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Korea on tough road to transformation

Park’s creative economy drive sparks start-up boom, but exposes cultural, structural barriers to creativity

Song Young-ki, the 28-year-old CEO of start-up DLighter, has a chic office in the business district of Gwanghwamun in central Seoul. Though his 1-year-old company has yet to generate revenue as its mobile app is still in the pilot stage, Song does not have to worry about rent or look for coffee shops that provide free Wi-Fi access.

Furnished with desks and sofas designed in a futuristic concept and even a foosball table, the 320-pyeong (1,058-square-meter) office is where he spends days and nights to realize his vision with his cofounder. The only catch is that he shares the office with nine other start-ups.

Song is one of the budding entrepreneurs at Seoul Center for Creative Economy and Innovation, one of 17 institutions that offer workspace, mentoring and funding for start-ups in Korea -- a major state project being pushed by the Park Geun-hye government.

“What start-up companies need the most is skilled staff, money and workspace. Having a workplace rent-free is something big for us, particularly places like this in central Seoul,” said Song, the creator of “Day Pocket,” an online social diary.

Residents like Song are granted a one-year stay at the center, along with mentoring and consulting services on legal or accounting affairs. To embrace more innovative entrepreneurs, the center plans to expand the size and invite 50 start-ups to incubate next year. 

This file photo shows members of start-up companies at the Seoul Center for Creative Economy and Innovation working to realize their dream.
This file photo shows members of start-up companies at the Seoul Center for Creative Economy and Innovation working to realize their dream.


Located on the first floor of the head office of KT, the nation’s second-largest mobile carrier, the center opened in July with the support of CJ Group -- the nation’s food and entertainment giant -- one of business groups enlisted for Park’s ambitious project.

Fifty years ago, her father late President Park Chung-hee turned a war-torn country into an economic powerhouse by fostering family-owned businesses at the vanguard of his industrial policy.

Noting that the half century-old industrial approach has reached its limit, Park has pushed her vision of a creative economy to nurture a new generation of businesses, ironically to curb the nation’s focus on manufacturing and the chaebol that her father protected.

Adopting the new industrial concept introduced by British author John Howkins, Park has pushed to nurture creative ideas from across society, assimilating them with ICT and science and technology and other industries to eventually create new technologies, markets and jobs.

Park believes that a creative economy could be a solution for emerging problems such as the deepening income inequality, slowing economic growth and rising youth unemployment.

Under her vision, the government has launched centers in 17 metropolitan cities and provinces nationwide over the past two years in collaboration with conglomerates that have strong footholds in different regions.

Seoul Center for Creative Economy opens 24 hours 7 days. (Kim Young-won/The Korea Herald)
Seoul Center for Creative Economy opens 24 hours 7 days. (Kim Young-won/The Korea Herald)


The nation’s large conglomerates, including Samsung Group, are providing technical and financial assistance to start-up firms by signing partnerships with innovation centers. Samsung supports two centers in Daegu and Gumi, while SK Group is tied to one in Daejeon and textile giant Hyosung launched a center in Jeonju to boost the carbon fiber industry in the region. Steel giant POSCO also runs a center in Pohang to nurture start-ups searching for fresh and eco-friendly business models.

Park is very keen on the success of her project, personally making frequent trips. She attended the opening ceremonies for 12 of the 17 centers despite her tight schedule and the series of political storms that have swirled around her. Her secretaries say her trips to regional centers show how much she cares about the projects and how much she wants to keep her creative economy drive alive.

Three years after she first laid the foundation for this somewhat unfamiliar concept, her vision has drawn mixed reactions.

Active advocates like Lee Min-hwa, chairman of the Korea Creative Economy Research Network, say her drive has built a favorable environment for start-ups in the Korean economy, which still heavily relies on heavy industries and exports of consumer gadgets and vehicles.

"Park’s drive on creative economy has definitely sparked a start-up boom,” Lee said.

"Now is the time for big businesses to guide start-ups to commercialize their products and seek overseas business opportunities.”

He reeled off figures to show that the vision has driven both qualitative and quantitative growth of budding enterprises. The number of newly launched businesses doubled in six years from 41,728 in 2009 to 84,697 in 2014. The money injected by angel investors grew more than 20-fold from 36.9 billion won ($31.4 million) in 2011 to 869.2 billion won as of July 2015. Korea is likely to have more than 30,000 venture firms creating more jobs. Over the last five years, employment rate of venture firms rose 8 percent annually, higher than big businesses at 2.3 percent.

Korea’s competitiveness in driving the creative economy has also improved at a rapid pace.

According to global consulting firm Bain and Company, Korea was ranked 17th this year from 25th in 2013, based on its index measuring countries’ ability to nurture and commercialize creative ideas and seek business expansion of new, innovative products. The U.S. topped the list followed by the United Kingdom and Canada.

Korea is not the only country that showed a rapid performance. Japan was ranked 15th from 32nd two years ago, thanks to its state-led “Cool Japan” drive, the company said in its report.

Despite the rosy picture, other experts and political opponents stepped up their offensive that the creative economy was just an illusion set to vanish when the next presidential race begins in 2017.

Rep. Jeon Byung-heon of the main opposition Minjoo Party lashed out at Park’s mega project saying it has only wasted taxpayers’ money so far.

The lawmaker, citing reports submitted by the Ministry of Science, ICT and Future Planning, said the administration has already injected 21.5 trillion won since 2013, similar to 22 trillion won spent by her predecessor for a controversial state project on refurbishing the nation’s four major rivers.

“I am concerned whether the massive budget is being wasted for this insubstantial project of creative economy,” he said during a parliamentary audit in September.

The public also remains hostile, Jeon said.

Quoting a survey conducted by a research group in August at the National Assembly, 61 percent of respondents said they see the creative economy as a fruitless task.

Under pervasive pressure, officials appear to be in a hurry to produce tangible results.

Managers at the centers say they feel pressured by the Future Ministry’s push to send daily reports on the centers.

“The ministry compiles reports sent by the centers on daily basis and … I heard that the office makes summaries to keep the president informed,” an official said.

The partner conglomerates, too, are feeling pinched.

Calling it a dull task, one executive said his company has been walking on eggshells to best entertain the government.

“There is nothing else to show, no progress at all because we are still at the starting point. We cannot help but feel constrained to create visual outcomes with the president at the opening ceremonies (of the centers),” another business official said on condition of anonymity.

Intellectuals also offer bleak prospects.

The government may be chasing a mirage, they say, stressing that Korea’s structural and cultural barriers would just impede integration of technology and creativity.

Starting a company does not get the deserved respect from society. Koreans are raised and taught to enter prestigious universities which then leads to an identical career path to the government and big businesses like Samsung and Hyundai.

Above all, the highly competitive society, where the value of “winner takes all” still prevails, leaves no room for those who failed, an inevitable process for start-ups.

In a book titled “Time for Accumulation,” a group of 26 professors of Seoul National University’s College of Engineering suggest that Korea now has to develop the ability to create new products based on conceptual designs of its own.

Korea Inc. needs to dispose of its long-held status as “a follower” and adopt a more creative approach, they said. But the ability to do so is a long, agonizing process of experiencing failure and analyzing the problem with a fresh perspective.

Start-ups are also afraid of the society branding them as losers.

“I believe that failure is an important step for start-ups, particularly those who start a business young. Enduring failure is a valuable experience but also a very painstaking process,” said Song of DLighter.

“I wish we could have some sort of contests designed to make those failures to stand up on their feet again, and to encourage them to start over. Money is not everything in a start-up business.”

By Cho Chung-un (christory@heraldcorp.com)

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