South Korea Is Planning To Become Asian Financial Hub

July 18, 2007
Government will offer tax incentives to stimulate mergers and acquisitions as well as formation of large-scale investment banks.

South Korea on July 18 gave details of its plans to transform the country into a regional financial hub, offering incentives to form large investment banks and to boost investment funds. The Ministry of Finance and Economy made the "road map" public after holding a second financial hub meeting, presided over by President Roh Moo-Hyun.

It is considering offering tax incentives to stimulate mergers and acquisitions among financial companies and the formation of large-scale investment banks, Yonhap news agency reported.

The government also plans gradually to ease other regulations on private equity funds. It aims to eliminate many of the regulations by 2010 and to approve the setting-up of hedge funds in South Korea by 2012.

Regulations on private equity funds' investment in overseas assets via offshore special purpose companies will be scrapped by the end of this year, under the plan.

Financial companies will be encouraged to enter foreign markets as part of a globalization drive, the ministry said. Procedures for setting up overseas branches will be streamlined.

The government also plans to diversify investments by the state-run Korea Investment Corp into private equity funds, hedge funds, real estate and other areas, and to boost its assets to $200 billion by 2015.

Early this month parliament passed the Capital Market Consolidation Act, hailed as Korea's "Big Bang," which lifts barriers between different financial sectors in Asia's third largest economy.

The government has outlined plans to transform and open up its economy to meet the threat posed by a low birthrate and ageing population, as well as by growing competition from lower-wage Chinese manufacturers. The Northeast Asian Financial Hub Initiative is a key part of this.

Copyright Agence France-Presse, 2007

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