"WGBI Inclusion Expands Capital Markets and Boosts Global Status"

Ministry of Economy and Finance Emphasizes Collaborative Achievements with Related Ministries
Also Mentions Possibility of Green Bond Issuance Next Year

"The inclusion in the World Government Bond Index (WGBI) has expanded the pie of our capital market and elevated our status in the global financial market."

On the 21st, the Ministry of Economy and Finance held a briefing at the Sejong Government Complex regarding FTSE Russell's decision to include Korea in the WGBI and evaluated the achievement as such. This emphasized the benefits that can be gained following FTSE Russell's announcement on the 8th (local time in the U.S.) that Korea would be included in the WGBI.

Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok briefs on the 9th at the Government Seoul Office in Jongno-gu, Seoul, regarding South Korea's inclusion in the World Government Bond Index (WGBI), one of the world's top three bond indices.
[Image source=Yonhap News]

The WGBI is an advanced bond index that includes government bonds from 26 major countries. It is considered the world's largest bond index with assets under management reaching $2.5 trillion. FTSE Russell, a subsidiary of the London Stock Exchange Group (LSEG), is the world's largest market index provider.

At the briefing, Gwak Sang-hyun, Director of the Government Bond Division at the Ministry of Economy and Finance, explained, "The capital market consists of the bond market and the stock market. When about 75 trillion won of stable funds flow into the bond market, the capital market pie expands." He added, "When foreign funds enter through government bonds, the corporate bond market also develops," noting that the possibility of issuing green bonds, which has been recently discussed, has also increased.

The Ministry of Economy and Finance has been making efforts to improve various systems to enhance foreign investors' accessibility to the domestic capital market. The foreign exchange market, which was considered relatively closed compared to other countries, underwent structural reforms swiftly, leading to a faster-than-expected success in WGBI inclusion.

Jung Yeo-jin, Director of the Foreign Exchange System Division at the Ministry of Economy and Finance, said, "FTSE Russell made the inclusion decision because it trusted our government's commitment to fiscal soundness," emphasizing, "This signal is significant." She also stressed, "As Korea's credit rating rises and the stability of the foreign exchange market improves, structural reforms of the foreign exchange market can be successfully and more rapidly achieved."

The collaborative effort of related ministries, including the Ministry of Economy and Finance, was also cited as a key factor behind the achievement. Kim Yoon-sang, First Vice Minister of the Ministry of Economy and Finance, who attended the briefing, emphasized, "Three bureaus of the Ministry of Economy and Finance (the Treasury Bureau, the International Finance Bureau, and the Tax Bureau) joined forces with other bureaus. Besides the Ministry of Economy and Finance, the National Tax Service, the Bank of Korea, the Korea Securities Depository, and the Financial Services Commission all cooperated, making this possible."

Director Gwak also explained, "During the WGBI inclusion process, the International Finance Bureau led the foreign exchange market structural reforms, the Government Bond Division and the Tax Bureau worked together on the integrated government bond account, and the Tax Bureau led the tax exemption measures for foreign government bond investors. The Financial Services Commission abolished the foreign investor registration system, and the Financial Supervisory Service and the Financial Services Commission handled other detailed financial supervision regulations and licenses."

The Ministry of Economy and Finance plans to continue structural reforms of the foreign exchange market and pursue inclusion in the Morgan Stanley Capital International (MSCI) developed market index, a long-standing goal of the stock market. Discussions on issuing green bonds will also be actively pursued. Some suggest that green bonds could be issued in the first half of next year.

Regarding this, Director Gwak said, "How government bonds will be issued in next year's budget (201 trillion won) is at the Ministry of Economy and Finance's discretion," adding, "Green bonds must be issued within this budget, but since it requires consultation, it is difficult to specify the issuance timing." However, he revealed that it is "under review," leaving the possibility open.

Meanwhile, FTSE Russell plans to start actual index inclusion from November next year, one year later. In the meantime, the inclusion weight will be gradually increased quarterly. As of this month, Korea's inclusion weight is 2.22%, ranking ninth among the included countries.

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