Busan Chamber of Commerce & Industry Vice Chairman Lee Young-hwal, officially expressed their concerns about the plan. The Busan Citizen Network for Saving Economy also issued a statement Monday to urge the financial authorities to prevent securities firms from establishing the alternative exchange.
"If the Financial Services Commission (FSC) overlooks the attempt to set up such an anti-Busan exchange, it will face an anti-government protest from 3.5 million Busan citizens," the civic group said.
KRX Chairman Sohn Byung-doo, however, said in January's press conference that the bourse operator does not oppose the establishment of an ATS in Seoul, showing his positive stance toward competition among various stock exchange platforms.
Additionally weakening the city government's argument, Busan Mayor Park Heong-joon pledged for the city to set up a digital assets exchange, which is another type of ATS. Busan said nothing has been decided yet regarding the establishment of the exchange.
|Busan Mayor Park Heong-joon speaks during a press conference at Busan City Hall, July 15. Courtesy of Busan Metropolitan Government|
The southeastern city is also facing concerns about possible damage to its achievement of attracting foreign financial companies, due to a controversy over Israeli venture capital company Yozma, which was selected last December as one of six foreign financial firms to borrow office space in the Busan International Finance Center (BIFC) almost free of charge, starting from August 2021.
Yozma's Korean subsidiary told The Korea Times that its plan to open an office in Busan has remained unchanged, but the company stepped away from Busan's 1.2 trillion won ($1 billion) fundraising campaign for startups in the city, after facing doubts from the mayor's opponents about a memorandum of understanding signed in April between Yozma Chairman Yigal Erlich and the mayor, who belongs to the conservative main opposition People Power Party.
Yozma Group Korea also decided this month to file lawsuits against JTBC in Korea and in the U.S. over the cable channel's recent news report that shed doubt on the credibility of its businesses. The venture capital firm claimed that its intention was distorted for political purposes.
The Busan mayor also defended Yozma, adding in a press conference last Thursday that other regional government heads belonging to the liberal ruling Democratic Party of Korea have not faced any criticism, despite their cooperation with the Israeli company.
The ruling party's Busan Metropolitan Council members and progressive civic groups in the city, however, have continued raising questions about the relationship between the mayor and Yozma.
Rivalry with Jeonju
The government's potential designation of Jeonju in North Jeolla Province as the nation's third financial center is also a threat to Busan's financial hub vision, because the two cities might end up competing to attract the headquarters of state-run financial institutions, such as Korea Development Bank, the Export-Import Bank of Korea and the Industrial Bank of Korea.
Jeonju, which accommodates the National Pension Service headquarters, has continued failing to win financial center status over the past few years. However, the FSC's study on ways to foster each region's specialized financial business has been interpreted as an attempt to support the city's financial hub vision.
"Because the financial industry has accelerated efforts to adopt contactless services, the new type of financial center strategy has been inevitable," the FSC said in a notification for recruiting institutions to conduct the study. "It has been necessary to foster each region's specialized financial industry and to seek measures for connecting them to strengthen the competitiveness of Korea's financial industry."
|The National Pension Service (NPS) Investment Management headquarters in Jeonju, North Jeolla Province / Courtesy of NPS|
Several of the ruling party's presidential hopefuls, including former Prime Minister Chung Sye-kyun and Rep. Park Yong-jin, also made favorable comments about designating Jeonju as the third financial center.
Busan's civic groups are protesting the plan, saying that the government should take into account the residential infrastructure, the possible impacts on other financial centers and the global competitiveness factor, when designating another financial hub.
According to London-based think tank Z/Yen, Busan ranked 36th in the global financial centers index in March, while Seoul placed 16th. Their rankings were far lower than other major Asian cities, such as Shanghai which ranked third, Hong Kong which ranked fourth, Singapore which ranked fifth and Tokyo which ranked seventh.
Industry insiders and financial experts have pointed out for several years that dispersing financial centers has brought down the competitiveness of Korea's financial hub strategy.