Jeonju on March 29, 2001. It was one of the selected cities in Korea to host the 2002 World Cup. Now the city is trying to kick a financial goal. Photo: AFP/Kim Jae-hwan
Jeonju on March 29, 2001. It was one of the selected cities in Korea to host the 2002 World Cup. Now the city is trying to kick a financial goal. Photo: AFP/Kim Jae-hwan

Any list of the capitals of East Asia’s finance would likely include Hong Kong, Singapore, Seoul, Shanghai and Tokyo. But Jeonju? Probably not.

The small city – population 652,000 – in southwestern South Korea is noted for its scenic architecture and rural cuisine. It is not noted for being a hub of regional or global capital.

And yet it is to this sleepy town that the fund management unit of South Korea’s National Pension Service, or NPS, has been exiled. The unit, which at the end of March this year had a whopping US$580 billion in its portfolio, was transferred from central Seoul to Jeonju last February.

While the move surprised many foreigners in finance, to say it was unwelcome by NPS portfolio managers would be an understatement: 30 of 220 fund managers resigned just before the move took place, and shortly after the move, another 11 handed in their resignations. More resignations are expected.

Jeonju? No, thanks. Seoul? Yes, please

The crux of the problem is simple: NPS fund managers have homes and families in Seoul and daily commutes are not possible, as road travel time from Seoul is about two and a half hours. Fund managers who live in Seoul – virtually all of them – have been given accommodation in Jeonju, where they stay during the week and return to Seoul on the weekends.

The separation from spouses and children has taken its toll. According to one of those who resigned, who spoke to Asia Times on condition of anonymity: “The morale of many of the fund managers who remain at NPS is low, and if they can arrange to take a job at a fund manager in Seoul, they are very likely to do so.”

He pointed out that since the fund managers want their children to be in the best schools in Korea – most of which are in Seoul – they won’t relocate their families to Jeonju. And the Jeonju accommodation is hardly top-drawer.

Another former fund manager at the NPS who now has a position in private-sector fund management in Seoul said: “One of the problems in Jeonju for the NPS fund managers was that they were assigned to share apartments with one or two colleagues. Sometimes that caused problems.”

A number of those apartments lacked air-conditioning, he added, and some fund managers found it difficult to sleep in the steamy summer. The relocation also presents problems for visiting foreign professionals.

“Doing business with the NPS has become a lot more challenging for foreign fund managers who are visiting Seoul to see clients and potential clients, in that if they want to visit the NPS to renew or establish contact, then they need to dedicate an entire day to the trip from Seoul to Jeonju and back to Seoul,” said Peter Douglas, who runs the Chartered Alternative Investment Analyst program in Japan and Korea.

The express bus from Incheon International Airport to Jeonju takes a hefty three-and-a-half hours. Yet few visiting financiers speak or read Korean, and travel outside Seoul, where English-speaking Koreans may not be available to provide assistance, can prove challenging.

The great dislocation

Management, of course, sees it differently.

Kim Sung-joo, the NPS CEO, sees the move as of benefit to Korea’s southwestern Jeolla provinces. These provinces missed out on economic development, since so many government operations were historically located in Seoul and much of the country’s industry was sited in rival provinces in the southeast.

Prior to his appointment as NPS CEO, Kim was a National Assemblyman for the Democratic Party – which has its core strength in the Jeolla region. The party fully supports the diversion of government offices from Seoul to provincial areas.

The NPS is not alone in being booted out of the capital. Under the government of the disgraced and now-jailed Park Geun-hye, major government agencies – bar those covering defense, foreign affairs and unification – were shifted from Seoul to the provinces in a politically motivated decentralization scheme. While the resultant inefficiencies have been widely lambasted, it seems unlikely that any party can ignore the provincial votes that drove the move.

At least NPS fund managers have parachutes: Their knowledge of international investments and the Korean market makes them in-demand hires for financial institutions in Seoul.

“Today in Korea there are relatively few institutional investors with sufficient numbers of asset managers who are experienced in global markets,” said Douglas. “Peeling some of those with experience away from the NPS is a very tempting thing.”

Those departing the NPS for the private sector can be compensated at market rates rather than at government salary levels. That, together with all the attractions that Seoul has to offer, may make the temptation of a return to the metropolis difficult to resist for many fund managers at the NPS.

This indicates that the bleed will continue.