Internet Regulations
With the Korean government’s indiscriminate regulations on the IT industry deepening, a growing number of local Internet companies are leaving Korea.
As the nation’s major portal operators like Naver, Daum Communications, and SK Communications, mobile and online games developers, and start-ups are all joining the trend, there is growing concern about the possibility that the local IT industry will become devoid of substance.
According to industry sources on May 25, the government’s growing regulations in recent years are prompting local Internet companies to leave the country and to gain footing abroad, instead.
Naver is a case in point. The nation’s top portal operator already established a foothold in the global market by setting up its overseas local subsidiary, LINE Corporation, in Japan. Messaging app LINE has surpassed 420 million users worldwide so far. The country’s second-largest portal site, Daum, is also trying to lay the foundations for its Android app “Sol” overseas. The company is delivering the latest information about Sol to users around the world through a global community that opened early this year. In addition, SK Communications is actively seeking to make an investment in marketing for its Android camera app Cymera in other countries including the US, even though the company has yet to decide on local marketing costs for the app.
The local gaming industry is also moving towards other countries. “Some foreign countries are trying to attract Korean gaming companies through various tax benefits and financial support,” said Kim Sung-gon, executive secretary of the Korea Internet & Digital Entertainment Association. He added, “The governments of China, some Southeast Asian countries, and the UK have showed interest in local gaming companies and have requested related information.”
Some local IT start-ups have their base in foreign countries. A head of a local start-up remarked, “Due to the characteristics of IT services, IT companies can gain their footing abroad if they put their mind to it.” The head continued by saying, “In the past, the Korean market had an advantage in that they are accustomed to Korean culture, although the size of the market was small. But with government’s regulations increasing, a growing number of people believe that it is hard to expand businesses at home.”
The main reason for this phenomenon lies in the fact that the government’s regulations are becoming stricter. Currently, there are 7 government agencies in charge of regulating the Internet industry — the Ministry of Culture, Sports and Tourism (MCST); the Ministry of Science, ICT and Future Planning (MSIP); the Korea Communications Commission (KCC); the Korea Fair Trade Commission (FTC); the Ministry of Health and Welfare (MOHW); the Ministry of Public Administration and Security (MOSPA); and the Ministry of Gender Equality and Family (MOGEF). There is growing controversy over the efficiency of regulations, since each government agency is imposing regulatory constraints upon the same issue.
In particular, the executive secretary commented on the gaming industry by saying, “There is no control tower at the governmental level. So, competition between relevant government agencies is creating more intense regulations. After the mandatory game shutdown system imposed by MCST and MOGEF, the Ministry of Education (MOE) and MOHW are apparently trying to regulate the gaming industry as well.”
Kwon Heon-young, professor of the Department of Science and Technology law at Kwangwoon University, pointed out, “The most urgent thing to realize the ‘creative economy’ policy is to establish a new agency responsible for regulating the Internet industry that can control all the government agencies.”