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2011 Mar/16
The proper model for the development of the asset management market in korea
Issue & Policy 11-01
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- Research Topic Asset Management/Pension
Yoon, Jong mun
태희
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- Summary
- In order to develop Korea’s asset management market and industry, it is important to select the right model and concentrate our efforts on it. The countries whose asset management markets grew fast can be grouped into two different models. Singapore and Ireland adopted the model to make their asset management market a financial hub for neighboring countries. On the other hand, Australia selected the model to increase domestic demand for funds on the basis of abundant pension assets. The two models have different approaches because Australia has a big domestic economy, while Singapore and Ireland do not. However, what these two models have in common is the fact that these governments chose the proper model for their economic environment and focused their policy efforts to achieve their final goal. Korea’s economic size is similar to Australia which has a strong asset management market. The fact that Korea`s asset management market size relative to the economy is smaller shows that Korea has growth potential. Especially, the demand for funds will increase in the future because pension assets are expected to accumulate for a considerable period of time. On the contrary, it is very hard to develop Korea`s asset management market as a financial hub in the Asia/Pacific region beyond Singapore and Hong Kong because Korea’s current competitiveness as a financial hub is far lower than Singapore and Hong Kong, which already play key roles as hubs. In addition, Korea`s fiscal condition and cultural traits which are different from other nations make it hard to provide attractive incentives to foreign companies and investors. Therefore, concentrating Korea`s efforts on creating funds demand is a better way to develop Korea`s asset management market. If Korea`s market grows further, many globally recognized asset management companies will expand their businesses in Korea resulting in the globalization of the market. In order to raise demand for funds, Korea should exert policy efforts to address the following challenges. First, Korea`s asset management market needs a strong foundation including an improved regulatory structure. Second, the Korean government should try to set up efficient market discipline to spur competition. Finally, Korea could deregulate asset management of the CPPs and introduce long-term savings plans. This will boost funds demand and also help Korea prepare for an aged society.