November 28, 2024

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SMEs and Startups Vice Minister Cho Ju-hyeon (SMEs and Startups Ministry)

By Cho Ju-hyeon

Small and midsized enterprises in Korea have shown remarkable progress in innovation in the global markets, pushing the need for systematic support from the government.

Of the 20 Innovation Awards winners at the 2023 Consumer Electronics Show held in January, nine were Korean companies. Among them, five were ventures and startups. This result was driven by continuous efforts from small companies, as well as the government’s stable funding in research and development.

But concerns loom over the low performance of SMEs in comparison to the level of government support, leading to a so-called “Korean R&D paradox.” In 2021, the nation’s total research and development expenditure came to 102.1 trillion won ($78.6 billion), the fifth-largest in the world, with the government’s budget reaching 27.4 trillion won. But the commercialization of introducing new products and services takes up only 50 percent. Of course, commercialization cannot be the key evaluation factor of successful research and development. The development of proprietary technology, which inevitably comes with countless cases of failure, is also important. However, we must consider ways to elevate the performance of SMEs with a more efficient support package.

In January, the Ministry of SMEs and Startups announced its plans to reform R&D support schemes for small companies.

The policy offers more opportunities for SMEs to dive into the research sector. Previously, companies in a poor financial situation with a debt ratio greater than 1,000 percent were not qualified to apply for receiving governmental support. But considering this had been a strict requirement for startups that mostly rely on policy funds, the new plan stipulates the gradual easing of financial requirements and assessments on whether proposed R&D projects show technological capacity and growth potential, lowering the bar for small companies.

In addition, the burden of preparing for a research project application has been lifted, with more autonomy guaranteed in using the funds. The minimum requirement of an application of 30-40 pages has been reduced to an application of up to 20 pages focusing on key research goals and methods. SMEs can enjoy a more self-driven research environment with changes made in the prior approval requirements of altering the business plan to post notification.

The ministry supports high risk and high return research projects, injecting 10 billion won in public and private funds as well.

It plans to expand its scale-up programs, which provides additional investments to startups formerly backed by private companies. The ministry will be adding support through investments and loans to contributions.

For SMEs, who are at the forefront of innovation, the ministry will make efforts to let them reach their full potential through a constant reform process.

Cho Ju-hyeon is the vice minister of SMEs and startups. Views expressed in this column are his own. – Ed.

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