Support Measures and Incentive Systems for Technology Innovation

In a market economy, technological innovation in the private sector is the key element for sustaining economic growth. To promote R&D in the private sectors, the Korean government has designed a variety of support measures and incentive systems since the early 1970's. Under the Industrial Technology Development Promotion Law and other laws, private firms establishing research centers are extended tax privileges and financial support such as tariff deduction on R&D equipment, and R&D subsidies. Small firms that are not able to set up research centers of their own, are encouraged to form research unions with other firms. As a result, the number of research institutes and unions has been growing remarkably, especially during the 1980's and the 1990's.

Research Institutes and Research Unions in the Private Sector

Unit: Number, Person

1989 1990 1991 1992 1993 1994 1995
Research
Institutes
(No. of Researchers) 		749

(22,056) 		966

(26,851) 		1,201

(30,469) 		1,435

(38,643) 		1,690

(43,872) 		1,980

(60,330) 		2,270

(63,037)
Reaearch
Unions
(No, of Firms) 		50

(1,102) 		54

(1,181) 		64

(1,415) 		68

(1,460) 		65

(1,279) 		57

(1,236) 		63

(1,346)

Tax Incentives

Reserve Funds for Technology Development

Private enterprises that reserve funds for technology development, technical information, R&D manpower and facilities, etc. for three years are given tax deduction. The maximum tax deductible reserve is 5% of the total sales.

HRD Expenditure

Private enterprises may take advantage of tax deduction of up to 15% of their total expenditures on training and in-house technical college.

Research Facilities

Private enterprises are allowed tax deduction of up to 10% of their investments for research facilities and to depreciate the total investment for research and test facilities at the rate of 90% a year.

Financial Supports

R&D Subsidy by Government

The government provides up to 50% of the total R&D expenditures when private industial institutes are involved in national R&D projects for core and fundamental technology development, industrial technology development, alternative energy development, etc. Also, the government provides financial support of up to 80% -90% of the total cost to individuals or small firms to help commercialize new technology.

Support by Government-ownde Corporations

Government-owned corporations such as the Korea Electric Power Corporation (KEPCO), the Korea Telecommunication Corporation (KTC), etc., extend financial support of up to 80% of their total R&D investment to relevant R&D centers and industrial technology research unions to develop indigenous R&D products.

Support by Banks

Banks, such as the Korea Development Bank, the Citizens National Bank, the Industrial Bank of Korea, etc., provide long-term, low-interest loans for R&D to the private industries for new products and process technologies development, and the commercialization of new technologies.

Support by Venture Capital Institutions

Venture capital institutions such as the Korea Technology Banking Corporation (KTB) offer comprehensive financial support to private companies' technology development activities. This financial support takes the form of equity investments, debenture purchases, conditional loans, technology development loans, leasing and factoring services.

Other Support Measures

Information Service

To expedite technology transfer from R&D institutes and universities to industry, the information system including technology data collection, application and distribution will be strengthened. The Korean government will establish twenty sector-specific D/Bs in cooperation with government-supportedinstitutes. An information highway between the Korea Research & Development Iformation Center (KORDIC) and the ten regional informatin centers will be estabnlished to facilitate the rapid exchange of information.

Standardization and Quality Control

The standardization system is a very crucial factor in improving product quality. This system helps various industries to combine and coordinate their efforts; therefore, maximizing their efficiency and productivity. The KS, a Korean standardization system, helps to meet international requirements, which further increases the technological level of Korea.

The Korea Research Institute of Standards and Science and Industrial Advancement Administration(IAA) under the Ministry of Trade, Industry and Energy help to promote the quality of industrial products, industrial standards and measurements, and inspection and testing of industrial products.

Intellectual Property Rights Protetion

Korea has reinforced its legal system for intellectual property rights protection in accordance with the international norms and standards. This system encourages new invention and innovation activities by protecting the rights of the inventors.

This law is thus an incentive for inventions and investment in R&D and the commercial use of new inventions.

Procurement System

The current bidding system, based on price alone, does not motivate companies to develop new technologies. The government will, therefore, introduce a new bidding system based on price and quality that will help promote technology development.

Collaborative R&D among Industry, Academia, and Research Institutes

The government, by providing financial as well as administrative assistance, encourages industry, academia and research institutes to establish a consortium for joint R&D. For this purpose, the Collaborative R&D Promotion Law was enacted in 1993, and as of Feb 1996, sixty-five industrial research cooperatives were founded involving 1,408 firms.

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