Finance Minister Hong Nam-ki was supremely confident in November last year when he said the government would consult index provider Morgan Stanley Capital International on having the country reclassified as a developed market from its current emerging market status.

The government’s drive to receive MSCI’s highest recognition is not new, as it has been pursuing it for the last 14 years. Seoul first floated the idea in 2008 to remove underlying market volatility of Asia’s fourth-largest economy, citing its global status as an emerging market.

The renewed push, however, has triggered a debate among experts. Critics question whether the upgrade would be the way to engineer market growth and even be worth the potential risk the change entails.

Data on whether Korea will see more capital inflows or outflows after the upgrade is still inconclusive. But supporters of the MSCI upgrade believe Korea would benefit from “quality money” from passive fund managers tracking developed markets, and that market volatility would be better contained.

“But an index shift does not change earnings volatility, the fundamental weakness of our market. That uncertainty will last unless we do something about our economy running on manufacturing companies, which are prone to cyclical challenges,” said Jeong Yong-teak, chief economist at IBK Securities.

Jeong said restructuring of a manufacturing-driven economy, which posts generally higher revenues in economic expansion, was the surest way to address earnings volatility. The MSCI index is a point of reference that should not tell the Korean government how to adjusts its fiscal rules, he explained.

In late January, the government said it may extend trading hours of the won spot market and allow overseas dealers to take part in the market, in a bid to put itself on MSCI watch list by June -- a step before being officially included in the developed market index.

Goldman Sachs said this week that the official inclusion could come as early as 2024, if Korea addresses major concerns MSCI has raised, including opening the contentious offshore currency market.

MSCI has said Korea needs an offshore currency market to make the transition. But easing the rules and potentially forsaking currency stability has long been contentious for Asia’s fourth-largest economy, which saw the won slip to its lowest during the Asian financial crisis in 1997 and 1998.

Kim Hak-kyun, head of research at Shinyoung Securities, said currency stability was not negotiable.

“Korea is not a key currency country like the US or Japan. I don’t think throwing away currency stability like that is really worth it (in order to) jump onto the developed market index,” Kim said.

The Korean government should also factor in a so-called investment cycle, which does not always favor top economies, Kim added.

“In the 1980s, emerging markets had a better run than developed markets. But in the 1990s, it was advanced countries. The cycle changes hands, so why not take advantage of that as an emerging market leader?” Kim said.

Others warned the government against haste in pursuing a status change, as Korea is already an advanced market according to rival index compliers like the S&P and the Financial Times Stock Exchange.

The International Monetary Fund and the Organization for Economic Cooperation Development also recognize Seoul the same way in their annual reports.

Heo Yule, a senior researcher at NH Investment & Securities, said, “An MSCI upgrade has its upside. But does that absolutely offset the downside? Have we looked through that too, and really weighed all our options before saying the upgrade is unavoidable at all costs?”