Stop legislating against business reality

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Stop legislating against business reality

Published: 01 Apr. 2025, 00:04 Updated: 01 Apr. 2025, 20:35

Audio report: written by reporters, read by AI

Lee Jeong-min

The author is the secretary-general of the Korea Venture Business Association.

In Korea’s venture sector, troubling new statistics are circulating with increasing urgency — numbers so unprecedented they evoke not only confusion but a looming sense of crisis. For years now, venture entrepreneurs have lamented the difficulties they face. What once sounded like individual complaints is now backed by hard data, and the figures are unlike anything we've seen before.

Even during seismic global events like the 2008 financial crisis and the Covid-19 pandemic — times when major Korean conglomerates and small businesses alike were rocked — venture companies maintained steady, upward growth, both in size and quality.

But recent trends paint a different picture. The number of technology-based startups has declined for four consecutive years. For the first time in history, venture companies as a whole have posted an operating loss. Annual venture investment, which peaked at 15.94 trillion won ($10.8 billion) in 2021, has since fallen by more than 20 percent. Funding for early-stage startups has plummeted.

Unsurprisingly, entrepreneurs are bracing for tougher times. The Business Survey Index for the first quarter of 2025, published by the Korea Venture Business Association, sits at a bleak 88.9 — down a staggering 21.8 points from the fourth quarter of 2024 at 110.7.

These numbers reveal the current state of Korea’s venture industry — once the engine of national innovation and a key player in global competitiveness. The reality is sobering, and for those of us in the field, deeply disheartening.

A image of mobility service Tada. [VCNC]

It is encouraging to hear the government and National Assembly repeatedly emphasize a “private-sector-led” economy. In today’s era of the Fourth Industrial Revolution, public authorities simply cannot anticipate every variable or micromanage economic policy. The era of top-down control is over.

But the devil is in the details. A private-sector-led economy implies trusting in the market’s capacity for innovation, embracing dynamism, and accepting outcomes shaped by rational choices. Ideally, the government and lawmakers would go further: reforming outdated systems in line with global standards and dismantling stifling regulations that have reached catastrophic levels.

Yet for decades, regulatory reform has been more slogan than substance. The gap between legal frameworks and the real industrial landscape has only widened. From the vantage point of Korea’s innovation-driven companies, the regulatory climate borders on disastrous.

An amendment to the Commercial Act was passed at the National Assembly in Yeouido, western Seoul, on March 18. [NEWS1]

What’s more alarming is the persistent creation of new regulations by policymakers who seem detached from the marketplace, guided instead by abstract ideals. These misguided efforts pose a direct threat to entrepreneurship and corporate innovation.

Consider the so-called Tada Ban law, or the blanket implementation of the 52-hour workweek without accounting for the unique demands of each sector. Attempts to pre-regulate platform companies fall in the same category. From a business perspective, such measures are baffling — layer upon layer of red tape that hobbles growth.

The latest example is a proposed amendment to the Commercial Act, currently under debate in the National Assembly. The bill would require all company directors to act in the best interests of both the corporation and all shareholders. While this may sound noble in theory, the realities of the business world are far more complex.

Lawmakers and policy designers should step into the economic trenches and see for themselves. Can directors truly balance the competing interests of various shareholders while also making bold decisions that foster innovation?

Why haven’t more advanced capitalist countries adopted such idealistic provisions? Has the National Assembly considered the potential for such rules to be exploited? Imposing these abstract, one-size-fits-all ideals on all businesses is little more than dogmatic idealism disguised as law.

In the real-world marketplace, there is no room for ideological posturing or partisan gain. If we are to honor the principle of private-sector leadership, then we must trust the market and adopt a pragmatic, field-oriented approach to policymaking.

As lawmakers rush to pass the Commercial Act amendment, I am reminded of a National Assembly member who once supported the Tada Ban but later acknowledged their mistake and issued a public apology. That rare moment of reflection deserves applause.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.