FKI "Korean Entrepreneurial Spirit Index Falls to Half Level Over 40 Years"

[Asia Economy Reporter Ki-min Lee] An analysis has revealed that South Korea's entrepreneurship index, calculated using various indicators such as cultural factors, institutional factors, economic will, business activities, and the public sector, has fallen to about half over the past 40 years.

The Federation of Korean Industries (FKI) announced on the 3rd that an analysis of the entrepreneurship index trends from 1981 to 2018 showed that South Korea's entrepreneurship index dropped from 183.6 in 1981 to 90.1 in 2018, falling by more than half over 37 years.

The entrepreneurship index is a composite result of 14 items across five sectors: ▲cultural factors such as corporate favorability and preference for entrepreneurial careers ▲institutional factors such as the level of economic institutions ▲economic will such as economic activity participation rate and civil service exam competition rate ▲business activities such as startup rate and large corporation ratio ▲public sector such as rule of law index and number of bills proposed in the National Assembly.

According to the entrepreneurship index trends by roughly decade, the index recorded 158.6 from 1981 to 1990, then declined to 100.8 from 1991 to 2000, 85.4 from 2001 to 2010, and 88.2 from 2011 to 2018. The average entrepreneurship index in the 2010s fell by about 44% compared to the 1980s.

The FKI pointed out that the biggest factors in the entrepreneurship index falling by more than half were declines in the business activities and public sector indices. The ratio of large corporations dropped from about 7% in 1981 to the 1% range in 2018. On the other hand, the number of businesses per 100,000 people increased significantly from about 352.7 in 1993, when the survey began, to 654.6 in 2018. The increase in the number of businesses alongside a decline in the large corporation ratio indicates a weakening of the growth will of existing companies, the FKI explained.

Among the public sector indices, the number of bills proposed in the National Assembly related to economic activities increased dramatically, greatly impacting the decline in the entrepreneurship index. The number of related bills proposed rose about 49 times from 491 during the 11th National Assembly (1981-1985) to 24,014 during the 20th National Assembly (2016-2020) as of April 22.

In particular, the FKI noted that all components worsened during the period 1991-2000, when the entrepreneurship index sharply declined. In the economic will sector, the civil service exam competition rate, which was about 100:7 in 1991, surged to about 100:2 in 2000. Additionally, in the public sector, the number of bills proposed doubled from 902 in the 14th National Assembly (1992-1996) to 1,951 in the 15th National Assembly (1996-2000). In the business activities sector, the large corporation ratio fell from about 2.5% in 1990 to about 1.1% in 2000.

The FKI forecasted that there is a concern that the entrepreneurship index could rapidly decline following the COVID-19 pandemic. South Korea's large corporation ratio is already among the lowest in OECD countries, and the number of bills proposed in the 20th National Assembly reached a record high of 24,014. Due to the COVID-19 crisis, there are worries about declines in corporate investment and startup rates.

Since a decline in entrepreneurship could lead to an economic crisis, the FKI argued that extraordinary measures are needed to enhance entrepreneurship, including creating a pro-business management environment through deregulation, careful proposal of corporate regulation bills, and raising awareness of entrepreneurs.

Yoo Hwan-ik, head of the FKI's Corporate Policy Office, emphasized, "In a situation where the global economy is stagnating due to COVID-19, the manifestation of entrepreneurship is more urgent than ever," adding, "To overcome this unprecedented economic crisis, all economic actors including the government and companies must do their utmost to enhance entrepreneurship."

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