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MKE Home > Newsroom > Special Report
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title [Business Opportunities] R&D
date 2007/09/03 hits 7536

Korea is relatively well equipped with various assets required by multinational corporations, such as excellent human resources, a solid economic foundation that allowed quick recovery from the 1997 financial crisis, a rapidly growing market and a mature social infrastructure. In addition, Korea has a geographical advantage in that it is close to the advanced capital and technology of Japan and the great growth potential of China.

Multinational corporations have recently begun to pay serious attention to the rapid growth and the state-of-the-art technologies available in the Korean market. As a result, there has been a dramatic increase in the number of corporate research institutes and R&D centers built in Korea. These research facilities are a key element of most companies` headquarters.

As of September 2005, total number of foreign-invest R&D centers reach 901 including 137 corporate R&D centers that are wholly owned by foreign investors. In terms of the countries of origin of 100% foreign-owned R&D centers, the following table shows that 52 R&D centers have their parent companies in the U.S.A., 19 are from Germany, and 17 from Germany. These countries are followed by the Netherlands, France, Switzerland, Singapore, and China.

Many of the world`s most prominent multinational corporations have established research centers in Korea. These include MS, Motorola, IBM, Dupont, 3M, Oracle, Honeywell, Dow Corning, Siemens, Bayer, Bosch, Basf, Volvo, Nokia, Fuji Xerox and Mercury. Research institutes are being established at a rapid pace in hi-tech fields such as information technology, telecommunications and electronics. This is because Korea enjoys a high technological level and world leading product competitiveness in these areas. In a survey of research institutes affiliated with foreign firms in Korea, over two third (68.4%) of respondents maintained that their primary goal was to `develop new products and new processes,` while 21.1% stated that their goal was to `improve and repair existing products and processes to adapt to the Korean environment.` In addition, 5.3% of those surveyed said that `to technically support their production and marketing departments` was their most important function. The above facts show that the R&D infrastructure of Korea can benefit foreign firms. Although the primary impetus for multinational corporations to establish research centers in local subsidiaries is to adapt to the local situation and to provide support for local operations, most foreign research institutes are now using these facilities to actively develop new products and processes.

Meanwhile, the Korean government is making every effort to encourage foreign firms to locate their research centers in Korea to develop employed new growth engines and industrial improvements. The government has focused on a variety of methods to attract the R&D centers of cutting-edge institutions and corporations such as Pasteur (France), Cavendish (UK), University of Warwick (UK), Novartis (Switzerland), Intel, HP, IBM and MS (U.S.A.).

As part of these efforts, as of July 1st, 2003, Korean government implemented the `Free Economic Zones Act` to improve the business environment in Korea to the level of those in advanced nations. Korean government plans to provide tax breaks and financial support for foreign firms moving into the government-designated Free Economic Zones (FEZs), as well as relieve regulations regarding labor, education and health care. As of the year 2003, Incheon, Busan and Gwangyang are designated as FEZs. In this manner, the government is promoting development plans to attract foreign institutes and related activities. In Sept. 2003, the government prepared comprehensive measures to induce foreign investments in an effort to continuously expand foreign direct investments in Korea. These measures include the `Cash Grant` for new foreign investment worth $10 million or more ($5 million or more in the case of R&D facilities) in the hi-tech sector, partial assistance for moving expenses (including rents, construction expenses, etc), facilities investment expenses and employment and training subsidies (assistance ratio will be decided in negotiations between the government and applicant foreign firms).

In 2000, the number of foreign firms` research institutes operating in Korea was only around 60. However, this number more than doubled in 2 years, which shows the sharp growth of R&D capabilities of Korea when compared to the past.

R&D Environment

The science and technology policies of Korea started in the 1960s, and went through an imitation stage in the 1980s. After the internalization stage in the 1990s, these policies began the initial stage of innovation in the 2000s. Evidently, the science and technology policies of Korea have evolved on the right track. In short term, Korea has sailed through the various stages to reach the current initial innovation stage as a result of the consistent implementation of science and technology-oriented policies.

The Korean science and technology level has continually improved. A research by the National Technology Map shows that it has jumped from only 30-50% of the level of those in advanced countries in 1994 to 60-70% in 2002. Meanwhile, the contribution of science and technology to the economic growth potential has sharply increased. According to the Korea Development Institute (KDI), the contribution of technological progress to economic growth rose from 9.8% in the early 1980s to 55.4% in the latter part of the 1990s. Korean national R&D programs have developed the greatest number of high-tech sectors in the world-CDMA, AIDS diagnosis reagent, etc. Also, the solidification of international competitiveness through technical innovation in key sectors-IT industry, automobiles, steel, shipbuilding, textile, etc.-is boosting up exports, which, in turn, spur further economic development.

R&D Manpower

Korea possesses many skilled and competent R&D personnel. According to an analysis by IMD in 2003, Korea is ranked 9th overall in terms of the number of R&D personnel.
An annual survey of R&D activities conducted by the Ministry of Science and Technology placed number of R&D personnel of Korea at 209,979. The number of R&D personnel in 1998 slightly decreased in the aftermath of the 1997 Asian Financial Crisis. However, the number has been steadily increasing since 1999

Meanwhile, 72.3% of the doctoral degree holders, who can be classified as high-level manpower, are concentrated in colleges and universities. It is no surprise, accordingly, that Korean colleges and universities have played an important role in fostering excellent personnel so far.

The number of students at tertiary-level of educational institutions, such as junior colleges, has risen along with the economic growth. Overall, the number of students enrolled at tertiary-education institutions increased 22.6 fold from 1965 to 2003. In particular, the number of graduate students increased 68.4 fold. The number of female graduate students has exploded from 301 to 104,237, a record of 346 folds.

As a result of the increase in students, R&D activities of colleges have also intensified. When we classify the total R&D expenses in 2004 by the type of R&D institutions, colleges used 1,932.7 trillion KRW (9.9% of the total expenses). Although this is the smallest portion of expenses, with public research institutions at 13.4% and corporations at 76.7%, colleges have seen the greatest increase. In 1992, the portion of expenses by colleges was a mere 6.1%.

In the electrical and electronic engineering fields, the ratio of researchers in Korea was the highest with 28.8%, followed by the machinery/ships/aviation fields (15.2%) and the metal-engineering sector (5.1%).

R&D Achievements

Korean theses published in journals according to Science Index (SCI) were 19,279 in 2004, a 2.6% increase compared with 2003 (18,787). Korea was ranked 14th overall and its share of theses worldwide rose from 1.85% to 1.96%.

According to the Korean Intellectual Property Office, the total number of international patents by Korean applicants under the Patent Cooperation Treaty grew 19.7%, from 3,521 in 2004 to 4,747 in 2005. With this significant figure, Korea`s status in terms of PCT application is getting more consolidated and is also retaining its high ranking at 8th place in 2002, 7th in 2003, and 6th in 2005 among 126 treaty powers.

Meanwhile, Korea`s technology exports are constantly on the rise. Korean technology exports totaled $638 million in 2002, an increase of 3.1% from the previous year. If we examine technology exports by type, the electronics and electrical sector totaled $419 million (65.6% of total exports), the tele-communications field totaled $95 million (14.9%) and the machinery sector totaled $92 million (14.4%). Thus, these three sectors account for 94.9% of all technology exports.

R&D Investment

Korea is ranked No. 8 in the world for R&D investments (IMD, 2003). R&D investment has been increasing at a rate of more than 10% per year on average, which was greater than GDP growth rate until 1997. Although R&D investment temporarily declined due to domestic factors in 1998, it has continued to increase since 1999. According to the Survey `2005 Research and development (R&D) activities` that have been carried out in the field of Science and Technology, the total R&D expenditure in the field of science and technology (natural sciences, engineering, agriculture, animal husbandry, fisheries, medicine, pharmacy, etc.) for the year 2004 in Korea was 22,185.3 billion Korean won, showing a sharp increase of 16.3% from the 19,068.7 billion won of the previous year. R&D expenditure as a percentage of Gross Domestic Product (GDP) is 2.85%, 0.21% higher than that of the last year. Overall, the reason for the increase in R&D investment compared with the GDP of Korea is the recognition the importance of R&D investment by many Korean enterprises.

Although the absolute amount of R&D expenses in Korea is less than those of advanced countries (9.1% of the U.S.A., 24.3% of Japan and 47.9% of Germany meanwhile 546% of Finland), the ratio of R&D investment to GDP stands in line at 2.45%, approaching Germany and U.S.A. (2.50 and 2.62, respectively). These figures are the results of recognition of importance in R&D investment. Setting up a basis to become one of the highly advanced countries, both the Korean government and the private sectors are committed to deposit unprecedented efforts.

Recently, R&D investment from foreign countries has been on the rise. While R&D investment from abroad stayed around 10 billion won until 2000, it has increased 6.5 fold since 2001, exceeding 75 billion won. The substantial increase in R&D investment from advanced foreign corporations displays the favorable environment and conditions for the R&D investment in Korea.

For the type of R&D investment status in Korea, government-sponsored research institutes and public research centers account for 13.8%, 10.1% by prestigious universities, and 76.1% by various corporations in 2004. Private sector contributions are greater than that of other countries, thanks to the focus on technology-oriented management by large firms such as Samsung, LG and Hyundai Motors. In other words, tech-oriented companies are expanding their R&D investment.

There are approximately 20 government-supported research institutes in Korea, and their primary focus is on the public sector and fundamental areas of national importance. Many prestigious universities also champion private firms by carrying out R&D activities.

Firm-affiliated Research Institutes

When a foreign firm advances into Korea, it is better to establish a firm-affiliated research institute if it wants to receive support from the Korean government. Currently, 134 research institutes in Korea have been acknowledged as firm-affiliated institutes. The research and development (R&D) activities of Korean corporations are mainly conducted by corporation-affiliated institutes, and Korean government`s support system is focused on these.

The firm-affiliated research institute system is unique to Korea. If those institutes are acknowledged by the government, a variety of support (tax, finance, human resources, etc) can be provided.

To be acknowledged as a firm-affiliated research institute, large corporations need to recruit 10 or more employees who hold a bachelor degree in a science field. When it comes to Small and Medium sized Business-affiliated research institutes, 2 or more personnel holding junior college diplomas or any equivalent qualification are sufficient, provided they report to the Korea Industrial Technology Association. Meanwhile, venture-business research institutes can be acknowledged if they have 2 or more junior college graduates.

Such a rising trend of firm-affiliated research institutes is derived from the recognition in the industry that the need for R&D is prevalent over the entire industry. Meanwhile, the Korean government is executing various technology development attraction policies, including a military service exception for specialized researchers and fund, tax and tariff support for firm-affiliated research institutes.

The total number of firm-affiliated research institutes recorded 11,810 in December 2005. Such a remarkable quantitative increase is the result of the rapid increase, starting the 1990s, in the establishment of research institutes of small and medium businesses.

As for the make-up of firm-affiliated research institutes of Korea, 6,628, or 52.7% of the institutes are conducting studies in the electrical and electronic industries, centered on IT and SI fields. This shows that Korea is the powerhouse of IT technology. And 2,189 or 17.4% are conducting research in the machinery field, and 1,965, or 15.6%, in chemicals. Such a trend exists because the number of small firm affiliated research institutes, such as the venture type and the technology-intensive type, has rapidly increased. Korean industry is sharply changing into a knowledge-based society, centered on information.

Concrete Supporting Policies

Korean government provides various supports to establishing research institutes. Many of these are limited to firm-affiliated research institutes, there are still some supporting systems that can be provided to firms without a research institute.

Land Supply Support

Foreign Investment Zones (FIZs)

The Foreign Investment Zone (FIZ) system is a government supporting system that is provided to firms whose investment and business activities greatly contribute to Korea`s economic and technical development. In the case of an R&D center, if a firm in the hi-tech industry or industry supporting service fields establishes an R&D center by investing $5 million or more and employing 20 or more research personnel, it can apply for a Foreign Investment Zone. FIZ is not a pre-designated area. A foreign invested company applies for the designation by selecting a desired location and applying to the head of that local government. The designation is decided by deliberation of a foreign investment committee. For any company operating in an area designated as an FIZ, rent is provided in full, and as long as the R&D center is in operation, the land can be provided semi-permanently.

Foreign Exclusive Industrial Complexes (FEICs)

A Foreign Exclusive Industrial Complex (FEIC) is an area of land in the existing national industrial complex or local industrial complex that is provided almost rent free to specific types of foreign invested companies. Companies with highly advanced technologies are eligible for the tax breaks FEIC offers as well as preferential occupancy rights. However, other manufacturers can also use the zone, according to their business content.

Techno Parks

A techno park is an area of land set aside to combine the technical resources of industries, schools and research institutes by overcoming the limitations of an area where the industrial environment is weak. Firms that become tenants of techno parks receive benefits such as tax breaks, preferential fund support and exemption of various levies. Techno parks are currently in operation in Gyeongbuk, Gyeonggi, Pohang, Songdo, Gwangju (Jeonnam), Busan, Daegu and Chungnam.

Free Economic Zones (FEZs)

An Free Economic Zone is an area operated by the government to promote foreign investment and enhance balanced development between regions by improving the management environment of foreign invested firms and the living conditions of foreigners. Incheon, Busan and Gwangyang and many more regions have been currently designated as FEZs. Further phases of the development plans are currently under works.

Science Research Industrial Complexes

The foreign R&D centers can be tenant firms in the following science industrial complexes that have been completed or are under construction. A science industrial complex is an industrial complex specified to firms and research institutes in the science/engineering field. 13 complexes are currently designated and in operation as science complexes.

Tax Supporting System

The tax supporting system was a typical of the supporting policy that has assisted the technology development of Korea since the 1970s, technology development activities began, and in the early 1980s, firm-affiliated research institutes were first established. The representative systems, such as the ability to present R&D reserves as loss in financial statements starting in 1972, tax deductions for research and personnel-developing facilities investments in 1974 and tax deductions for research and manpower developing expenses, were newly established to support R&D activities. Since then, many tax supporting systems were created or changed to support research manpower or to secure research facilities equipment. Recently, the Korean government is reducing tax support overall, but tax support for the R&D field has not been reduced. The tax supporting system is divided into an R&D stage, commercialization, a market entry stage and other tax support systems. Their concrete details are as follows:

Tariff Reduction and Exemption on Items for Research

Korea reduces and exempts tariffs on academic research items that are imported to be utilized at firm-affiliated research institutes. The goal of this system is to contribute to experiment and practice education and science and technology development by reducing and exempting tariffs in order to encourage education, academic and cultural activities and promote R&D under the Article 90 of the Customs Act. Many companies utilize the tariff reduction and exemption system on industrial technology items for R&D due to the enormous tax advantages it provides.

A total of 290 items for industrial technology R&D targeted for tariff reduction and exemption under Article 37.4.1 of the Enforcement Decree of the Customs Act; thus, 80% of the tariff reduction rate is applied in customs clearance (application period: Jul. 1, 2003 - Jun. 30, 2004).

In addition, 80% of tariff reduction is applied to reagents for R&D, components, raw materials and samples. In the case of components, the components of research equipment are excluded from tariff reduction, except for the components that are directly used for R&D. Unlike other tax supporting systems, the tariff reduction and exemption system is not a corporate tax reduction and exemption type, which is based on profit generation. Instead, it provides reduction and exemption effects to items used for research activities.

Participation in National R&D Programs

Korean government qualifies a company for participation in national R&D programs if the company owns a research institute, in order to support the company`s R&D activities. The Korean national R&D programs were initiated with the promotion of the Specified National R&D Program of the Ministry of Science and Technology (MOST) in 1982.

A number of other national R&D programs soon followed, including the Industrial Basis Technology Development Program of the MOCIE in 1987, the Alternative Energy Development Programs of the Ministry of Power and Resources in 1988, IT R&D Program, the Energy Saving Technology Development Project, and the G7 Project (Leading Technology Development Program) of pan-government departments in 1992. Currently, most government departments, such as the Ministry of Agriculture and Forest, the Ministry of Construction, the Ministry of Environment and the Ministry of Health and Welfare are implementing R&D programs. Major programs are as follows:

The Specified National R&D Program

First national R&D program was initiated in 1982 under the Technology Development Promotion Act in order to foster national science and technology innovation capabilities and to enhance key industrial technologies. This is an aim-oriented R&D program to enhance Korean science and technology power to the level of advanced countries, while gathering industries`, schools` and research institutes` technology development capabilities through future potential new technology development. The goals of the program were to strengthen the competitiveness of the future industry, increasing abilities to innovative new technology appearance, expanding creative research skills, developing technologies for the public sector or national strategic areas, forming research infrastructure, and carrying out a key role in science and technology innovation.

The research expenses were only 13.3 billion won for a state-led R&D program and a private sector-led R&D project when the Specified National R&D Program was launched. After 15 years, however, the research program expenses expanded 19-fold to 254.3 billion won in 1996. Since then, the research program budget has gone through drastic raise year after year to reach 1,446.0 billion won in 2005 (43 times larger than the initial expenses), and 1,716.3 billion won in 2005.

The Industrial Technology Development Program

In the process of changing the industrial policy by the former Commerce and Industry Ministry and now the MOCIE in 1987 from an industrial-type-based support system to a function-based one, a manufacturing infrastructure technology development program was initiated. In 1999, the program was renamed as the Industrial Infrastructure Technology Development Program. And in 2002, the Clean Production Technology Development Program was integrated to be finalized as the Industry Technology Development Program.

The program enhances industrial competitiveness, rather than science and technology development, but through market conforming policy. From the development stage, support was provided based on firms` participation. The program`s primary focus is on Industry-School-Research Institute Cooperation researches and about 60% of programs are in the form of Industry-School-Research Institute Cooperation research. This program is intended to contribute to the improvement of SMB`s technical strength and the on-site technology development of colleges and research centers. 544.3 billion won was allocated to the budget of the Industrial Technology Development Program in 2003, 6.8% up from 2002.

IT R&D Program

Among national R&D programs, the IT R&D Program has exhibited the most vibrant growth. The Ministry of Information and Communications (MIC) has presented a vision of Cyber Korea 21 for development of persistent information and communications technologies, and the Information and Communications Technology Development 5-Year Plan was drawn up on the strategic and practical level. Thus, 6 key projects and 2 key infrastructure sectors have been proposed and R&D is mainly conducted in these key areas.

The IT R&D Program in 2003 focuses on solidification of software and service sector technology development that can create new IT demand based on mature private sector capabilities. Also, the program concentrates on high integration and Social Overhead Capital (SOC) in the parts industry, so that highly price-competitive products can be produced on time.

Looking into R&D investment size in 2003, the total size was 917.8 billion won: contribution sector, 641.8 billion won; loan sector, 300 billion won and; investment sector, 30 billion won.

Pan-Government Departments National R&D Projects

There is a national R&D project promoted by pan-government departments instead of by one department: the 21C Frontier R&D Program.
The 21C Frontier R&D Program, as a follow-up project of the Leading Technology Development Program, which ended in 2001, is a mid-term and long-term national R&D program to develop the future strategic technology sector as the world`s top level technology by selecting the future strategic technology sector and intensively investing into it, under the judgment that the program has comparative advantage over those of other advanced countries. About 10 billion won is provided for 10 years by project corps. In 1999, two project corps were operated, while 5 were operated in 2000. In 2001, there were 5 project corps and in 2002 there were 8; thus, a total of 18 project corps were operated. In 2003, four potential technologies have been selected as project tasks: intelligent robots, ubiquitous computing, hydrogen energy-saving devices and brain disease treatment; thus, the Frontier R&D project corps have increased to 22.

Fund Financial Support System

Korean government provides various financial support structures for firms` R&D. As financial support policy, the government provides contribution support, fund operation through government budget accounting, and a technology credit guarantee system. Comprehensive financial supporting systems are as follows:

In addition, venture capital investment support by startup investment firms established under the SMB Startup Supporting Act and policy fund support by commercial banks play an important role in the technology development financial support system.

Although general financial support is commercial finance that is decided and operated by financial institutions themselves, technology introduction and cutting-edge industry support are preferentially supported. This financial support includes the technology development loans extended by Korea Development Bank (KDB), the technology development fund support by the Industrial Bank of Korea and the technology development fund loan of KB Bank. As of the end of 2002, 128 startup investment companies are registered and 78 associations have been formed with 808.4 billion won of operating amount. The invested amount reaches 565.2 billion won for 1,460 firms.

Among the technology development financial and banking supporting systems, the demand for technology credit guarantee is rapidly increasing and highly utilized by small and medium venture businesses. This system is efficient for small and medium-sized venture businesses that cannot adequately utilize support funds or government subsidy due to a limited ability to provide collateral, lower credit compared to large corporations and the inability to adequately collect information.

As of the end of 2002, guarantee size stands at 16.5225 trillion won compared with the contribution amount of 498.5 won, which has a 10.4-fold fund support effect. More than 80% of the guarantees were provided to new technology businesses.

Manpower Fostering Supporting System

Korean government operates an assortment of supporting programs for talented research personnel. The systems for industry, school and research institute personnel exchanges include a research program project and a project to support new researcher training, as well as an industrial site technology support program and SMB technical manpower supporting public works.
The recent supporting projects include the coordination of qualitative and quantitative imbalance in industrial technical manpower arising from manpower supply/demand disparity, and the industrial technology research site training project, connecting professional training and firms` on-site training to support the employment of university graduates (including junior college graduates).

A company-based technical college fostering and supporting system is conducted to for the talent. An overseas training support project for post-doctorates have been implemented to foster superior domestic research personnel.

For overseas manpower utilization systems, the following systems have been implemented to help Korea retain highly intelligent and well trained professionals: an overseas brain pool system, over-seas specialized manpower introduction support, and Science, Gold and IT card systems.

Korean government intends to foster 10,000 personnel for science and technology development in future-promising and cutting-edge fields for the second science and technology phase development using these manpower nurturing systems. Also, Korea aims to increase the number of researchers from 280,000 in 2001 to 250,000 by 2007.

Specialized Researcher System

One of the most important policies in Korea`s manpower policies is a military service exemption system in which a superior researcher is exempted from military service, if he works for 4 years in a designated research institute. This system has been in place for over 30 years. The military service exemption is to support researchers in the science and engineering sectors. If an organization hires 5 researchers with master`s degrees or higher (2 for small and medium firms), it is eligible to apply for inclusion in the program.

The demand for specialized researchers has gradually increased. As of 2003, the number of specialized research institutes surpassed 3,600 and the number of firm-affiliated research institutes among them reached about 3,200.

New Technology Acknowledgement System

Korean government supports firms` R&D through a variety of new technology acknowledgement systems. The new technology acknowledgement system, the KT mark system, was established by the Science and Technology Minister. It is an initial stage market advance supporting system operated by the Korea Industrial Technology Association for new technologies and new products. For any technologies that acquire the KT mark, the companies are given support in the forms of the public agency preferential purchase support, preferential consideration for the government development funds and the technology development fund from commercial banks and publicity campaign of acknowledged technologies and products through exhibition halls. In addition, new IT superior technologies, new construction technologies, the NT mark and the EM mark are included in the new technology acknowledgement system.

Current Status of Industry, School and Research Institute Research and Support System

Korea is actively promoting the industry, school and research institute cooperation policy for efficient utilization of limited research resources and for enhancement of the synergy effect. The major systems implemented by each government department are the Technology Innovation Center and the Techno Park of the Ministry of Commerce, Industry and Energy (MOCIE). Also, the Ministry of Science and Technology (MOST) operates the Regional Research Centers (RRC), Science Research Center and Engineering Research Center (SRC/ERC), the Industrial Technology Research Association, the Corporate Research Cluster Supporting Project, industrial site technology support and Industry-School-Research Institute Cooperation research support. The Ministry of Information and Communications (MIC) operates the S/W Support Center and the Information and Communications Startup Supporting Center. The Small and Medium Business Administration (SMBA) also operates the Industry-School-Research Institute Consortium, the SMB Technology Research Society and TBI.

Regional Research Center (RRC)

Regional Research Centers (RRC) were established in 1995 to contribute to industrial development suitable for regional characteristics and to nurture superior manpower by enhancing research capabilities of universities and colleges located in provincial areas while cultivating key local industries.

The support from RRC is provided in a different way for each center. The centers make agreements for a period of a year via publicly recruiting and selecting R&D plans for technology enhancement of regional industries to be fostered, while identifying key local fostering fields. The achievements are evaluated every 3 years and, depending upon the results, the support may be extended up to 9 years.

Science Research Center/ Engineering Research Center (SRC/ERC)

Related business expenses and center operation expenses directly spent for academic activities and international cooperation will be supported for 9 years in this project. On average, around 1 billion won will be differentially provided considering research features, number of participating researchers and yearly performance evaluations of the center. In the first year, typically about 650 million won is assisted.

Regional Technology Innovation Stronghold Projects (TIC/TBI/TP)

The Technology Innovation Center (TIC) is a project that forms technology innovation environment for local industry and supports new technology ventures. It seeks to do this by connecting specialized strategic industries and comparative fields of universities by region with the matching fund of the central government, local governments and universities. The TIC center is established in universities and research institutes nation-wide to conduct joint R&D, equipment use, industrial manpower education and training and information provision for local corporations. The government assists on average of 1 billion won annually for the center`s research equipment purchase for 5 years, while the universities and local governments provide land, facilities and operating expenses and R&D costs.

The Technology Business Incubator (TBI) is a project to provide technology development and commercialization funds, work place, technology and management guidance, information, investment and connecting fund to candidate firms or firms founded within a year. By utilizing superior research man-power and facilities held by universities and research centers in each region, comprehensive business incubating support, ranging from technology development and business startups to commercialization, is provided to foster successful venture businesses.

The Techno Park Project (TP) is designed to promote the joint development of technologies and com-mercialization by concentrating regional technology innovation of firms, universities and research institutes into a certain place based on regional technology innovation clusters. Additional goals of the TP Project are to complete a national innovation system through innovation cluster by region, and to contribute to the utilization of local economy activation and national competitiveness. Seven Techno Parks are in operation in Ansan, Songdo, Chungnam, Gwangju, Jeonnam, Daegu and Gyeongbuk since 1997. Annually, 5 billion won is assisted to each TP for infrastructure construction and equipment purchase.

Corporate Research Cluster Supporting Program

The Corporate Research Cluster Supporting Program is being implemented through the Korea Industrial Technology Association to foster technology innovation capabilities, to solidify the connection between industry, school and research institutes for at least one global leading technology development per corporate research cluster and to secure international competitiveness. Currently, 19 clusters are in operation. The research clusters supported by this program are mainly required physical factors, including technology experts, office and manpower. Any firms that participate in research clusters are provided with technology development fund investments and loans, R&D support for transferred technology under the Science and Technology Encouragement Fund and additional point grants when allocating specialized researchers to designated institutions.

Sharing Research Equipment

To support firms` R&D activities, the Korean government is promoting a joint research equipment activation program. The Basic Science Research Institute was founded to encourage sharing of research equipments. Thus, analyses support through 110 types of cutting-edge research equipments in the head institute and six other branch institutes are provided. Through Korea Equipment Online, joint research equipment utilization promotion is supported by providing various services, such as registration and DB establishment of industries, schools and research institutes, searching for joint utilization research equipment and reservation systems, research equipment meta information and joint utilization result registration, management and statistics.

R&D HR Development Program
Advanced R&D capability
Global marketing and distribution network
Systematic in-house R&D staff training program

7th Round: March 15 -April 30, 2007
8th Round: October 15 - November 30, 2007

Financial Support*
New Employment
Up to 80% of annual salary within 30 million KRW (US$ 30,000) for each R&D person for the first 2 years

Temporary Stationing for Training Personnel
Up to 50% of accommodation expenditure within 50 million KRW (US$ 50,000) per trainer

Benefits from R&D Center Registration
: Applicable to a Company with R&D Center registered to KOITA

Tax Credit
Tax credit amounting to
-either 15% of R&D and HR development cost occurred during a certain tax year
-or 40% of excess of the average R&D and HR development costs for the last four years (50% for SMB)
Tax credit amounting to 7% of facility investment for R&D and HR development or the commercialization of new technologies.

Customs Duty Reduction
80% of custom duties imposed on research equipment (within announced items), reagents, semi-processed goods, raw materials and samples, which are imported for R&D purposes

Local Tax Exemption
Acquisition Tax, Registration Tax on the purchase of buildings and land for R&D purposes
Property Tax, Aggregate Land Tax on the possession of buildings and land for R&D facilities in operation during the tax year

Individual Income Tax Exemption
for Foreign Engineers
Exemption of individual income tax for 5 years
Qualifications for R&D personnel
-Min. 5-year¡?s experience or 3-year¡?s experience with bachelor¡?s degree
-Within the technology-intensive industry list
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