World Economic Forum: February 2, 2022
  • South Korea is now at a critical inflection point. The country has succeeded in becoming an economic powerhouse with a technological edge, especially through big conglomerations manufacturing software and hardware.
  • The scene is starting to change. Startups are increasing in number and furthering their influence and impact on the market.
  • Mindsets, cultural differences and the language are hurdles that foreigners face when entering the South Korean market, though many more factors make it an attractive one.

BTS, Squid Game, Samsung, Mukbang, Skincare…

When you see these words, what comes to mind? Most people easily think of South Korea. Although these words represent essential aspects of the country, it is so much more.

Building an economic powerhouse

Once one of the poorest countries following the Korean War in the 1950s, South Korea has rebuilt its economy from scratch. With barely any natural resources available, the only asset that Korea has had to rely on is its people, who have acted as a cornerstone of the extraordinary economic growth known as the Miracle on the Han River. The country’s number one focus was to elevate education, and within just 10 years following the Korean War, illiteracy plummeted from 78% to 4%.

In parallel, the country put all its efforts into maximizing export products, starting with simple items such as garments, fibre and footwear. As exports picked up, the government focused on building more sophisticated hardware-based products for heavy manufacturing industries such as automotive, TVs, steel, mobile devices and semiconductors. At the same time, the government has strengthened its collaborative ties to support a select number of front runners in these industries, which led to the creation of Chaeobols – family led large industrial conglomerates.

While highly successful, this choice has had side effects including the uneven distribution of wealth and power and the creation of classes among the population. Economically speaking, South Korea has risen to become the 11th largest economy and the fifth largest exporter of goods and services globally. Samsung and LG have become the top display makers worldwide; Hyundai and Kia combined are third in vehicle production numbers. In July 2021, the United Nations Conference on Trade and Development (UNCTAD) upgraded Korea’s status to a developed economy.

A balancing act

South Korea is now at a critical inflection point. The country has succeeded in becoming an economic powerhouse, with a technological edge in manufacturing and hardware-based industries primarily led by large corporations. However, in the era of the Fourth Industrial Revolution, where innovative disrupters could overthrow strong incumbents, the country has been striving to use startups to foster such disruptive innovation; making the balance between industrial conglomerates and startups ever more crucial.

Korea hasn’t always been known as a startup friendly country. This recent development only occurred in the last few years thanks to government support schemes for startups like TIPS (Tech Incubator Program for Startups), a state led incubation programme that discovers and nurtures promising startups by selectively matching them with government funding. In 2017, South Korea established the Ministry of SMEs and Startups to systematically oversee various startup support schemes to continue and reinforce the momentum. Venture investments have also poured into Korean startups and have grown 78% year-on-year in 2021, surpassing 7.7 trillion won ($6.4 billion). The number of new jobs created by startups in 2021 surpassed the number of jobs created by the four largest conglomerates combined.

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