In the Digital Economy Era... Driving the Activation of Technology Startups

Minister Park Young-sun of the Ministry of SMEs and Startups. Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Moon Hyewon] The government is revamping the current manufacturing-centered startup criteria to drive the activation of diverse technology startups suited for the digital economy era.

The Ministry of SMEs and Startups announced that the revision of the Enforcement Decree of the Small and Medium Enterprise Startup Support Act, which includes the redefinition of the startup scope and the setting of a public procurement ratio for startup company products, as well as the revision of the Enforcement Decree of the Market Support Act to promote win-win cooperation in public procurement between large and small-medium enterprises, were approved at the Cabinet meeting on the 6th and will be implemented from the 8th of this month.

The revision of the startup scope included in this enforcement decree amendment is a follow-up measure to the "Revision of Startup Scope to Activate Convergent Startups," a core task of the "10 Major Industry Regulatory Innovation Plan" announced at the 16th Emergency Economic Central Countermeasures Headquarters meeting on the 17th of last month.

The scope of startups eligible for government support has remained largely unchanged since the Small and Medium Enterprise Startup Support Act and its enforcement decree were established in 1986, focusing on manufacturing. This revision reflects the changed startup environment and represents a significant overhaul after 35 years.

According to the Ministry of SMEs and Startups, the criteria for determining whether a business is a startup have shifted from physical elements to human elements, allowing various types of business models to be recognized as startups. Previously, acquiring another company's factory and starting a business was not recognized as a startup. Now, if a new business is launched by a different person with a new item, it is recognized as a startup. Also, previously, restarting a business in the same industry after closure was never recognized as a startup, but now if the business is started after 3 years (2 years in case of bankruptcy or insolvency), it is recognized as a startup.

Additionally, public institutions participating in the public procurement system are required to set a target ratio of 8% for purchasing products from startup companies out of their total annual procurement performance. The Ministry of SMEs and Startups set this target ratio through consultations with related ministries based on the average value of 8.6%, which was the average amount of procurement contracts made by public institutions with companies less than 7 years old from 2015 to last year. While guaranteeing the autonomy of public institutions in product purchasing, the ministry plans to review the performance and adjust the ratio after 2 to 3 years of operation. Applying the 8% ratio to last year's public institution procurement performance corresponds to approximately 11 trillion KRW.

The revision of the Enforcement Decree of the Market Support Act, which promotes win-win cooperation in public procurement between large and small-medium enterprises, is a follow-up to the amendment of the Market Support Act (last April). It includes support for products that combine different technologies and create social and economic value, enabling their entry into the public procurement market through win-win cooperation between large and small-medium enterprises.

The "Public Procurement Mentor System" (Public Procurement Win-Win Cooperation Support System) is a system benchmarked from the U.S. federal government's "Mentor-Prot?g? Program," adapted to the Korean procurement market situation. Since January this year, the Ministry of SMEs and Startups has selected and supported 26 projects (95 products) through two announcements. Unlike the U.S., small businesses directly sign procurement contracts with public institutions, and large companies subcontract part of the contract from small businesses. This system is designed not only to strengthen the delivery capabilities of small businesses but also to promote the localization of materials and components. The support areas of the Public Procurement Mentor System are divided into ▲Innovation Growth ▲Materials and Components ▲Capability Enhancement ▲Technology Convergence ▲Value Creation according to the win-win cooperation method.

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