[2020 National Audit] "Kibo Guarantee-Linked Investment, Limit Increased but Investment Amount Decreased"

[Asia Economy Reporter Kim Cheol-hyun] Although the government stated it would foster and support small and medium-sized enterprises (SMEs) and venture companies, it has been pointed out during the National Assembly audit that the Technology Guarantee Fund (TGF) has actually reduced its guarantee-linked investments.

According to the 'Annual Guarantee-Linked Investment Budget and Performance' data received by Lee Joo-hwan, member of the National Assembly’s Industry, Trade, Energy, SMEs and Startups Committee (People Power Party, Busan Yeonje-gu), from the Technology Guarantee Fund on the 19th, the guarantee-linked investment amount decreased from 45 billion KRW in 2017 to 30.7 billion KRW in 2018, and further down to 26 billion KRW in 2019 and this year, showing a reduction of 19 billion KRW over two years. The investment amount for 'startups within five years of establishment,' which is the target of guarantee-linked investments, also declined annually from 43 billion KRW in 2017 to 28.3 billion KRW in 2018, 25.9 billion KRW in 2019, and 13.8 billion KRW up to August this year.

Guarantee-linked investment is an investment method implemented by the Technology Guarantee Fund since 2005, where the fund provides corporate guarantees for technology and simultaneously invests by acquiring stocks, convertible bonds, and bonds with warrants of SMEs. In 2018, the Technology Guarantee Fund Act was amended to raise the total limit of guarantee-linked investments from 10% to 20% of the fund’s basic assets, thereby increasing the total investment limit. However, despite the amendment, the investment amount in 2019 was only 26 billion KRW, which is 4.7 billion KRW less than the 30.7 billion KRW in 2018.

Guarantee-linked investments target companies with high risk that find it difficult to attract investment, especially supporting early-stage startups and technology innovation companies that are in the blind spots of private investment. Moreover, a significant number of companies that received guarantee-linked investments subsequently secured private investments, with the scale of private investments exceeding twice that of the guarantee-linked investments, playing a catalytic role in attracting private capital. Therefore, there are calls for budget expansion. Assemblyman Lee Joo-hwan stated, "With the expansion of the private venture investment market, the fund’s policy investments must be supported."

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