Keep business adventurousThe Small and Medium Business Administration unveiled the second phase of its plan to facilitate the growth of 1,000 green venture enterprises. Last month, President Lee Myung-bak underlined the importance of “creating a venture boom” like the one in the early 2000s to resolve the issue of youth unemployment and encourage entrepreneurship at an emergency meeting of his economic committee. The plan is an odd collection of policy measures, and it would be impractical to expect that it will offer any significant solutions to these issues.
On the surface, the plan looks similar in many ways to the one implemented to boost business ventures in 2004, especially in terms of the creation of a government-backed insurance fund, the promotion of mergers and acquisitions, and the introduction of the repechage system, except that it is larger in scale.
Since then, however, the government has had an opportunity to make a firm commitment to nurturing new business ventures.
The number of business ventures in Korea currently amounts to more than 20,000. The annual sales of NHN Corporation, an Internet content service operator, exceeded 1 trillion won ($868 million), with 202 venture companies that have annual sales of over 100 billion won. The market capitalization of NCsoft, a leading online game company, and Seoul Semiconductor exceeded 1 trillion won, respectively.
The first venture promotion policy, which was initiated during the Kim Dae-jung administration, may be said to have yielded some success. However, the venture bubble has also caused significant side effects. Fake venture enterprises played games with the money and then vanished into thin air. A considerable number of that first generation of CEOs received harsh legal punishments for their involvement in accounting fraud, embezzlement and stock price manipulation. This is a painful wound.
Without business ventures that are fully armed with technology, ideas and a strong, challenging spirit, Korea can hardly expect another economic turnaround.
However, the government should play a limited role in transforming the dreary landscape of these new business ventures. Instead, it should launch efforts to deregulate, to ensure there is tangible progress from when a business starts up to its growth and to its revival. Meanwhile, the related tasks should become the responsibility of the market and the private sector.
We need to remember that most of the start-ups that received excessive policy protections in 2004 failed, while also keeping in mind that the most successful ventures received no government support and made the best of a bad bargain based on their own strength and ingenuity.