Turning Seoul into a new financial hub in Asia has for long been a campaign promise of local politicians cutting across party lines.

Seoul Mayor Park Won-soon, who is now in his third term, is no exception. He had even announced plans to replace old apartment buildings with high-rises of up to 50 stories and create more parks and leisure spaces to reinvigorate the city’s financial district Yeouido.

But the city’s progress in realizing these yearslong dream is being questioned as its neighboring rival Tokyo is making all-out efforts to promote itself as an alternative to Hong Kong.

According to the Financial Times, Tokyo -- in cooperation with its central government ministries and financial authorities -- is considering offering various benefits such as short-term visa waivers, tax advice and free office space for Hong Kong financiers who are seeking to shift base due to the prolonged social instability as a result of Beijing’s proposed national security law.

While Tokyo wants to capitalize on the opportunity to replace Hong Kong, the former British colony -- which has maintained its status as Asia’s leading financial center for decades -- Seoul seems to lack solid, effective plans to entice professionals and institutions wanting to relocate.

The Seoul government, for its part, has said it is making efforts to attract foreign investors by offering free offices. But the plan is mainly for small fintech companies.

“We’ve been making efforts to attract overseas firms by providing free office space, patent and regulation consulting and network-building via the Seoul fintech lab, located in Yeouido,” said a government official in charge of the city’s financial industry.

Before the coronavirus pandemic hit, the city was gearing up to kick off its overseas investor relations events in the first half of this year, but they had to be postponed, the official said. The city laid part of the blame on the nation’s corporate tax laws, with high tax rates in Seoul because it is categorized as an overpopulated area.

“We are aware of the incentives that overseas big players look forward to. We’d like to lower corporate taxes as well, but due to its location Seoul cannot provide better benefits.”

Instead, the city will attempt to attract more financial players from abroad by opening a new office in Yeouido in October, tentatively named the “Seoul Office,” and launch a website to provide information in different languages on the nation’s major financial regulations, the official added.

Given the circumstances, some experts say Seoul is not ready to be Asia’s next preferred financial center, on par with Hong Kong, considering the size of the domestic economy and the lack of freedom for financial activities here.

“Since the UK has retained the top spot as a financial hub, it’s understandable that Hong Kong’s big players are fleeing there. Singapore and Tokyo face difficulties such as the small market size and financial regulations, but they have surely emerged as prime alternatives,” Sung Tae-yoon, an economics professor at Yonsei University, said.

“Compared to the two cities, Seoul’s conditions are even worse. The current size of the domestic economy is relatively smaller than Singapore and our financial regulations are stricter than that of Japan. For now, it seems difficult to promote Seoul as an alternative to Hong Kong, unless it improves its standards,” he added, suggesting that the city should seek practical ways to reduce the burden of overseas investors in the financial sector.

A survey conducted by London-based think tank Z/Yen Group in March showed that London and Tokyo were still in second and third place, respectively, while Seoul ranked No. 33 as a financial center. The Global Financial Centers Index rated 108 financial centers, combining assessments from finance sector professionals with data.

Seoul was designated as a financial center in January 2009 as part of the city’s drive to lure big financial players from abroad. Mayor Park also announced last year that he would secure the financial district of Yeouido to emerge as a fintech hub, but with no substantial achievement made so far.

Hong Kong appears to be less favorable to attract talent now, said a hedge fund manager based in the city, citing growing the instability that undermines the overall living environment.

“Hong Kong is losing its luster and I see many (financiers) are planning to move to other countries like the UK and Singapore,” he said, on condition of anonymity.

“Smart people can go anywhere, regardless of (the level of) infrastructure. But even if Seoul wants (to be an alternative to Hong Kong), language still remains a big hurdle, more than anything else.”

By Jie Ye-eun (yeeun@heraldcorp.com)