Another Resurfacing of Public Institution Relocation to Provinces... 'Restless' National Policy Banks

'Innovation City Performance Evaluation and Policy Support Report' to be Announced on the 28th
National Balanced Development Committee to Consult with the National Assembly on 'Additional Relocation' Based on Effectiveness Analysis

[Asia Economy Reporter Kangwook Cho] As the issue of relocating public institutions to provincial areas resurfaces, national policy banks such as KDB Industrial Bank, Export-Import Bank of Korea, and IBK Industrial Bank of Korea are facing difficulties. It is expected that as early as next week, a service report commissioned by the Ministry of Land, Infrastructure and Transport will be released, and based on this result, the push for relocating public institutions may intensify. In the market, concerns are raised about inefficiency in operations and loss of personnel, along with worries that the continuity of operations of national policy banks, which are currently shouldering the heavy responsibility of financial support for companies affected by the novel coronavirus disease (COVID-19), could be disrupted.

According to government ministries and the financial sector on the 22nd, the Ministry of Land, Infrastructure and Transport commissioned the Korea Research Institute for Human Settlements to conduct the "Innovative City Performance Evaluation and Policy Support Service," and the report is expected to be announced as early as the 28th. This report analyzes the effects of the designation of innovative cities and the relocation of public institutions to provincial areas, which began in 2005. Although it does not specify sending particular institutions to provinces, it is known that the Presidential Committee on Balanced National Development plans to promote additional relocation of public institutions through consultations with the National Assembly based on this service result.

Previously, during the 20th National Assembly, bills were proposed to relocate the Seoul headquarters of KDB Industrial Bank, Export-Import Bank, and IBK Industrial Bank to Jeonbuk, Busan, and Daegu respectively, and national policy banks have long received enthusiastic "love calls" from provincial areas. Earlier this year, in March, the amendment to the Special Act on Balanced National Development, allowing the designation of innovative cities in Daejeon and Chungnam, passed the plenary session of the National Assembly, increasing the feasibility of additional relocation of public institutions to provinces. Especially after the ruling party's landslide victory in the April general election, the issue of relocating national policy banks to provinces became a top concern. At that time, Lee Hae-chan, leader of the Democratic Party, mentioned, "After the general election, we will start Public Institution Relocation Season 2," indicating the intention to relocate public institutions in the metropolitan area to provinces for regional balanced development.

Local governments are already making all-out efforts to attract public institutions, coordinating with local elected lawmakers. However, the financial sector holds a negative stance on the relocation of national policy banks. The demand for relocation that ignores the roles and characteristics of national policy banks raises concerns that it could damage the policy finance functions.

Financial Services Commission Chairman Eun Sung-soo expressed concerns about relocation during his tenure as president of the Export-Import Bank of Korea. At that time, he said, "The Export-Import Bank earns more than 60% of its revenue overseas," and "Seoul is more helpful for business as overseas buyers and government officials contact us there."

National policy banks believe that if relocation discussions become serious, damage to competitiveness and personnel outflow will be inevitable. In particular, some criticize that the very fact that relocation discussions arise while the government has tasked national policy banks with the heavy responsibility of COVID-19 financial support shows a disregard for the seriousness of the crisis and is mere armchair theorizing.

Currently, KDB Industrial Bank has established a dedicated organization to operate a 40 trillion won Industrial Stability Fund and is fully engaged in supporting key industries such as aviation and shipping, which have been hit hard by the COVID-19 crisis. The Export-Import Bank is supporting exports of companies suffering from management difficulties such as Doosan Heavy Industries and Korean Air, as well as domestic small and medium-sized automobile parts and materials, parts, and equipment companies. IBK Industrial Bank is also in an emergency situation supporting not only small and medium enterprises but also small business owners. Because of this, there are criticisms about whether the issue of relocating national policy banks should be decided based on "regional political logic" rather than the purpose of "financial industry development" and "the role of national policy banks."

A financial sector official said, "The very fact that relocation discussions arise during this emergency period when national policy banks are at the forefront of overcoming COVID-19 is causing internal unrest," and emphasized, "Just as the Ministry of Foreign Affairs has not moved to Sejong City to perform its core functions, it is better for national policy banks representing the country to remain in Seoul in terms of national interest and efficiency."

This content was produced with the assistance of AI translation services.