Korea's venture investment below 50% of U.S. and China

Korea's venture investment below 50% of U.S. and China. June. 09, 2017 07:08. by Saem-Mool Lee evey@donga.com. Recent report showed that the amount of investments in ventures compared to the Gross Domestic Product (GDP) in Korea was below 50 percent of those of the U.S. and China.

According to the report titled “Comparison, Eval‎uation, and Policy Implications of Venture Capitals Home and Abroad” issued by Korea Economic Research Institute (KERI) on Thursday, Korea’s GDP-to-venture investment stood at a mere 0.13 percent last year. This figure was one third of that of the U.S. (0.37%) where venture traditionally thrived. Moreover, the figure did not even reach half of that of China (0.28%).

“If Korea fails to close the gap with China, there are high possibilities that Korea will lose grounds in leading the fourth industrial revolution,” said Lee Tae-gyu, a fellow researcher at KERI.

According to the report, KERI argued that GDP-to-venture investment rate should be increased to 0.2 percent in the short term to catch up with China. To this end, the report estimated that the annual venture investment made at 2.15 trillion won last year should be expanded to 3.2 trillion won this year.

KERI also pointed out the urgency of promoting Corporate Venture Capital (CVC) for the Korean venture capital market to flourish. Under the Fair Trade Act in Korea, it is impossible to make a follow-up investment when a venture financed by venture capitals of large companies are incorporated as their subsidiaries.

“As most of the CVCs are financed by large conglomerates, there are high possibilities that further investments will be marred by regulations on large companies,” said Lee, implying that CVCs should be excluded from the watch list.