South Korea has spent years trying to solve one of the country’s most persistent economic problems. Too much of its population, corporate activity, finance and high paying professional work is concentrated in and around Seoul, while many regional cities struggle to retain workers and attract investment.
The government’s answer has been to move public institutions out of the capital and use them as anchors for regional economies. The logic is straightforward. Move a large institution, and jobs, household spending and related business activity may follow.
That strategy is now running into a more difficult test as South Korea considers moving some of the institutions that help finance the country’s industries and exports.
About 2,000 employees from Korea Development Bank, Industrial Bank of Korea and the Export Import Bank of Korea gathered outside KDB headquarters in Seoul’s Yeouido financial district on Aug. 11 to oppose the possibility that their institutions could be relocated outside the capital.
The three banks occupy a different position from many other public institutions. Korea Development Bank is a government owned policy lender that finances major industries and corporate restructuring. Industrial Bank of Korea is a government controlled bank focused heavily on financing small and midsize companies. The Export Import Bank of Korea is the country’s official export credit agency, providing financing for South Korean companies and overseas projects.
Their workers argue that the government is trying to solve Seoul’s economic dominance by moving institutions whose work depends heavily on the very concentration the government wants to break apart.
Many of South Korea’s largest corporate headquarters, financial firms and professional services are concentrated in the Seoul metropolitan area. Foreign financial companies and diplomatic missions are also heavily centered there. State bank unions say moving their headquarters elsewhere while much of their business network remains in Seoul could make policy financing less efficient and weaken the institutions’ ability to respond quickly when companies or industries need government backed support.
The government sees the same concentration from the opposite direction.
South Korea’s regional development problem is difficult to address precisely because companies, jobs and people continue to gravitate toward the capital. If public institutions are allowed to stay in Seoul because their partners and workers are already there, the government risks reinforcing the concentration it is trying to reduce.
President Lee Jae Myung of South Korea has said his administration is preparing another round of public institution relocations and intends to move as many organizations as possible within practical limits. Lee has also said the government wants to avoid spreading institutions too thinly across the country and instead concentrate them in larger groups so that relocations generate stronger regional economic effects.
For workers at the three state backed banks, however, the dispute is also about whether jobs once considered among the safest and most desirable in South Korea are losing their appeal.
Government backed banks were once widely viewed as elite employers because they offered relatively high salaries, strong job security and prestigious careers. In South Korea, such positions were often described as jobs so desirable that they were compared with workplaces granted by the gods.
That reputation has weakened.
Commercial banks and private companies have become more competitive in compensation, while younger employees have become more willing to leave traditional long term employers. State bank unions now argue that Seoul based employment has become one of the remaining advantages keeping some workers from moving to the private sector.
Turnover figures cited in the original report show how quickly the situation has changed. Industrial Bank of Korea’s turnover rate increased to 3.75% last year from 1.35% in 2021. Korea Development Bank’s rate rose to 5.3% from 2.25%, while the Export Import Bank of Korea saw its rate climb to 3.35% from 1.95%.
Union officials fear relocation could accelerate those departures.
For many employees, a headquarters move would involve more than a longer commute. Because so much of South Korea’s financial and professional labor market is concentrated in the capital region, leaving Seoul can affect future career options as well as decisions involving housing, spouses and children.
One union official said some workers facing the possibility of relocation had already chosen higher paying positions at private companies rather than risk moving with their employers.
That concern helps explain why employees who once held some of South Korea’s most sought after jobs appeared in the streets wearing red protest headbands after leaving their offices.
At the Aug. 11 rally, workers arrived with employee badges still around their necks and office bags in hand. After eating meals prepared by their unions, they raised signs and shouted slogans opposing relocation toward the National Assembly.
Union leaders also argued that the three policy banks remain financially valuable to the government. According to union officials, the Export Import Bank of Korea is paying about 500 billion won in dividends to the government this year, while the combined dividends of the three banks are approaching 2 trillion won.
Some lawmakers have joined the opposition.
Rep. Kim Hyun Jung of South Korea’s ruling Democratic Party argued that finance depends on networks and said regional economies need access to low cost policy financing more than they need the physical headquarters of state banks. Rep. Han Chang Min of the Social Democratic Party also criticized the way the relocation issue is being discussed and supported the unions’ opposition.
The dispute is spreading beyond the three lenders.
The Korea Deposit Insurance Corp., a government backed institution that protects depositors and handles troubled financial institutions, has held a policy forum opposing relocation. The Korea Inclusive Finance Agency, a public institution that supports lower income and financially vulnerable borrowers, has also begun explaining the relocation issue to employees.
The union representing NH NongHyup, one of South Korea’s largest financial groups and a network built around the country’s agricultural cooperative system, is also opposing relocation and considering stronger labor action.
Its union argues that moving NongHyup related organizations would remove a large number of workers and their spending from neighborhoods around its Seoul offices. That argument highlights another complication in the government’s regional development strategy. Moving jobs to strengthen one local economy can also weaken the commercial districts that lose them.
The confrontation could soon expand beyond protests.
The Korean Financial Industry Union, the national labor organization representing workers across the financial sector, has failed to reach an agreement with employers over wages and a proposed four and a half day workweek. It is preparing for a strike on Sept. 4 and plans to add the relocation issue to its broader labor campaign.
The government could announce its second public institution relocation roadmap as early as September.
The coming decision will test whether South Korea can use public institutions to reduce the economic dominance of Seoul without weakening institutions that have built their workforce and business networks around the capital.
For the government, leaving major public organizations in Seoul risks perpetuating the regional imbalance it wants to fix. For the state banks, moving away from Seoul risks losing employees and separating their headquarters from much of the financial and corporate network they were created to support.
Both sides are pointing to the same reality.
Too much of South Korea’s economy is concentrated in Seoul.
They simply disagree over whether moving the banks will help solve that problem or make another one worse.
