S. Korea Tightening Regulations on Startups in New Industries

South Korea is tightening regulations on startups, while other major countries in the world are pushing for regulatory reforms to accelerate the growth of new industries.

According to data from the Hyundai Research Institute (KRI), the number of newly introduced or strenthened regulations totaled 9,715 during the eight years between 2009 and 2016, while that of regulations intended to ease the regulatory system was only 837. The institute suggested that the regulation paradigm should be shifted toward private autonomy to achieve innovative growth of the South Korean economy.

According to the institute's report on the direction of regulatory innovation in the era of the Fourth Industrial Revolution, the paradigm should be shifted to private autonomy in order to boost the vitality of emerging industries.” In other words, market protection systems, which were designed to meet the demands of the Industrial Age in the past, need to be improved according to the needs of the coming Fourth Industrial Revolution era.

The report said that the size of the domestic media content industry, such as film, animated film and television content, showed an annual average growth of 7.4 percent from 19.9 trillion won (US$17.9 billion) in 2011 to 26.5 trillion won (US$23.84 billion) in 2015. In particular, the media content industry posted a trade surplus of US$440 million (489.06 billion won) in 2015,  with exports reaching US$650 million (722.48 billion won) against imports of US$220 million (244.53 billion won). 

The report also said more and more media content can be created when the media content rating system, which is the most typical regulation system in the media content industry, changes to a self-rating system in order to shorten the time needed for classifying media content ratings. The introduction of the private autonomous rating classification system is expected to boost sales of the digital online film market by 20 percent and this will also boost real gross domestic product (GDP) by 58.4 billion won (US$52.54 million) and create 1,200 jobs. When sales of movie theaters increase 10 percent, the amount of real GDP will rise 126.4 billion won (US$113.72 million) and the number of new jobs will grow 2,512.

The media content industry is not the only one that needs regulatory reforms. Currently, ride hailing services, like Uber, are still illegal in South Korea because of regulations, and remote medical services, which remotely connect patients with their doctors or specialists, have been at a standstill for 10 years due to opposition from vested interests. This is in stark contrast with Japan, which allowed remote medical healthcare services in 2015 and provides health insurance coverage for remote medical services in April this year, and China, which already has more than 100 million users of remote medical services.

Regarding this reality, an executive from the venture industry said, “Amid a convergence of new technologies, including artificial intelligence (AI), the Internet of Things (IoT) and big data, new products and services based on such technologies are coming into the market. However, South Korean venture companies suffer frustration in the process of reaching out to the market and end-users owing to regulations even though they have technologies and ideas.”

In this regard, the Korea Venture Business Association is planning to set up a “regulation digging system” and focus on removing regulations that hinder the growth of startups in the future.