Government supports innovation

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Government supports innovation

The government has decided to ease regulations that require technology holding companies to own more than 20 percent stakes in subsidiaries, taking the level to 10 percent. It will also be allowing fintech start-ups developing apps for wiring money overseas to get investment from government-funded venture capital firms and allowing taxis to use mobile smartphone taximeter apps.

These were a few of the regulations seen as limiting innovation that the government decided to adjust on Wednesday.

“The government will allow new industries if there are no regulations or if the regulations are ambiguous,” said Prime Minister Lee Nak-yon on Wednesday. “We will swiftly fix existing regulations that are irrational.”

The prime minister stressed that the government will speed up its efforts to reform regulations pre-emptively before the regulations becomes an impediment to progress.

Recently, demands have been on the increase for the government to be more aggressive in encouraging innovative growth, especially as the Korean economy has been decelerating.

The Bank of Korea in October lowered its earlier 2018 growth projections from 2.9 percent to 2.7 percent.

According to the government, the required stakes that technology companies must own in subsidiaries is being lowered so they will be able to more easily raise funds.

A total of 73 technology holding companies have been created by local universities and public research institutes, and they have roughly 800 subsidiaries.

By lowering the stake that these holding companies are required to own to 10 percent, the government believes that the parent entities will be more likely to invest in the subsidiaries. Higher R&D spending would in result in the creation of more jobs.

Additionally, the government has decided to lift the regulation that has prevented fintech companies that have developed overseas-wiring apps from getting investment from venture capitalists connected to government funds. Under the existing rules, companies that provide overseas financial transaction services are deemed to be financial companies. Venture capital firms have not been permitted to buy their shares.

If more fintech companies are able to enter the market due to the availability of capital, the costs of moving funds could decrease, the government believes.

Also related to the financial services industry, the government will be updating the regulations to allow roboadvisers to expand their services.

Under the currently regulations, start-ups that utilize roboadvising in the management of client assets must have equity capital of 4 billion won ($3.5 million). The government will be reforming the regulations to lower the bar to 1.5 billion won. Following the changes, the government expects the local roboadviser market to expand to 30 trillion won by 2025.

The government said it will also look into changing the regulations on taximeters that currently prevent the use of smartphone app taximeters that utilize the global positioning system.

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