Government Supports Reduction of Over 2 Trillion Won in R&D Costs for Small and Medium Enterprises and Mid-sized Companies

Support for R&D Labor Costs and Reduction of Research Expense Burden for Small and Medium Enterprises and Mid-sized Companies

The photo shows the 4th Emergency Economic Meeting on COVID-19 response held at the Blue House on the 8th. (Photo by Yonhap News)

[Asia Economy Reporter Moon Chaeseok] The government announced on the 9th that it will reduce the research and development (R&D) burden of small and medium-sized enterprises (SMEs) and mid-sized companies by about 2 trillion won, as the novel coronavirus infection (COVID-19) has spread worldwide. This is a follow-up practical measure to the announcement made at the 4th Emergency Economic Meeting held the previous day.

According to the government, this measure will be implemented according to current government regulations without additional funding. The focus is on providing support swiftly and creating a stable research environment for researchers.

After the administrative rules of each ministry, including the Ministry of Trade, Industry and Energy, the Ministry of Science and ICT, and the Ministry of SMEs and Startups, are revised and finalized by mid-month, the measures will be enforced. The target companies for support are all SMEs and mid-sized companies participating in government R&D projects supported by the three ministries. This includes new projects for this year as well as ongoing projects from last year. The measures will be implemented temporarily until the end of this year, with consideration given to extending support based on the situation at year-end.

Upon application by companies wishing to receive support, changes to project agreements between the applying companies and the relevant specialized institutions will be made. For projects where agreements have not yet been established, the specialized institutions will enter into project agreements with the companies, including the support details, without requiring company applications.

Joint support from the ministries includes ▲ investing about 1.2 trillion won to support labor costs for all research personnel ▲ reducing the private burden ratio of research expenses for companies participating in government R&D from a maximum of 35% to 20% (from 50% to 35% for mid-sized companies), and reducing the cash portion from a maximum of 60% to 10% (from 50% to 10% for mid-sized companies), with an investment of about 1 trillion won.

Additionally, ▲ the payment period for government technology fees, which require companies to pay 10-40% of government support funds back to the treasury when sales are generated from government R&D support, will be extended up to two years ▲ changes to research goals, duration, and plans due to changing circumstances will be permitted ▲ fees for meetings and events canceled due to COVID-19 and costs for purchasing health equipment will be recognized.

Additional support will also be provided by each ministry. The Ministry of Trade, Industry and Energy plans not to apply debt ratio and liquidity ratio criteria temporarily in assessing corporate financial conditions this year. Under current regulations, projects are halted if the executing company does not meet financial requirements, but this will not be applied when deciding on project extensions next year.

The Ministry of Science and ICT has proposed measures to reduce company burdens by project. Companies participating in basic research projects (Leading Research Centers) supporting joint research between regional universities and companies will be exempted from cash contributions temporarily this year. This is expected to reduce contributions by about 2.8 billion won this year. The government technology fees for the Materials Innovation Leading Project and this year’s research and development special zone technology commercialization projects will also be uniformly waived.

The Ministry of SMEs and Startups will further reduce the private burden from 20% to 10% for the Startup Growth Technology Development Project (4.779 billion won) supporting SMEs and venture companies established within seven years and with sales under 2 billion won as of this year. It will support early execution of contributions for all R&D projects by up to three months. For companies located in special disaster areas such as Daegu and Gyeongbuk affected by COVID-19, qualification requirements for R&D applications will be relaxed and additional points awarded. Restrictions on participation will be lifted for companies with a debt ratio exceeding 1000% or those fully capital impaired.

This content was produced with the assistance of AI translation services.