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South Korea STI policy

The 577 Initiative, part of the Science and Technology Basic Plan of the Lee Myung

Bak Administration (2008-2012) has been initiated in 2008 to foster genuine innovation in

South Korea. The number 577 has symbolic character with the 5 standing for increasing R&D

spending from 3.23% of the GDP in 2006 to 5% in 2012. The first 7 stands for 7 focus areas

which include:

1) Key industrial technologies;

2) Emerging industrial technologies;

3) knowledge-based service technologies,

4) government supported “Big Science”,

5) National- issues related technologies (Mega Trends);

6) Global issues technologies and

7) Basic research, basic and converging technologies.

Targeted Key Technologies: Biotechnology and Nanotechnology for both industries

and research centers.

Overall budget: $554 billion over 5-year period

Envisioned impact: fostering of innovation and commercialization of developments in

selected focus areas, the increase of R&D expenditures to 5% of the GDP as well as increasing

investments in basic research.

1. Political structure

South Korea, or officially, the Republic of Korea, is nowadays a wealthy and developed

country in the East of Asia, with a GDP (PPP) per capita of $35,485 and with the 15th position

in the HDI. Its impressive economic growth took place during the so called period “Miracle on

the Han River”, which refers to South Korea‟s post-war export-driven economic growth,

helping to the rapid industrialization and urbanisation, technology developments, skilled

workforce and significant rise in living standards. Seoul, the capital of South Korea is an

important global city, international trade center, prominent economic and educational hub.

During the 50´s, after the Korean War and the division of South and North Korea, South

Korea started its path to nation establishment. From historical point of view, South Korea was a

highly centralized system. After the War, it became a military dictatorship and still strongly

centralized. During the 90‟s, South Korea was moving toward a local self-governance system,

so that in 1995 the system was implemented by electing subnational administrators and

legislatures for the first time, almost coinciding with the worldwide trend for decentralization.

Local autonomy was being promoted through different decentralization reform packages in

order to transfer power to local governments, like decision-making power and control over

resources. The vertical relationship with the local governments became more sophisticated and

process oriented. Local governments gained functions to deal with their own interests such as

local economic development strategy, local planning, although much dependency on the central

power persisted, especially regarding financial matters and policy-making.

At present, South Korea has 16 regional governments: 9 provinces and 7 metropolitan

city governments, under which there are 232 local governments with relative political and fiscal

authority. The local governments are semi-autonomous and consist of executive and legislative

bodies of their own and are administrated by the Ministry of Government Administration and

Home Affairs. Higher-level local governments basically serve as intermediaries between the

central and lower-level local governments. Despite of the numerous reforms for

decentralization, the Korean subnational governments are still heavily dependent on the national

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government. Political and legal authority is concentrated by the president and the central

government, thus, the process of transferring authority to local governments has been difficult.

Therefore, Korea is characterized by the monopoly of the central government.

Korea has few natural resources and is heavily dependent upon imports for energy and

raw material. This lack has encouraged the country to find other means for economic

development. Therefore, in the 80‟s and 90‟s, South Korea was performing an industrial

restructuring towards human-capital and technology-intensive products. Technologic

development has been highly marked by the state‟s influence and intervention. Even that since

the 90‟s, reforms for decentralization were permanently implemented, Seoul, the capital of

South Korea concentrated almost half of the total population, the majority of the most

distinguished universities, most of the 30 big enterprises and foreign companies and most of the

government organizations, being also the main center for innovation. However, researchers

(Yooil Bae, Singapore Management University) mention that dominance from the center was “a

necessary evil” for Korea in the process of strong-state industrialization, to mobilize scarce

resources, to rehabilitate the national economy after the Korean War and to control democratic

development. Highly centralized governments have been a strong tradition in South Korea,

extending back more than six hundred years. Thus, the decentralization process is still ongoing

and even with the popularly-elected local governments, a long road lies ahead before achieving

a certain degree of local autonomy as in other advanced societies.

One of the most important sources of productivity growth in South Korea has been,

undoubtedly, science and technology. After the Korean War, during the military rule, South

Korea started its efforts to develop a science and technology policy through some major policy

decisions. The first steps on this pathway was the development of some basic institutions to

support the adaptation of foreign technology to domestic conditions, like the Ministry of

Science and Technology and investments in technology research institutes: Korean Institute of

Science and Technology - a government R&D facility dedicated to applied technology, Korean

development Institute, Korean Advanced Institute of Science, and Korean Atomic Energy

Research Institute. Following efforts have resulted in the creation of Pohang Institute of Science

and Technology and the Research Institute of Industrial Science and Technology. Seoul was

becoming the main scientific community and center for technology, scientific research and

innovation. Thus, in order to foster the development of other regions of the country, a 2nd

scientific community was created near Taejon – the Daedeok Science Town/Valley.

Another reason for the high productivity of South Korea's was the shift from labor-

intensive industries to those that were highly automated. Moreover, the so-called “chaebols”,

have also played a significant role for the economic growth. Chaebols were corporate groups

mainly run by families, exercising monopolist or oligopolist control in product lines and

industries. They were significantly supported by the state and managed almost 60% of the

“Miracle on the Han”. Big corporations like Samsung, Hyundai, LG have also started as

chaebols. However, the chaebols have gained strong criticism, mainly because of inhibiting

small businesses or independent entrepreneurship. It is also worth mentioning “The Creative

Research Initiative (CRI) founded in 1997 and intended to support the shift “from imitation to

innovation” research.

The Korean government has always been involved in the technologic development

through massive R&D expenditures and numbers of researchers. In 2008, Korea devoted 345

billion to R&D, accounting for 3.37 percent of GDP. In 2011, South Korea ranked number one

among 152 countries on the ICT Development Index followed by the Scandinavian countries of

Sweden, Iceland, Denmark and Finland. The main factors of ICT development are strongly

connected with the state intervention: full privatization of the industry and liberalization of the

market, a sophisticated infrastructure and high-skilled workforce, a coordination of R&D

between private and public organizations by the state through its research and policy

organizations.

The STI policy governance is also part of the centralized system of South Korea. In

2011 was reconstituted the National Science and Technology Commission (NSTC) as a co-

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ordinating agency with considerable responsibility for national STI policies and allocation of

public R&D funding. The key STI funding ministries are the Ministry of Education, Science

and Technology (MEST), the Ministry of Knowledge Economy (MKE) and the Ministry of

Strategy and Finance (MOSF). However, NSTC functions as the highest consideration and

decision council in the science technology field, both on national and local level. It establishes

and coordinates major policies for ST and is also in charge to develop local science technology

promotion plans. When establishing the vision for national S&T development, the NSTC has

the role to deliberate on local issues and establish a coordination plan for local technology

innovation policy. The mission of the NSTC illustrates the aforementioned aspects regarding to

the control of the central government on the local ones.

There are also two advisory bodies at the top administrative level like the President

Committee on Green Growth (PCGG) and the Presidential Advisory Council on Education,

Science and Technology (PACEST) chaired by the President. Besides these advisory bodies,

there are three main think-tanks for policy advice: Science and Technology Policy Institute

(STEPI), Korea Institute of Science and Technology Evaluation and Planning (KISTEP) in the

public sector and the Samsung Economic Research Institute (SERI) in the private sector. These

organizations provide significant policy evidence to the NSTC and ministries through different

tools like technology foresight exercises, benchmarking, technology impact assessments etc.

2. Policy rationales

From a cheap manufacturer and exporter, Korea has evolved into a nation that is highly

aware of the need to compete in innovation and knowledge. From the mid of 80‟s South Korea‟s

economy is committed more to technology-based economic development and focuses on the

importance of STI. In the recent decades it had high level of R&D expenditure, a highly

educated labour force, good and improving innovation framework conditions. Nowadays, Korea

has a relatively strong STI system, committed to technology-based economic development and

promotion of innovation framework conditions. Although, the efficiency of long-standing

policy emphases on manufacturing and large firms is in question. Several structural problems

have been identified, like relatively weak innovation performance of SME‟s, a lagging services

sector, limited domestic job creation among the industrial conglomerates, a dominant role and

sometimes alleged unfair business practices of the chaebols, suppressing the innovation capacity

of SME‟s. These issues led to a shift in policy priorities and led to the institution of a

comprehensive set of measures aimed to foster cutting-edge innovation and consolidating a

knowledge-based economy driven.

In 2003, the Roh government initiated some extensive innovation-oriented policies in

all the sectors of the economy, especially oriented to subnational regions, which were relatively

undeveloped comparing to the capital area and being perceived as a new source of growth. In

this way, the Five Year Balanced National Development plan (2004-2008) was introduced and

implemented, including the transfer of most ministries and public agencies to provinces outside

Seoul from 2012. Besides this, the government launched a “win-win” strategy between SME‟s

and large companies.

In 2008, a new STI policy was being developed as a new government was established.

The main failures were the lack of world-class researchers and HR, SME‟s incapacity of

innovation and lack of regional innovation, the stringent need to move from an effective

innovation follower- to an innovation front-runner and search new means of economic growth,

the university research sector performed small share of public-sector R&D, producing small

numbers of PhDs in STI, the research system was heavily inclined to thematic R&D, thus, it

was necessary to focus more on basic research; a wide gender gap in the R&D system. One of

the main problems was the difficulty on coordination of the separate Ministries innovation

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policy work. The problem was compounded by the strong rivalry among the ministries which

later led to duplication of the policies and insufficient cooperation between the ministries.

Another problem was that any innovation policy in South Korea still needed capacity

of fundamental and basic research as it was still nascent. Despite of the efforts to improve the

innovation capacity of SMEs, their innovation performance still falls far short of that of the

chaebols (large conglomerates). Due to all the basic economic activities were concentrated in

the Seoul metropolitan area, the local and regional level science and innovation was meeting

serious imbalance, in terms of lack of S&T human resources, weak regional capability in

research and weakly developed regional clusters.

From 2008, the Lee government, focused on strengthening potential output growth,

create employment, developing a more favourable business environment, making the economy

more knowledge-based. The government searched for new sources of growth, such as “green

growth” and a selection of 17 technologies and sectors. The “win-win” strategy was continued

(renamed as “shared growth”) by designating SME-suitable business areas and introducing a

profit sharing system. A Science and Technology Framework Law was created, being the legal

basis for the five-year Basic Plan of Science and Technology (2008-2012). In addition to the

Basic Plan, in 2008, Lee government announced the “577 Initiative” with the target group on

industries and research.

One of the most important points was to concentrate on strategic technology areas, and

become the world‟s seventh “S&T power”. To meet these targets, the government has increased

expenditure on R&D and has used tax incentives to encourage more private investment in R&D.

Beside this, the government was continuing to shift away from large firms towards SMEs. The

main areas the initiative were:

1. Key Industrial Technologies (Cash Cow)

Developing high value added technologies needed to sustain global competitiveness of

key manufacturing industries in Korea.

2. Emerging Industrial Technologies (Green Ocean)

Developing IT-based convergent technologies that can create new industries

Developing emerging technologies in the areas of drug, health and medical care for which

market sizes are expected to expand in the future due to aging society.

3. Knowledge-based Service Technologies (Knowledge Based S&T)

Developing knowledge-based service technologies such as S/W, cultural technology

and design, which as immense effects on the job creation.

Developing knowledge-based technologies for the enhancement of industrial

productivity such as intelligent manufacturing system technology.

4. State-led Technologies (Big Science)

Continuous development of technologies in the areas such as construction and

transportation, space & ocean, nuclear power and nuclear fusion for which private sector‟s

investment is difficult although essential for national interest.

5. National Issues-related Technologies (Risk Science)

Technological development in the area of current issues related to healthy life of people

including new types of disease such as mad cow disease and pathogenic avian influenza, and

food safety.

R&D on current socio-economic issues including international price of oil that has

recently risen sharply, and component material associated with trading deficit with Japan.

6. Global Issues-related Technologies (Mega Trend Science)

Technological development to cope with common issues of human kind such as energy,

climate change, environment and food, and to occupy vantage point in the future market.

7. Basic & Convergent Technologies (National Platform Tech.)

3. Policy scope

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Since the STI policy of South Korea has always been focusing on the supply-side

technological innovation, the present STI policy and especially the 557 Initiative is putting more

emphasis on the demand-side in order to encourage the industry becoming a first mover rather

than a catch-up follower, to respond to the social demand and to the changes in the market

resulting from open innovation.

The government introduced strategic public procurement policies for innovation-

oriented SME‟s and has increased procurement of innovative goods. To implement the public

procurement policies were developed two important programmes like The New Technology

Purchasing Assurance Scheme and the Procurement-conditioned SME R&D Programme.

According to the first programme, local governments and national companies have to procure

obligatory a proportion of innovative products and services from SME‟s, especially giving

priority for products and services with technology certification such as NEP (New Excellent

Product), NET (New Excellent Technology), the GS (Good Software), and the EPC (Excellent

Performance Certification) by governmental agents. The second programme refers to

government finance for the technological development of SME‟s, therefore, public institutions

should give pre-commitment of procurement for SME‟s MEs participating in national R&D

projects and purchase the products for a certain period after the project.

South Korea is also increasingly using standardization to encourage innovation in ICT

field. An important role for the standardization process has the Telecommunication Technology

Association through organizing public and private research institutes and private companies.

The Ministry of Knowledge and Economy has launched a programme in 2010 to

support pre-commercial stage of products, in particular, chemical materials, from SMEs. The

main centre for the testing purposes has been established in a government-supported research

institute. The Ministry has also hosted annual global R&D forum since 2009 to enhance

demand-side through an open innovation system.

Another measure is offering tax incentives for consumers and companies who buy

electric vehicles and green products in the field of new and renewable energy. The Korean

government has also been strengthening inter-departmental cooperation to coordinate efficiently

demand-side innovation policies.

4. Instruments, policy –mix, governance issues

R&D policies in Korea have been known to use a variety of direct instruments for the

promotion of national R&D activities and industrial development, including tax credits, tax

exemptions, R&D grants and subsides, with a national R&D approach which focus more and

more on indirect instruments, such as:

- Establishment of clusters

- Incubators

- Networks for the promotion of private companies innovations

- S&T infrastructure-service development:

Establishment of technology intermediaries

Intensifying technology certification programmes

Building-up of systematic IPR structures

Since 2008, the Ministry of Education, Science and Technology coordinates the

activities in science and technology in South Korea.

In 2011, the new Science and Technology Council (controlling 75% of the country‟s

R&D budget) 1 was launched.

1 http://www.koreatimes.co.kr/www/news/nation/2011/04/113_83887.html

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Recent changes in the innovation policy mix

For the „Science and Technology Basic Plan: 577 Initiative‟, the government set up a

goal: to devote 5% of GDP to R&D by 2012. To reach this goal, the government promoted

private investments in R&D through several policy instruments, as well as an increasing ration

of government expenditure on R&D each year. Various tax incentives to encourage more

private investment in research and innovation were implemented.

To strengthen the corporate innovation capabilities of the nation, the government set

up a variety of technological/financial products, such as encouraging private financial

institutions to actively involve and turn their collateral-based loans into technological value-

based ones.

Many government departments including the MKE (Ministry of Knowledge and

Economy) and the Small and Medium Business Administration (SMBA) set up a financial

scheme to raise technology funding to €4.7b (KRW 7.1t) by 2012, thanks to direct financial

support scheme and micro-credit loans, for both technology-based SMEs and individual-based

entrepreneurial founders.

The S&T Investment Fund of MEST and the Technology Entrepreneurship Investment

Fund of the MKE are part for the government plans, to connect anticipated results from the

government-funded researches with technology funds, thus making easier technology transfer

and raising money for their commercialisation.

According to OECD, the Korean government has been providing diverse tax incentives

to promote private sector‟s R&D investment and innovation activities such as:

deduction of income and corporate tax as much as a certain percentage

(25% for SMEs and 3~6% for non-SMEs) of research and human development cost

related to general R&D activity;

deduction of income and corporate tax as much as a certain percentage

(30% for SMEs and 20% for non-SMEs) of research and human development cost

related to new growth engines and core technology development R&D activities;

deduction of income or corporate tax as much as 10% of money

invested in research and human development facilities;

exemption of local tax on real estate owned by corporate in- house

R&D institutes; deduction of income or corporate tax as much as 7% of technology

acquiring cost until 2012;

50% cut of income tax of foreign experts until 2012; and no tax charge

on researcher‟s income acquired by research activity.

As a result from the previous policy instruments as mentioned above, the number of

corporate in-house R&D centres has increased from 13,324 in 2006 to 21,162 in 2010. Amongst them, the number of in-house R&D centres in SMEs has also increased from 12,398 in

2006 to 20,047 in 2010.

The proportion of technology transfer produced by the GRIs and universities compared

to the total R&D investment has increased to 12.8% in 2009 from 4.6% in 2004.

The royalty income per transfer has also increased to €79.0m in 2009 from €32.4m in

2004 (KIIP, 2010).

The MKE devises a plan for promoting technology transfer and commercialisation

every three year, formerly every five year, based on the Law for Promotion of Technology

Transfer and Commercialisation. The 3rd

Plan, set up from 2008 to 2012 counts five core tasks

1. strengthening the finding and good management of national technology

resources

2. establishment and enlargement of technology finance system

3. establishment of the system for total process in R&D and

commercialisation

4. support for entering global market of private companies

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5. enlargement of infrastructure for technology transfer and

commercialisation.

The MKE, MEST and the SMBA, has implemented other instrumental drivers to

improve knowledge circulation since 2009 such as:

promotion of more investments by private companies into the GRIs and

universities with more incentives for the companies

enlarging governmental matching funds for the investment of private

companies; strengthening the collaborative projects even in the area of basic and

original technology

introducing a new law for co-owned companies by industry and the

GRIs and universities

incorporating more need from industry into R&D in the GRIs and

universities

activation of technology forum within the knowledge triangle and so on

(NSTC, 2009).

The number of the GRIs’ spin-offs went from none in 2005 to 17 in 2011. The technology holding companies in universities have also been spreading by easing

regulations and government supports such as financial support by the establishment of a new

venture capital. Criticism rises that the basic research in the GRIs and universities has been

decreasing because of too much emphasis on the entrepreneurial culture in the GRIs and

universities through policy instrumental drivers.

Social innovation has also become one of the main concerns of the government.

A social interest in how to use innovation as a tool to address social challenges such as climate

change, energy crisis, social security and aging populations, widening social inequity, chronic

disease and the cost of health care has been noticed by the South Korean government and its

population.

The government encourages both the public sector and the private sector to develop

innovative technologies, products, services and new business models such as technology-based

social enterprises.

Social innovation is mostly found in the fields of open communications through internet

and smart phone-based cyber-net such as “kakaotalk” and “metoday” in Korea, the quality of

life through organic food and environmentally-friendly agricultural products, employment for

disables and social minorities such as social enterprises, and protection of environment and

people, and social design of different village or cities and the like.

Social enterprises solving increasing homeless people and unemployed young

generations are particularly supported by the government.

High creativity and new design capacities for both individuals and organisations are

needed. That is why the government and many organisations have tried to develop life-long

learning programmes as well as benchmarking to improve the capability of creation, diffusion

and utilisation of new ideas and designs to solve social problems.

Social innovation in Korea is, however, still in its infancy. The government has tried to

focus on social enterprises to ease social issues resulting from unstable unemployment. There

are even some regulations to make social innovations blocked or otherwise marginalised.

5. Coordination issues

As mentioned before, coordination process is one of the main weaknesses of innovation

policies in South Korea. Along with it, the government is set to tie prospective results from

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government- funded researches with technology funds, thus making easier technology transfer

and raising money for their commercialisation. The S&T investment fund of MEST and the

Technology Entrepreneurship Investment Fund of the MKE are some of these types of funding.

The S&T investment fund of MEST and the Technology Entrepreneurship Investment

Fund of the MKE are part for the government plans, to connect anticipated results from the

government-funded researches with technology funds, thus making easier technology transfer

and raising money for their commercialisation.

To counter these issues, the government set up some measures, and the creation of

Innovation bodies.

Since 2008, the Ministry of Education, Science and Technology (MEST) coordinates

the activities in science and technology in South Korea.

In 2011, the new Science and Technology Council (NSTC - controlling 75% of the

country‟s R&D budget) was launched – as the main actor and with a key role for coordination.

Its main functions are:

• Establishment and coordination of major policies and a plan for science

technology promotion

• Establishment of a basic plan and a local science technology promotion master

plan

• Suggestion of budget expansion plan related to science technology and of

research development investment

• Distribution, coordination and operation of national research development

business budget

• Establishment of the plan related to mid and long term national research

development business

• Investigation, analysis and evaluation of national research development

business

• Promotion and development plan of government funded research institution in

the science technology field

• Establishment and coordination of national growth engine policy

• Coordination of the policy related to science technology innovation such as next

generation growth engine industry, cultural and tourist business, part and process innovation

field, etc.

• Coordination of the policy for science technology manpower cultivation

• Construction of support system for promoting local technology innovation

policy

• Financial support for technology innovation

• Policy support related to national standard and intellectual property right

In July 2010, the government created a new position at the Office of the President,

Senior Secretary to the President for Education, Science and Culture: his role is to identify and

develop new growth instruments in the areas of science and technology, broadcast and

information technology, and green growth. He also has to design future strategies and insure

their implementation. This position was first occupied by a woman scientist.

This is the reflection of the demand from the science and technology community for

integrated focus and more political interest on science and technology policy as well as

broadcast and IT policy at the President‟s Office level.

Innovation governance also counts bodies at the top administrative level such as the

President Committee on Green Growth (PCGG) and the Presidential Advisory Council on

Education, Science and Technology (PACEST) chaired by the President.

At the political level, two select committees within the National Assembly are related:

the Select Committee for Education, Science and Technology and the Select Committee for

Knowledge Economy.

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One of the most important development in the nation‟s S&T policy is the government‟s

strain to strengthen the roles and functions of the NSTC, which until now has been the highest

weak policy decision-making body.

Also, the strengthened position of NSTC is expected to play a critical role in the

advancement of the nation‟s S&T.

In addition, the government has started to recognise the growing importance of

intellectual property. In April 2011, the National Assembly approved the Basic Law for

Managing Intellectual Property and the Intellectual Property Management Council was

established in July 2011 on the basis of the Law, under the Prime Minister‟s Office and chaired

by the Prime Minister.

The Council will be responsible for facilitating the creation, protection, and utilisation

of intellectual property and for giving advice and recommendations to the NSTC for IP-centred

R&D budget and programmes.

At the operational level, the key ministries include the MOSF, MEST and the MKE:

• MOSF has the power to allocate government budget and nearly 30% of R&D

budget – almost 70% of R&D budget allocation for the year of 2011 is being carried out by the

new NSTC

• MEST is responsible for the development of fundamental and mega science and

for the management of the thirteen GRIs under the Korea Research Council of Fundamental

Science and Technology (KRCF). It relies on the National Research Foundation of Korea (NRF,

www.nrf.re.kr) for funding and performance management of national R&D projects, mainly in

the areas of fundamental science and university research including humanities and social

sciences.

• MKE is responsible for the development of industrial technology and for the

management of the thirteen GRIs under the Korea Research Council of Industrial Science and

Technology (ISTK). It relies on the Korea Evaluation Institute of Industrial Technology and the

Korea Energy Management Corporation (KEMCO, www.kemco.or.kr) for the performance

management of R&D projects.

• Other ministries with significant research responsibilities include: the Ministry

and Health and Welfare; the Ministry of Environment; the Ministry of Defence; and the

Ministry for Food, Agriculture, Forestry and Fisheries.

These organizations offer various R&D programmes, collect proposals from

researchers, select appropriate researchers for projects, review the performance of the projects in

the middle of the project management, evaluate the final performance at the end of one year

period regardless of the multiannual projects and report the final results to their ministries and

the NSTC.

Think-tanks are held for policy advice, Science and Technology Policy Institute

(STEPI) and The Korea Institute of Science and Technology Evaluation and Planning (KISTEP)

in the public sector and the Samsung Economic Research Institute (SERI, www.seri.org) in the

private sector.

STEPI and KISTEP play important roles in providing significant policy evidence to the

NSTC and ministries through various tools such as technology foresight exercises, National

Technology Road Mapping (NTRM), benchmarking, technology impact assessments, to name a

few. Particularly KISTEP which had been under the auspices of MEST moved into the NSTC as

a main supporting agency. KISTEP conducts evaluation on the performance and effectiveness

of every project at programmes level and asses the results of organisational evaluation of GRIs

on behalf of the NSTC, which are evaluations reflected in next year‟s R&D budget.

Korean Federation of S&T Societies and the Korean Academy of S&T, known to be

experts in universities and organisations, take part in the foresight and impact assessment

process.

The key research performers are the private sector, public sector research organisations

(PSROs) and the higher education sector that is in large part comprised of Korea‟s universities.

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The organisational performance in GRIs is evaluated by the umbrella Councils, the

ISTK and KRCF, annual evaluation for their managerial performance and every three year

evaluation for their research performance.

According to OECD, research activities are concentrated in particular regions such as

Seoul, R&D Special Zones in Daedeok, Daegu and Gwangju with a supporting organisation

called Daedeok Innopolis, the Republic of Korea is a highly unitary state.

The institutional role of regions in research governance is still not strong. The regional

governments have responsibility for regional research and innovation policy through

participation in central government‟s programmes such as „the 3rd General Plan for Regional

S&T Promotion‟ over the period between 2008 and 2012 set out in 2007 and the „5+2 Economic

Development Plan‟ established in 2008. These plans have been monitored and amended

continuously by the NSTC (NSTC, 2007a, 2008, 2010a). At the regional level, the Technoparks

in sixteen regions have played an institutional role for implementation of the government‟s

programmes. The MKE supervises the Technoparks and allocates the necessary budget.

6. Evaluation of 557 Initiative

An official final evaluation of the 557 Initiative has not been finalised yet, as it has

finished at the end of 2013. However, in one of the OECD reports (2012), we can distinguish

some aspects that are still prevalent even after the implementation of the 557 Initiative:

- the levels of international collaboration are very low; according to OECD, just 26% of

scientific articles are produced with international co-authorship, and only 4% of PCT patent

applications are produced with international collaboration. This is mainly because of Korea‟s

conglomerate industrial structure which tends to retain technology development within the

group.

-the R&D spending reached 4.36% from GDP in 2012, which means that South Korea

is closer to its goals of 5% expenditure;

-universities and research publication outputs rank comparatively low comparing to

international standards, even if Korea has relatively high public-sector expenditures on R&D.

However, there are signs of change thanks to the 557 Initiative: basic research increased to 35%

of the total in 2012.

- R&D is still mainly conducted by large manufacturing conglomerates. SMEs have

contributed little to innovation, however, there are signs of improvement as more and more

government support goes to SME‟s, so that by 2015 the share of R&D budget of MKE

(Ministry of Knowledge Economy) should reach 40% of the total.

-a better scientific infrastructure and stronger ICT sector thanks to various ICT

initiatives. Ex: the establishment of the National S&T Information Service, a centralized

database in order to monitor better HR and S&T infrastructure.

- due to the intense activity of Seoul in STI, it appeared an unbalanced regional growth.

Therefore, the government has continued the efforts in fostering innovation inside the regions.

As a result, in 2012, Korea had 105 regional innovation centers and 18 techno-parks, as well as

7 programmes to strengthen the competitiveness of clusters.

- ongoing enhancement of knowledge transfer process from public sector research. A

leading role has the Technology Holding Company system, which promotes the establishment

of venture businesses by universities and research institutes, as well as the Leaders in Industry-

University Programme (LINC) and the Brain Korea Programme (BK), both of which seek to

improve industry-academia collaboration.

-the demand-side innovation policy is still at an early stage, despite of the efforts of the

government. One problem is the reluctance of many local governments and public companies to

purchase innovative products and services from SME‟s because of the lack of quality

verification and difficulty for the repair and maintenance of a purchased product. Many SMEs

are also reluctant to invest in the development of innovative products and services due to the

high risks in unpredictable purchasing power. The government and also the Ministry of

Khattab El Qrarah Manas Ussenov Victoria Rosca Yousra Zaghdoud Bernichi 11.16.2014

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Knowledge and Economy contributed with pre-commercial R&D supporting programmes,

regularly workshops and communication activities between local governments and technology-

based SME‟s, which helped to raise the proportion of public procurement for up to 7%.

However, the coordination between demand-side policy and supply-side policy instruments is

very weak.

7. Policy recommendations

Considering the results of the evaluation, one of the main policy recommendations

could be:

-increase of basic research and university research;

-strengthening local R&D;

-fostering creative manpower, among the society, especially in higher education level,

as the educational system in Korea is based more in memorization than creativity;

-encourage more S&T globalization, as it is the lowest among OECD countries by

increasing the international science collaboration level with other developed and developing

countries;

-foster openness among industries and promoting an Open&Networked Mode;

- develop more innovation policies among the SME‟s;

- improve the coordination of the innovation policies from national level to local level;

-the role of the NSTC as a demand-side policy entrepreneur needs to be strengthened;

-more cooperative innovation governance amongst ministries and many other

stakeholders are also needed. New programmes need to be designated to coordinate supply-side

measures with demand-side innovation policies;

- improve regulatory, structural and educational cooperation between all stakeholders

(government, business, researches and costumers)

- fostering the global creative human capital talent who have the vision to become a

vital part of the creative economy

Moreover, the ultimate key player of R&D should be the private sector by:

-Supporting systems for encouraging the establishment of private R&D centers;

-Supporting systems for promoting investment by private enterprises;

-promoting the venture capital firms.

8. Priorities and targets for the next political cycle

The present Park Government which took office in 2013 is continuing the efforts of the

previous governments in order to achieve the goal of transforming South Korea into an

innovation front-runner and to seek new means of economic growth. Therefore, the new plan is

strongly connected to the development of a “creative economy”. A new ministry was set in

charge of developing a guiding plan for the creative economy - the Ministry of Science, ICT and

Future Planning (MSIP). The new Plan focuses on Korean creativity and imagination combined

with science, technology and ICT to create new industries, new markets, create new jobs and

strengthen existing industries. The plan – Creative Economy Plan has set three goals and six

main strategies. The 3 goals are:

-creating new jobs and markets through creativity and innovation;

-strengthen Korea‟s global leadership through a creative economy;

-creating a society where creativity is respected and manifested.

The 6 strategies consist in:

-properly compensate for creativity and create an eco-system that promotes the creation

of start-ups;

-strengthen the role of venture firms and SME‟s in the creative economy and improve

their ability to enter global markets;

Khattab El Qrarah Manas Ussenov Victoria Rosca Yousra Zaghdoud Bernichi 11.16.2014

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-create growth engines to pioneer new markets and new industries;

-foster global creative talent that has the spirit to rise to challenges and pursue dreams;

-strengthen innovation capacities in science, technology and ICT, which form the

foundation of the creative economy;

-promote a creative economic culture together with Korean people.

The new MSIP will be in charge to coordinate the measures developed by the relevant

ministries and agencies in these areas. The government also works on setting up a public-private

partnership to help effective implementation of the Creative Economy Plan through constantly

receiving the views of private sector actors and reflecting these in policies.

However, the objectives of the Plan are not very different from those of previous plans.

The main distinctive feature is a new emphasis to the role of venture firms and start-ups and

comes with a wide range of measures to address them, as they are perceived the key to the

creation of new markets and jobs. One of the problems is that some SME‟s and start-ups still

find it hard to succeed, as in many sectors “chaebols” rely mostly on their in-house network of

suppliers and for many graduates the main goal is getting a job at LG, Samsung or Hyundai.

Thus, the new president is committed to reduce the productivity gap between SME‟s and large

companies, as well as any anti-competitive practices of the “chaebols” and creating a fair

playing field for companies of all sizes. Based on the creative economy strategy, a new five-

year Basic Plan for Science and Technology with the following strategies:

-enhancement of R&D investment and maximising efficiency, raising R&D support

from 68 trillion to 92.4 trillion until 2017, up 35% from the previous government;

-the strategic development of technologies: 30 priority and 120 strategic technologies

have been identified, covering energy, environment, ICT and healthcare fields (smart grids,

carbon capture and storage, personalised pharmaceuticals);

-building mid to long-term creative capability through greater funding for basic sciences

and international exchange;

-greater support for SME‟s and venture companies in new industries, and the

stimulation of intellectual property generation and commercialisation;

-creating new science related jobs, in part through new measures to boost start-ups.

The Ministry of Knowledge Economy sketches an amazing high tech future for Korea.

Based on a 2009 survey of 3,000 IT industry experts and researchers, they listed such

futuristic technologies as home medical checks for common diseases, mobile phones that only

need to be recharged once annually, home appliances that respond to brain waves, automatic

temperature adjustments for in-door climate control, super high-definition televisions, universal

language translators, and efficient solar cells providing most electrical energy. While all this

may be remarkable, similarly astounding technologies were predicted in Korean government

reports twenty years ago.

Korea remains a tech power, and the nation‟s future in science and technology would

ultimately depend on its STI policies, global economic competitiveness and capacity of

innovation.

Khattab El Qrarah Manas Ussenov Victoria Rosca Yousra Zaghdoud Bernichi 11.16.2014

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