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Korea’s Strict Regulations Push Large Businesses to Invest in Overseas Startups
Regulations on Mobility Industry
Korea’s Strict Regulations Push Large Businesses to Invest in Overseas Startups
  • By Youn Won-chang
  • August 3, 2018, 10:33
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Mirae Asset and Naver will make a US$150 million (169.35 billion won) investment in Grab through “Asia Growth Fund”which was created based on the business tie-up.
Mirae Asset and Naver will invest US$150 million (169.35 billion won) in Grab through “Asia Growth Fund,” which they have jointly created.

Mirae Asset Financial Group and South Korea’s top internet portal Naver Corp., which have been in partnership, are to make a large investment in Singapore’s Grab, the largest ride-hailing firm in Southeast Asia. This is their second investment in the mobility industry overseas after jointly investing 280 billion won (US$248.01 million) in China’s Didi Chuxing Technology Co. in April.

As the domestic car sharing industry is making a slow progress due to strict regulations, more and more South Korean large businesses are investing in start-ups abroad. Accordingly, some experts point out that the South Korean government should relax related regulations as soon as possible.

Mirae Asset and Naver announced on August 2 that they will invest US$150 million (169.35 billion won) in Grab through “Asia Growth Fund,” a fund they have jointly created. Grab provides its ride-hailing service in 500 cities of eight countries in Southeast Asia. Japan’s SoftBank Group and China’s Didi Chuxing are among its major shareholders.

With the latest investment, the number of domestic large businesses investing in Grab increased to four, including Hyundai Motor Co. and SK C&C Co. Their cumulative investments amount to 251 billion won (US$222.32 million).

South Korean large businesses invest in the global mobility industry because they have recognized its high growth potential. The corporate value of China’s leading ride-hailing firm Didi Chuxing is estimated at US$80 billion (90.32 trillion won). Grab is also worth approximately US$6 billion (6.77 trillion won) now.

In contrast, Kakao Mobility, a transportation service subsidiary of Kakao Corp., attracted 500 billion won (US$442.87 million) investment from Texas Pacific Group Inc. (TPG), one of the four largest private equity fund management firms in the world. Kakao Mobility is valued at 1.6 trillion won (US$1.42 billion) in South Korea.

However, the company is struggling to develop profit models due to regulations. In addition, it scrapped a plan to introduce an “immediate dispatch” service, which allows 5,000 won (US$4.43) paying users to be immediately and unconditionally matched with an available taxi nearby even when they are in congested areas at the busiest hours. It faced the opposition of the Ministry of Land, Infrastructure and Transport and the city of Seoul.

Its plan to launch “carpool,” a car sharing service for commuters, is also at standstill because of the strong opposition of the taxi industry. In other words, Kakao Mobility has lost momentum to raise the corporate value and jump up to be a global leading ride-hailing platform by attracting additional investments.

The window of opportunity for the domestic mobility industry seems to be completely closed. Carpooling start-up Poolus, which managed to grow despite regulations, underwent restructuring owing to financial difficulties, while Modoo Shuttle, which operated shared buses during the rush hours, may need to give up on its business model itself with the local governments’ stern crackdown.