Seoul and Busan have spent about 2 billion won ($1.4 million) on business with the consulting firm that compiles the Global Financial Centres Index (GFCI), the benchmark used to rank the world's financial hubs. Given that online survey responses play a substantial role in how the GFCI is calculated, some question whether the resulting assessments can be considered sound.
Records submitted to the office of Rep. Kim Hyun-jung of the Democratic Party of Korea, a member of the National Assembly's National Policy Committee, show that Seoul, Busan and the Busan International Finance Promotion Agency spent a combined 2.00233 billion won on projects tied to the British consulting firm Z/Yen since 2018. Of that, 1.98949 billion won went directly to Z/Yen, according to the data released on the 28th.
The GFCI is a competitiveness index for global financial centers that Z/Yen publishes twice a year, in March and September. In the rankings released on the 16th, Seoul placed seventh. Busan ranked 23rd in March and 22nd in September, its highest placement on record. The city stood at 51st in 2020, a sharp climb over six years. Busan itself has cited the improvement as evidence of the results of policies to build up the city as a financial center, including the development of the Busan International Finance Center (BIFC).
Industry observers say the index's objectivity is undermined when the local governments being evaluated make continuous payments to the organization compiling the rankings. Seoul joined Z/Yen's membership program in 2018 and has spent 1.53169 billion won on annual fees through this year. The stated purposes include promoting Seoul as a financial center and attracting investment among global finance professionals, identifying foreign investment and producing city promotional materials.
The Busan International Finance Promotion Agency, which handles the city's work on developing a financial hub, spent 463.18 million won on related projects from 2020 through this year. Beyond annual fees, the budget went to domestic and overseas investor relations events, domestic presentations of the GFCI results, invitations for finance experts and research on maritime finance.
The issue is that subjective assessments serve as a core metric in how the GFCI rankings are calculated. The index combines quantitative indicators supplied by bodies such as the World Bank and the Organisation for Economic Co-operation and Development with survey responses from finance professionals. Final rankings are produced by merging the scores that finance professionals assign to each city with scores derived from the cities' quantitative indicators.
When this reporter took part in the survey directly, however, it was possible to respond after entering only a name, affiliation and area of expertise, with no separate procedure to verify employment. Respondents select the financial centers they are familiar with and rate each city's suitability for the finance industry on a 10-point scale. Responses such as giving Busan 10 points while assigning New York, London and Hong Kong one point each were possible.
Busan in fact shows a wide gap between its score from finance professionals and its final score, which incorporates quantitative indicators. Busan's score from finance professionals was 832, equal to that of New York, the top-ranked financial center, and 21 points higher than second-place London at 811. Its final score, by contrast, was 737, below New York at 761 and London at 757. Z/Yen said the gap between assessment scores and final rankings "may be the effect of strong marketing." Lee Yoo-tae, a professor at Pukyong National University and chairman of the Financial Center Innovation Forum, said, "The GFCI is structured so that rankings are inevitably affected by marketing, so local governments clinging to ranking competition end up only lining the pockets of the consulting firm."
Kim said, "It is positive that Seoul's and Busan's international profiles have risen, but the performance of a financial center cannot be judged by an outside organization's rankings alone." She added, "For Seoul and Busan to grow into genuine financial centers, related companies and specialized professionals must gather around the institutions that have already relocated there. We will work out support measures suited to each region's characteristics so that the change can be confirmed in real terms, such as attracting financial firms and increasing jobs."
