Friday, April 19

South Korea’s public investment: the benefits of the approach

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How South Korea’s public investment is boosting the economy

South Korea is an advanced country in terms of the development of its industrial and technological sectors. Government support plays an essential role in this, with the government making serious efforts to strengthen businesses. According to Euractiv, South Korea’s venture capital investment is growing thanks to government support.
At first glance, Korea may appear dominated by the private sector, but this is not the case. The country has adopted a system of state-led industrial development, which involves active government involvement in the economy. This approach has been used for more than 50 years and has produced excellent results.

Formation of the Korean economic model

In the 1960s, the local government adopted a model of industrial development based on five-year plans. In this way, the authorities stimulated a declining economy. To do this, they took over the financing of all the industrial conglomerates – chaebols – which became the main drivers of the market. The state took over strategy development, control of business development and entry into the global arena. This approach took the Korean economy to the next level and continues to yield positive results.

South Korea's investment in local innovative startups

Over time, the government’s role in shaping the industrial sector has changed. The authorities now focus mainly on supporting young companies. The government provides venture capital to develop innovative projects and promising companies in IT and related sectors. The Korea Venture Investment Corporation (KVIC) manages the following investments:
– in venture capital funds;
– in startups that have previously received funding from certain government-trusted venture capital funds.
In this way, the authorities help startups to get a large amount of investment to develop their idea.

Disadvantages of the system

The South Korean economic model has helped the country to achieve a high position on the world stage despite the difficult post-war years and crises. However, experts also point out the strategy’s weaknesses, largely based on the desire to catch up with the superpowers. Instead, the focus should be on sectors with a promising future, such as technology and semiconductor production. This focus increases the importance of government support for new ventures and investment in innovative startups.
Moreover, public funding can help to finance risky investments and encourage unique projects to emerge. In this respect, the country has notable advantages over other countries, such as members of the European Union. European government funding has a history of conservatism and bureaucracy, an obstacle to developing innovative sectors. And Korea can offer an excellent alternative, supporting businesses and helping to increase the number of startups.

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