news about Asset Management Market Has Big Potential

Asset Management Market Has Big Potential

Dr. Thankom Gopinath Arun Institute for Development Policy & Management, University of Manchester

Financial globalization is a process involving the growing economic interdependence of countries worldwide.

The present phase of globalization has found substitutes for labor mobility in the form of trade and investment flows.

Along with liberalization, sound financial regulation and supervision are needed to protect the stability of the financial system to reduce the systemic crisis and to provide protection for small depositors.

Objectives of the regulations, such as to sustain systematic stability and protect consumers, need to be clearly defined.

However, the objectives of regulation should be limited to correcting identified market imperfections, failures and externalities.

The regulatory role of the government _ introducing appropriate legislation and maintaining competitive conditions _ has become more important in the wake of the Asian financial crisis.

In a competitive market scenario, the regulatory practices should be able to provide sufficient autonomy and independence to financial institutions to introduce sound internal control systems and competitive business practices.

After the crisis, Korea opened up its market to foreign investments. Foreign banks and securities firms were allowed to have subsidiaries and foreign ownership of Korean financial institutions was permitted. Stock and money markets were also liberalized to attract foreign funds.

To become a financial hub, a country needs to establish infrastructure, have a skilled workforce, a social safety net and foreign investment. The government should work on improving the efficiency of financial markets by improving the transparency and accountability of markets.

The Korean government should promote public sector initiatives to enhance the demand for long-term asset management services, restructuring investment trust companies and easing regulations on product development and streamlining the domestic equity market by improving corporate governance and strategic alliances.

Int??l Financial Hub Seminar Opens Thursday

South Korea has begun its quest for international expertise on strategic approaches to building a regional financial center to expedite its grand vision of emerging as the Northeast Asian financial hub.

The Ministry of Finance and Economy (MOFE) has organized an international conference with five local financial and economic institutes to diagnose the current status of the Korean financial market and counsel about areas that need to be improved. The conference, which will take place at the Hotel Shilla in central Seoul today under the theme of ``Road to Prosperity and Cooperation: Financial Hub in Northeast Asia,???? will provide Korea with the insight crucial to laying a solid foundation to grow into the financial hub of the region.

Ever since the Financial Crisis battered the Asian economy back in 1997, Asian countries have been searching for ways to avoid repeating the same mistake through promotion of sustainable capital market prosperity in the region. ``Korea??s plan to grow into the Northeast Asian financial hub is in the same continuum of such efforts by Asian countries. The role and the function of public financial institutions are critical for growth of national and regional capital markets,???? said MOFE spokesman. ``This conference will serve as an opportunity for Asian economies to borrow the insight and wisdom of international financial market experts, the wisdom that would help spur growth of the Northeast Asian financial market,???? he said.

In fact, Northeast Asia, comprised of Korea, China and Japan, has successfully emerged from the financial crisis and is now well positioned to grow into a financial hub, backed by its rich foreign exchange reserves that amount to some $2 trillion. The strategic geopolitical location of Korea _ located between world??s second-biggest economic power and world??s fastest-growing emerging market _ offer ideal conditions for a hub, coupled with its superb information technology infrastructure. The government also lifted the regulation that bans investment of national pension funds in the stock market in January this year. With foreign rating agencies?? reassessment of Korea??s previously undervalued stocks, the Korean stock market is continuing its strong rally, making Korea one of the more attractive investment destinations in Asia.

The Korean government has set its focus on asset management business, looking into the great growth potential of the service sector in the country. It expects that the domestic demand for asset management services would mushroom due to Korea??s rapidly aging population. Korea boasts the world??s fourth-largest foreign exchange reserve and national pension funds amounting to 150 trillion won. Nevertheless, foreign capital accounts for a mere 0.58 percent of bonds issued in Korea and only 2.55 percent of assets handled by local asset management firms are invested abroad. Against such backdrop, the MOFE has launched the Financial Hub Promotion Committee yesterday to streamline the government procedures for fine-tuning and implementing the economic policies involving fostering Korea into the regional financial hub. The committee, consisting of 30 government and private financial experts and led by Minister of Finance and Economy Han Duck-soo, will draw up the action plans of Korea??s financial hub blueprint. Vice ministers of government ministries will serve as the committee members from the government side. In its first meeting convened yesterday, the committee decided to institute six subcommittees _ Financial Regulation Improvement, Financial Market Innovation, Financial Supervisory Capacity Innovation, Foreign Exchange System Improvement, Financial Hub Strategy and Financial Talent Cultivation.

The government decided to pursue legislation of a law on building and developing a financial hub to ensure that the current administration??s financial hub initiative succeeds and is developed by subsequent administrations as a long-term national goal. The law would guarantee liberal business activities of financial institutions, promote competition, transparency and innovation in the financial markets, serve as catalyst for laying down a solid foundation for financial market growth and support local financial firms?? advancement into overseas arenas. The committee plans to open up Korean??s stock exchanges to foreign firms, first to Chinese firms and then to companies in other Asian countries and open up the domestic market to foreign accounting firms as early as 2007.

Accounting Market to Open in 2007

The government will set up guidelines to make it easier for Korean financial institutions to participate in merger deals and investment projects in Northeast Asia to help transform the country into a regional financial hub. Toward that goal, it will overhaul financial regulations and related laws. The plan is included in the grandiose vision of the Ministry of Finance and Economy (MOFE)??s financial hub promotion committee laid out Wednesday.

The ministry said the task force will support the financial hub project by resolving the problems of foreign businesses here. The ministry plans to hold a meeting with foreign institutions operating here to listen to their problems.

Visit: Hankooki for more info about foreign investment.

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