Tech market must be revitalized
In a joint government-corporate meeting last month on this theme, Vice Finance Minister Choo Kyung-ho said that bolstering the venture and start-up industry will be one major goal in the government’s three-year plan for innovating the economy. The measures could include lifting some of the stumbling blocks to start up a venture company, such as a requirement on a joint liability guarantee for financial loans and restrictions on stock options.
The Financial Services Commission on Jan. 8 already announced measures to ease the credit guarantee system for small and midsize companies that included a five-year exemption on the requirement on getting a joint liability guarantee from state-invested credit insurers for individuals with promising technology and solid credibility when starting up a business. It is the first relief in liability guarantees for individual start-ups.
The deregulation only applies to public financial institutions, but if it extends to private lenders and helps to increase angel investors, more young people with bright ideas, imagination, passion and skills would be encouraged to venture to commercialize their technologies.
The government in a recent economy-related meeting proposed to revise the tax system on stock options in venture companies to help liquidity and sprawling in venture capital to promote the industry. Currently, if employees exercise the option on the shares in companies, they face an income tax rate as high as 38 percent.
Under the new measures, an employee in an unlisted venture company would have a choice not to pay any tax when exercising an option to buy shares in his or her company, and instead later pay the tax on the gains when selling the shares. The measures, which could help venture companies in recruiting bright individuals, will be submitted to the National Assembly this month and could be implemented in the second half.
The government has taken practical and meaningful steps to vitalize the venture and start-up industry by removing key stumbling blocks. In order to stimulate start-ups, financial penalties on failures and protective mechanisms against risks must be lessened, and rewards and incentives must be increased to encourage talented people to take risks in starting up businesses or joining innovative companies.
But so far they are baby steps. The road remains uncertain. The government should not stop in eliminating joint liability requirements but ultimately encourage investment, not lending, in the venture industry. To vitalize the venture capital market and breed angel investors, mergers and acquisitions as well as the technology-heavy Kosdaq market need to be revitalized. Various red tape that hampers aggressive research, investment and growth should be lifted. Companies with creativity and innovation should be appreciated and encouraged to fuel entrepreneurship among young people with ideas.
One of the annoying hurdles is the local online identity verification system. More and more Koreans are shopping directly and purchasing foreign products online. But foreign consumers cannot do the same because they cannot plug into the localized digital verification system demanded by all local shopping sites for payment. Since the 1990s, to make an electronic transaction in Korea, a person must obtain a digital certificate supplied by the site with which they interact. The certificates are issued through a browser plug-in called ActiveX, supported only by Microsoft’s Internet Explorer.
Although somewhat eased, the security encryption remains widely used by banks and retailers. The compulsory encryption standard trapped the growth of the IT and security industry. The government must allow diversity in online security in electronic transactions based on global standards in order to ease expenditures for Internet companies, increase convenience for Internet users, revitalize e-commerce, strengthen financial security and reduce virus infections.
Whenever I visit countries in Southeast Asia, I cannot help but feel proud of our government system. We may not be happy about its work all the time, but it has helped to build this solid and advanced economy of ours.
But we cannot stay satisfied with our status quo. There must be fundamental and proactive changes. We hope the three-year economy innovation plan will include aggressive and progressive ideas and action.
Translation by the Korea JoongAng Daily staff.
JoongAng Ilbo, Feb. 21, Page B10
*The author is the head of the Presidential Committee on Youth Generation and the chief executive of Dasan Networks.
By Nam Min-woo