November 28, 2024

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SMEs and Startups Minister Lee Young (SMEs and Startups Ministry)

By Lee Young

SMEs and Startups Minister

With rapid growth led by large conglomerates, South Korea was able to be the world’s 10th largest economy. But now, startups are becoming another growth engine for the country, backed by the SMEs and Startups Ministry paving a powerful avenue for growing and developing high-potential firms.

Fifty percent of Korean products that received the Innovation Awards at Consumer Electronics Show last year in the United States were from venture and startup companies. Venture firms, especially those who generate 100 million won ($811,00) or more in revenues are among the leading employers in the nation, and the top three in terms of revenue.

In the pandemic era, digital transformation has also become central to creating resilient global economies. Compared to 20 years ago, the number of digital tech giants among the world’s top 10 companies in terms of market cap increased from two to eight as of 2021.

However, Korea has failed to place a unicorn company with a corporate value of 1 trillion won on the list of world’s top 100 companies, while rival countries have made advancements during the contactless push for businesses.

Noting that the nation needs an effective strategy for the pivot towards innovation, the Ministry of SMEs and Startups has put forward an initiative called “Great transformation to become a global startup powerhouse” to tackle complex economic crises and secure a new growth driver for the digital economy. The movement vows to start remodeling existing companies based on digital transformation and global expansion as well as creating new firms.

As the first phase of the initiative, we plan to expand the global funds from 6.7 trillion to 8 trillion won and set up new global K-startup centers in Vietnam and Europe. Also, we will strengthen support for foreign entrepreneurs including students and actively host the global networking event ComeUp to make Korea a global startup hub.

In order to foster new startups in the tech-heavy industry, a business area where Korea remains vulnerable, the government will invest 2 trillion won for the next five years to help them target global markets and boost commercialization and research and development. 8 trillion won will go into private fund of funds and other venture funds to accelerate a fast scale-up of venture and startup companies.

Also, the government plans to provide support for small companies which indirectly export their products with large companies acting as middlemen. Currently, indirect exports take up 21 percent of the nation’s total exports.

We will make efforts to diversify export countries to emerging markets including the Middle East and South America, rather than being dependent on a small number of countries. Strengthening exports of digital products such as online platforms, software, and content is a key growth strategy for startups as well.

Keeping in mind the chronic problems of small manufacturing companies, such as lack of manpower and low productivity, we look to join hands with large companies to build smart factories powered by artificial intelligence. Also, through a grand policy reform, we plan to reduce support for research and development that yields poor results and fail to commercialize, focus on expanding innovative research and development that takes on new challenges.

Lastly, nurturing local brands and markets as leading brands well-received here and overseas is another key agenda item. The government will support small businesses that can spur innovation to help them turn into venture companies. These local ventures and mom-and-pop shops are expected to be at the vanguard of shaping local culture.

In terms of e-commerce, the ministry will collaborate with online shopping platforms to create jobs for 100,000 small ecommerce business owners every year and create the so-called “digital traditional market” where the entire retail process including online shopping, logistics, delivery and customer service will be digitalized that can in turn increase the sales revenue for small firms.

In the future, the digital economy will reshape all human experience. The secret to building a new future in the wave of change is to leapfrog as a “global startup powerhouse.” The Ministry of SMEs and Startups will lead the way, based on support from private-public partnership, to become “Startup Korea.”

Lee Young is South Korea's SMEs and Startups minister. The views in this column are her own. -- Ed.

By Byun Hye-jin (hyejin2@heraldcorp.com)