[Editorial] A new financial vision

The Financial Services Commission has unveiled a vision to foster the financial industry as a growth engine of the Korean economy. Dubbed the “10-10 Value-Up Plan,” it is aimed at increasing the financial sector’s share of Korea’s gross domestic product to 10 percent over the next 10 years.

Currently, the financial industry accounts for about 7 percent of Korea’s GDP, relatively small for an advanced economy. In some advanced countries, such as Singapore and Australia, financial services account for more than 10 percent of GDP.

The sector’s meager contribution to the economy is the result of its stagnation for an extended period of time. Its share of GDP has remained in the 6 percent range since the mid-1990s.

Korea’s financial industry has been unable to grow to its full potential because the Korean government has long regarded it merely as a support for the real economy rather than as a source of growth on its own.

Now, the government’s perceptions have changed, as attested by this new vision statement. It calls for the financial industry to take a leading role in accelerating Korea’s transition to a creative economy, while at the same time creating many high-quality service jobs.

To achieve this, the industry needs to change fundamentally. The vision is intended to give it a much-needed jolt. It points out three areas the financial industry needs to focus on ― competition, convergence and consumer protection.

The FSC plans to sharply increase competitive pressure on financial companies to make them more innovative. This strategy is well conceived, given that nothing is more efficient than competition in making a company more competitive.

To promote competition, the commission pledges to tear down entry barriers in such segments as financial investment services, and encourage M&As, especially in the securities industry, where many small players get by on their brokerage fee income.

The FSC will also promote the convergence or shared growth between finance and the real economy by vitalizing “creative finance,” services that help companies with innovative technology and creative ideas to secure funding without offering collateral assets.

Of note is a plan to encourage the establishment of “tech credit bureaus,” companies that specialize in providing highly credible technology assessment information to financial companies and investors. These bureaus are an essential element of the infrastructure for creative finance.

The vision also calls for efforts to restore consumer confidence in the financial industry, which has plummeted in the wake of a recent series of scandals.

This vision sounds more realistic compared with the misconceived financial hub dream pursued by President Roh Moo-hyun 10 years ago.

Yet the new vision could also end up being nothing more than a dream if it is not thoroughly implemented. The FSC says it will announce specific follow-up measures from next week. It remains to be seen how these steps will be implemented.

There is one prerequisite for the successful implementation of the vision: The government should stop appointing unqualified figures to run financial institutions, private or public. The recent mess at Kookmin Bank clearly shows the high price exacted by the practice of parachute appointments.