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Gov’t to back SMEs for research projects

The government plans to shore up small- and mid-sized enterprises for their investment in research and development to expedite their growth and fend off the workforce exodus to large companies, officials said Wednesday.

The Ministry of Knowledge Economy will boost subsidies for SMEs to 40 percent of its R&D budget by 2015 from last year’s 26 percent, said Chung Yang-ho, head of the ministry’s industrial technology policy division.

Currently, the ministry spends about 4.5 trillion won ($4 billion) on R&D support, which accounts for 30 percent of its entire expenditure. State-run research institutes receive about 62 percent of the total and major corporations the remaining 12 percent.

With the new policy, the share of large businesses will diminish to a single digit by then, Chung said.

“Local businesses’ lack of specialized workforce has made it difficult for them to invest in new areas,” Chung said. “SMEs especially have seen their young talents migrate to big firms and other jobs.”

The ministry noted that private investments in R&D have expanded by 11.2 percent on average between 2006 and 2010 despite a global economic slowdown in 2008-9.

But the growth pace has slowed down during the period in relation to government spending, which increased 12.5 percent annually to nearly 44 trillion won last year.

SMEs and startups in particular are injecting less and less money into R&D while increasingly depending on state coffers, which currently take up nearly 50 percent of their R&D funds.

Korea stands at 21st among 30 members of the Organization of Economic Cooperation and Development in terms of R&D spending by SMEs.

Conglomerates, meanwhile, scaled up the amount of investments but its ratio to sales has constantly dropped in the five-year period. The proportion of professionals with a master’s or doctoral degree to their research teams went down as well.

The government’s rising research spending is in line with its “Science and Technology 577 Plan” aimed at jacking up the nation’s R&D investment to 5 percent of gross domestic product by 2012 and transforming Korea into one of the world’s seven science and technology powerhouses.

But its funding policy has drawn criticism over its efficiency. The Korea Institute of Science and Technology Evaluation and Planning pointed to poor quality of papers as an indicator that the outcome did not live up to expectations.

KISTEP crafted an index to assess papers issued after R&D projects, using such factors as the influence of the journals where the papers were published and the number of citations per paper.

The state-run think tank found that Korea’s quality index lags behind the international average and deteriorated for two years in a row to 2009. When it singled out papers dictating government-led programs, the figure was far worse and declining.

To rejuvenate private R&D activities, the ministry said it will foster “open” collaboration between industry, academia and research institutes to facilitate demonstration and accelerate commercialization after the project.

“Existing R&D strategies have shown limits in the face of kaleidoscopic changes especially in the global information and technology market,” Chung said.

“Given uncertainties such as Europe’s deepening crisis and a U.S. rating cut, we need to boost investments in innovative programs in the private sector to leap to become a first-mover.”

By Shin Hyon-hee (heeshin@heraldcorp.com)
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