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SKorea fosters startups as it seeks economic shift

Youkyung Lee (via AP/ SMH) | May 31, 2013
South Korea's government wants to cultivate entrepreneurship after years of diminishing returns from the reliance on state-favored companies known more for their massive scale and aggressive competitive instincts than bold thinking and creativity.

Kwon Sunbeom's future was mapped out. Talented in math and science, he attended a specialized high school and majored in electronic engineering at a prestigious university. Lifetime employment at one of South Korea's towering conglomerates beckoned.

Instead, while his peers were seeking jobs at Samsung and LG, he scaled back his studies and started a company with friends. Together they invented a garbage bin that compresses rubbish using solar power and wirelessly communicates to be collected when full.

Using 50 million won ($44,000) of their own money and channeling the business in a garage spirit that made Silicon Valley famous, they lived for a month in a shabby factory without air conditioning, subsisting on instant noodles, to make their first prototype. So far they have sold 31 of their "Smart Bins" to universities in Seoul and another 12 to Saudi Arabia and the United Arab Emirates.

"I saw a garbage bin overflowing with trash in the street one day and thought someone should press them down," said Kwon. "Because there was no one, I thought it should be done by a machine. And because it was located outside, I thought it can use the solar energy as a power source."

Kwon, 25, is the kind of risk taker South Korea's government says it wants to cultivate as it reckons with diminishing returns from years of reliance on state-favored companies known more for their massive scale and aggressive competitive instincts than bold thinking and creativity.

The chaebol, as the conglomerates are known, helped transform South Korea into a wealthy industrialized powerhouse but are increasingly criticized as part of a fraying economic setup based on copycatting innovations from abroad. South Korea is also casting a nervous eye at up-and-coming Chinese companies such as Lenovo and ZTE that aspire to beat South Korean companies at their own game.

Since taking office in February, President Park Geun-hye has held up Steve Jobs and Bill Gates as examples of the talent that South Korea needs to foster.

Among the policies aimed at nurturing a "creative economy," South Korea is pouring more than 3 trillion won ($2.7 billion) into funding startups, establishing a third stock market to help new ventures raise money, and changing laws to lower hurdles for crowd-funding. To increase the chances of a financial payoff for entrepreneurs, it plans to give tax breaks and other incentives to big companies that invest in startups.

"We feel the limits of the economic strategy that led our economy in the past," said Choi Soon Hong, Park's adviser on future strategies, at a briefing earlier this month. "From the past growth model based on imitation and catching up, we have to change the growth model based on creativity and leading."

 

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