How to nurture a Samsung Electronics in the financial industry

The Financial Services Commission announced Wednesday plans to strengthen the competitiveness of Korea`s financial industry, with an aim to raise financial industry`s value-added to 10 percent (currently 6 percent) of GDP within 10 years. To this end, it will allow domestic banks to operate an overseas holding company in order to spur overseas advancements, ease regulations on lending-specific financial institutions and set up a technology credit evaluation institution to invigorate start-up activities.

Korea`s financial industry has supported the rapid growth of the country`s economy, but its growth potential and dynamism declined in the wake of the global financial crisis in 2008. Repeated occurrences of illegal financial cases also worked to lower the public`s confidence on financial institutions. The economic paradigm has turned for a shift due to population aging, entry into a mature economy limiting high growth, and a shift of growth engine from factor input to creativity and innovation. However, there has been lack of efforts to find a breakthrough on the part of both the government and the financial industry. The incumbent government is also facing criticism of having been negligent on caring for the financial industry as its economic invigoration plans are centered on the real economy.

The financial industry backs up the real economy through efficient distribution of resources, and itself creates high value-added as well as quality jobs. It is a growth engine to the economy. The financial industry is a basic infrastructure for the economy, and if a crisis in its system occurs, the economy overall takes the toll. Upgrading the financial industry and stabilizing the financial market is a necessity for Korea to enter the ranks of developed nations.

The competitiveness of the Korean financial industry lags behind that of advanced countries and the real industries. But the industry secures advanced information technology and outstanding talent pool, and thus has high potential for a leap. Systemic fostering of talented financial manpower, bulking of financial institutions and promoting universal banking, and adjustment of special financial zones should be seriously considered. It is time to nurture a Samsung Electronics in the financial sector.

The latest plans included concrete and detailed sub-plans. It is also necessary to single out measures that the previous governments announced but fizzled out and promote them. The reason Korea`s financial industry lags behind advanced countries is not because the financial authorities` supervision is weak but due to excess regulation and intervention on even the financial institutions` voluntary efforts to seek profit model. Deregulation should speed up.

It is also important to normalize some areas before discussing upgrade. Key example is considering state-owned financial institutions as a booty and promoting a personnel appointment through influence from above when a new government sets in. The government should not intervene in personnel appointment of financial institutions that turned private.