○ Start-up is an important economic activity that can revitalize the national economy and generate dynamism as a source of jobs, new ideas and innovation.

○ Various Services for Promoting Business Start-up

- To foster would-be entrepreneurs and create the entrepreneurial business climate, the SMBA runs various programs such as the start-up course, start-up clubs, Biz-cool program for young people, and graduate school for business start-up.

- The SMBA promotes a favorable business environment for starting up a business conveniently and rapidly by removing or streamlining regulations and procedures that used to hinder start-up activities and by providing the start-up agency services through a business plan approval system.

- The SMBA offers the necessary location for start-ups by supporting the operation of business incubators (BIs) at universities and institutes across the nation, and providing funds for business founders through venture & start-up funds.

① Business Incubator : The SMBA supports BIs operated by universities and research institutes equipped with facilities and equipment that can support would-be entrepreneurs or new SME founders. This program is designed to promote the survival and growth of newly established venture companies. Currently, about 270 business incubators across the nation host about 4,304 SMEs. SMEs are provided with land, an expert consulting service, marketing education and other supports.

② Start-up Course : Start-up course is an education program targeting would-be entrepreneurs or new SME starters, designed to improve their management capabilities and raise the start-up success rate. Local universities and specialized institutions offer about 100 courses a year.

③ Entrepreneur Club : The SMBA provides financial support and training for entrepreneur clubs at universities to expand their start-up mind-set and inspire their entrepreneurship. This program is designed to train college students as future entrepreneurs with creativity and pioneer spirit. Currently, 518 entrepreneur clubs in 200 universities boast about 16,158 members.

④ Entrepreneur Graduate School : In order to foster start-up specialists through systematic and professional education, 5 universities, including Hoseo University and Jungang University have run pilot programs for entrepreneur graduate schools since 2004.

⑤ Biz-Cool for Teenagers : To inspire the teenagers' pioneering spirit and business mentality, 80 middle and high schools have implemented Biz-Cool pilot programs. About 20,000 students attended the program and took a variety of financial education courses that conduct case studies on self-management, business start-up, business administration, and finance. The purpose of the program is to help them find their career and revitalize start-up activities.

⑥ Start-up Procedure Simplification : In the past, SMEs had to obtain approvals or licenses for 74 matters to construct factories. However, such complicated approval processes have been simplified into a package system in approving start-up business plans. The simplified procedure is expected to facilitate start-up activities of venture enterprises.

⑦ SME Venture Start-up Funding : This program is designed to promote start-up activities and create jobs through funding for venture SMEs with superior and feasible technology. As part of the program, the would-be entrepreneurs or less-than-3-year-old SMEs can receive loans of up to $2 million a year with low interest.

○Those intending to start up an enterprise, or expand/restructure an existing business will encounter the most common difficulties with financing. This is mainly due to banks requiring collateral prior to agreeing to extend a loan, since their technology and corporate value cannot be correctly assessed when evaluating creditworthiness.

○Therefore, the SMBA provides direct and indirect financing support for SMEs to ensure that creative and innovative SMEs will not fail as a result of difficulties with financing.

○As for indirect financing services, the SMBA provides a security assurance service for SMEs ineligible for bank loans due to a lack of collateral and technology. This service allows these SMEs to borrow needed funds from the KCGF(Korea Credit Guarantee Fund), KOTEC(Korea Technology Credit Guarantee Fund), and local KCGF offices.

- In addition, small business owners, enterprises in the start-up phase, technology-oriented SMEs and SMEs awaiting reorganization are provided policy funds through the SBC (Small Business Corporation).

○In efforts to support SMEs with direct financing from the market, the SMBA plans to utilize venture capital and the KOSDAQ market.

- Prospective SMEs which have the technological capability but lack collaterals are provided venture investment funds from venture investment companies and venture investment partnerships.

- KOSDAQ market and the Free Board are operating to enable public offering from the stock market or to provide large funds for small and medium venture companies.

① Credit guarantee services : In an effort to enable SMEs which lack collaterals to acquire needed funds, credit guarantee organizations provide guarantee services by issuing credit guarantee letters. Currently, KCGF, KOTEC, and local KCGF offices are in charge of the guarantee services, and the Korean government in turn financially supports such organizations, thereby strengthening the base for guarantee.

② Policy Fund for SMEs : SMEs can borrow needed funds at a low interest rate to promote facility investment, restructuring, commercialization of new technologies, and assist start-up activities. The total policy funds allocated in 2005 amounted to $3.16 billion, and the budget compiled for 2006 amounts to $ 2.75 billion for this policy fund.

③ Account Receivable Insurance Program: The program is designed to protect SMEs against management difficulties stemming from the failure to collect payments. This insurance on account receivables (sales on credit + notes receivable) was initiated in 2004, and is expected to ensure management stability of SMEs by preventing their resulting bankruptcies.

④ Venture Investment Fund : To ensure the continuation of venture investments mainly from the market for innovative SMEs, the SMBA plans to create $500 million worth of venture investment funds in 2006 by setting up 102 venture capital firms, and 400 venture capital partnerships. To build a foundation for the stable growth of venture capital, the SMBA also plans to form the 'fund of funds' amounting to $1 billion in the long term for financing investment funds for venture businesses. The objective is to provide stable financing in the long term that is able to meet the needs of the capital market. Moreover, the SMBA is revitalizing markets other than KOSDAQ to provide a stable basis of growth for venture capital. Furthermore, the SMBA is seeking to revitalize the venture capital market by creating a $120 million active secondary fund aimed at buying the shares unlisted on KOSDAQ among the venture shares owned by venture capital firms.

○ Importance of Human Resources

- The 21st century is an era of rapid changes driven by market liberalization and IT advancement. The key to corporate competitiveness in this age of speed is acquiring competent human resources capable of flexibly and promptly responding to the changing environment.

○ SMEs facing manpower shortages despite the increase in the unemployed young

- Although the number of jobless young across the nation reaches 400,000, SMEs are in desperate need of additional 100,000 workers in the workforce. As this lack of workforce is attributable to the combined factors of the SMEs' poor working conditions and relatively few welfare benefits as well as young people's preference for larger enterprises, it requires much effort and time to fundamentally resolve the problem.

The SMBA is well aware that 'Developing & Securing Competent Human Resources' is the key solution to enhancing competitiveness of SMEs. In this regard, the SMBA is making policy efforts to raise the capabilities of both SME employees and managers, whilst additionally creating a social and business environment whereby SMEs can employ competent human resources.

- To lure an increasing number of the workforce into SMEs, the SMBA implements the 'On-site Work Conditions Improvement Program' and provides tax benefits and preferential treatment to workers with lengthy employment.

- In order to change the way that young people perceive SMEs, and maintain friendly ties between the jobless and SMEs, the SMBA initiated a 'SMEs Experiencing Program for College Students' and a 'Youth Employment Package Program'.

- The 'SME Training Center' implements various programs to educate the SME managers and employees in respect of a new management method, and on-site work skills.

- The foreign workforce's industrial training system and the industrial technician certified system have been put in place to ensure stable availability of manpower at production sites and intermediate-level technicians, respectively.

① On-site Work Conditions Improvement Program : This program aims to encourage the inflow of workers into SMEs by minimizing the number of challenging workplaces and improving the quality of life for workers through the development and diffusion of needed equipment aimed at alleviating the adverse conditions such as heat, dust, smell and noise at the production site. As part of this program, the SMBA supports SMEs to develop equipment without aid, and are assisting these SMEs with a minor capability to do so by forming a consortium with universities and research institutions.

② Preferential Treatment for SME Employees : The SMBA has implemented various programs to encourage an increasing number of employees into SMEs. The scope of tax deduction has expanded, concerning the costs of R&D, human resource development, and welfare facilities investment of SMEs. Added to this, employees who work for SMEs longer than 5 years are granted the right to purchase public housing ahead of others.

③ SMEs Experiencing Program for College Students: This program aims to change the way college students perceive SMEs and encourage their employment by providing them with lectures on the role and status of SMEs; enabling them to attend a field trip to SMEs; enabling them to have exchanges with CEOs who possess excellent managerial philosophy; and creating the SME vision. This program is conducted at as many as 200 universities across the nation every year.

④ Youth Employment Package Program : Under this program, the SMBA identifies the employment needs of member companies through cooperative association in each sector and by business group, and then provide training for the young jobless aged 29 or less according to the scope of employment. The five-month training includes two-month assembly training and three-month onsite training. For those who have completed the training course, the SMBA arranges for their employment at a relevant SME. For those SMEs which hire accomplished students that have completed the three month onsite training, the SMBA provides a new monthly employment grant valued at $600 for up to one year from the employment insurance fund in order to encourage employment.

⑤ SME Training Center : SME Training Center, as a public education institute, provides low-cost quality training services for the employees of SMEs. Designed to improve on-site work skills, the center runs various training programs concerning production technology, IT/automation, quality assurance and digital technology.

⑥ Industrial Training System : The industrial training system aims to ease labor shortages experienced by small and medium-sized manufacturing businesses, and strengthen industrial cooperation among Korea and other developing nations. Since its introduction in 1994, it has received trainees from 15 nations, including China, Vietnam, and Indonesia. Currently, 70,000 foreign trainees work in about 10,000 SMEs. In 2007, the industrial trainee system will be integrated into the employment license system to strengthen the rights of foreign trainees.

⑦ Industrial Technician Certified System : This program was designed to relieve SME labor shortage problems by sending some of those on military duty to work in the areas of production or manufacturing. Every year, the SMBA supports SMEs to utilize 4,500 men on duty.

○ Current Status of SME Exports

- As consumer demands become more diversified and change rapidly in the world economy in the 21st century, marketing capabilities have become more important than ever in the global market as well as domestic market. It is because only the companies capable of finding new markets with an aggressive marketing strategy can survive the fierce competition by rapidly identifying the needs of the market and customers. Nevertheless, export-based SMEs represent only 30% of the total SME manufacturers. Also, the export destinations and products are limited to China and the US, and to some items such as IT, respectively.

○ Support for the successful entrance of SMEs into overseas markets

- The SMBA is creating a favorable business environment for SMEs to reinforce their export capability and receive customized export services of specialized export institutions in the private sector.

- Efforts are being made to solidify the domestic demand base of SME products by having public institutions purchase SME products, and supporting domestic exhibitions by industry.

- Exhibitions are held in foreign nations to increase the contact between SMEs and foreign buyers, and talented personnel are trained as overseas trade professionals to widen the access into foreign markets.

- In other efforts to encourage the entrance of SMEs into global markets, the SMBA is helping SMEs to increase their export volume; get information on international procurement market(http://www.b2g.go.kr/); obtain internationally recognized certifications; and advance into foreign retail distribution chains.

① Purchasing SME Products: This program has been ongoing since 1981 for the purpose of expanding the SMEs' market and supporting their stable management. Under this program, public institutions are obliged to purchase SME products first.

② Supporting SMEs' Participation in Overseas Exhibitions: In an effort to promote the export of SMEs, the SMBA supports SMEs by dispatching their trade missions to overseas exhibitions, which are the most effective tool in conducting export marketing activities. This support is provided for about 2,000 companies every year.

③ Fostering Trade Professionals: In an effort to promote the export of SMEs, the SMBA selects unemployed or SME employees capable of communicating in foreign languages and dispatches them to overseas markets to foster them into trade professionals. They are dispatched to the overseas trade centers, companies run by Korean businessmen, or overseas branches after taking three to eight weeks of training courses on overseas trade. While remaining for six months (or up to one year), they engage in export activities.

④ Supporting SMEs with Finding New Overseas Markets : This program intends to foster SMEs that are about to start up a business or that depend heavily on domestic demands into export-driven businesses by supporting them throughout the entire export process from the initial phase. The support takes the form of trade education, survey of an overseas market, the arrangement with new buyers, and product public relations. The SMBA plans to intensively support over 1,000 SMEs normally geared for domestic demand annually to help them expand their export base.

⑤ Acquiring Internationally Recognized Certifications: This program seeks to promote export by assisting SMEs acquire the requisite foreign standard certificates required by importing countries, enhancing their credibility and eliminating non-tariff trade barriers. The number of those certificates reaches 87, including CE in Europe and NRTL in the US. This program also provides consulting on standard testing, survey, certification, and factory survey in 91 certification areas for four systems including the ISO14001 environment management system and the TS16949 automobile certificate.

⑥ Providing Information on International Procurement Market: International procurement market amounts to $2 trillion per year. However, Korean SMEs take up only 0.2% or $4 billion of the huge procurement market. In an effort to expand the Korean SMEs' share of the international procurement market, the SMBA provides information on international bidding, award and main contractors in real time(1,000 pieces of bidding information per day) through the construction and operation of the Integrated System on International Procurement(www.b2g.go.kr). The SMBA also offers training programs and seminars on international procurement, and supports SMEs with participation in exhibitions.

○ Growth of Venture Businesses

- When innovative SMEs first emerged in Korea around 1980s, they did not produce tangible results due to insufficient government support. However, the government established the KOSDAQ market in 1996, and legislated 'the law of special measures' to foster venture business in 1997 in order to provide intensive support for them. As a result of expanded business opportunities spurred by the advancement of IT technology such as the Internet, the innovative venture firms posted an unprecedented record of dramatic growth worldwide. Thus, as a key player of economic revitalization, they made a significant contribution to the nation's economic recovery from the financial crisis and to transition into a knowledge-based economy.

Year	1998	1999	2000	2001	2002	2003	2004	2005
Number of Venture firms	2,042	4,934	8,798	11,392	8,778	7,702	7,967	9,732

○ Policies to promote venture businesses

- As venture businesses are expected to lead the Korean economy as a strong growth engine in the future, the government will continue its policy stance to foster venture businesses. In addition, the policies will be adopted with focus on improved quality and competitiveness of SMEs rather than quantitative growth.

- The government ensures that funds, human resources, land or other necessary production resources will continue to flow evenly into SMEs. To that end, efforts are under way to establish an infrastructure that will facilitate the start-up and development of innovative SMEs by easing or even removing various regulations relating to business activities. This measure is based on the law of special measures on fostering venture businesses.

- Further to this, policy efforts are being made to facilitate M&As of venture companies with the expectation that M&As will bring about positive effects: facilitated strategic alliances among enterprises, and venture investment; and the flexible movement of technician services.

- Additionally, the government is promoting the globalization of venture businesses through the establishment of overseas small business development centers and global star funds.

① Promoting M&As of Venture Companies : To boost active M&As of venture businesses, the SMBA has implemented various policy measures to ease relevant regulations, and provided incentives for venture businesses, such as tax benefits since April, 2004. Those measures to relieve regulations include a simplified procedure regarding small-scale stock exchanges, corporate value assessment by certified institutions, a streamlined procedure regarding M&As and business transfer, replacement of a stock-holders' meeting by an executive board when shares traded are less than 50% of the total. Also, tax benefits have been expanded regarding stock trades and M&As.

② Overseas Development Center : This program is designed to help those SMEs intending to enter an overseas market locate a new market by designating private companies with prior experiences of supporting venture companies based on the overseas network, as overseas SME development centers. As of now, 24 overseas development centers in 12 countries have supported 300 venture firms enter overseas markets.

③ Global Star Fund : A global star fund is a specialized fund to assist the entrance of small and medium venture firms into global markets, including advanced economies such as the US, EU and China as well as emerging markets in Asia. The SMBA, along with foreign investment institutions, organized two funds valued at $100 million.

As a new growth engine of the Korean economy, venture businesses are regarded as an alternative to relieving polarization between large and small businesses. In this regard, two measures have been formulated and implemented to revitalize venture businesses each in 2004 and 2005.

Major policy measures include the following three conditions : first, seeking to revitalize venture capital investment by creating 'the fund of funds' valued at $1 billion; second, allowing venture businesses to establish their subsidiaries in the form of a stock company in universities or research institutes to promote the start-up of innovative businesses, while strengthening incubation capability through the expansion of the tenant period in a business incubator from three to five years; third, helping venture businesses that failed to meet the entrance requirements list themselves on KOSDAQ by taking into consideration their technology level and growth potential. The objective is to promote KOSDAQ as a market dedicated for SMEs and venture businesses. Those measures helped the venture ecosystem develop a step further, as noted by the number of venture businesses surpassing 10,000.