Korea commits $1.7b to start-up ecosystem

The idea is to improve the national coronavirus response model, including test-trace-treat capabilities, while also developing the government’s “untact” policy for creating a more automated and online-oriented business sector. There will also be significant support for private M&A.

According to a release from the Ministry of Economy, the state-owned Korea Asset Management Corporation (KAMCO) will oversee a KRW2 trillion corporate asset-buying program, providing guidelines for asset prices and participating in deals. KAMCO will match buyers and sellers, while co-investing with private equity funds, corporate restructuring funds, and the National Pension Service (NPS).

Additional private sector support is expected to come from an easing of regulations around corporate venture capital firms. The government is set to reveal plans next month under which non-financial holding companies will be allowed to own corporate VCs. The move is intended to increase investment by large companies into start-ups. However, this has been a point of contention in domestic politics, with antitrust groups describing it as excessively empowering for chaebols.

These measures are part of a KRW100 trillion package, including KRW60.5 trillion for public sector support and KRW15.2 trillion for private investment in public projects. The government highlighted soaring unemployment as the main economic pain point following a third consecutive month of net job losses in May. Next month, it plans to launch a 150,000 private-sector job creation program that will provide incentives and hold job fairs specifically for the private sector.

Investment in Korean private companies has proven relatively resilient during COVID-19 due to a sense that success containing the coronavirus has kept most sectors running. According to AVCJ Research, start-up commitments totaled $346.4 million across 73 deals in the first quarter of 2020, compared to $477.8 million across 99 deals during the same period last year. Last month, state-owned Korea Development Bank and Korea Growth Investment jointly committed KRW2.5 trillion to the local VC ecosystem.

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• Topics
• North Asia
• Regulation
• South Korea
• Economy
• M&A
• Venture
• covid-19
• coronavirus