- Focus on Korea’s Manufacturing industry - April 30, 2008 Streamlining the procedures of starting a business 2 nd Meeting on the Enhancement of National

- Focus on Korea’s Manufacturing industry -- Focus on Korea’s Manufacturing industry -

April 30, 2008April 30, 2008

Streamlining the procedures of starting a business

Streamlining the procedures of starting a business

2nd Meeting on the Enhancement of National Competitiveness2nd Meeting on the Enhancement of National Competitiveness

MOSF • MOJ • MKE • MOE • MLTM • SMBA

National Competitiveness Council

MOSF • MOJ • MKE • MOE • MLTM • SMBA

National Competitiveness Council

BackgroundBackgroundII

Overview of the Starting-a-Business SystemOverview of the Starting-a-Business SystemIIII

IIIIII

IVIV

VV

Improvement MeasuresImprovement Measures

Expected EffectExpected Effect

Implementation ScheduleImplementation Schedule

ContentsContents

BackgroundBackgroundII

I. Background I. Background

Where Korea stands in terms of starting a businessWhere Korea stands in terms of starting a business

Steady decline since 2002 when the venture boom burst

Steady decline since 2002 when the venture boom burst

No. of business start-upsNo. of business start-ups

61,85261,852

53,48353,483

’02’02 ’07’07

Poor EnvironmentFor Startinga business

Poor EnvironmentFor Startinga business

Complicated administrative

procedure

Complicated administrative

procedure

High cost burden

High cost burden

I. Background I. Background

For sustainable economic growth and job creationFor sustainable economic growth and job creation

Promoting new business start-

ups

Promoting new business start-

ups

Drastic overhaul of administrative

regulations on establishment of corporationsand factories

Drastic overhaul of administrative

regulations on establishment of corporationsand factories

Creatinga business-friendly

environmentfor startinga business

Creatinga business-friendly

environmentfor startinga business

Economic

Gowth

Economic

Gowth

Job CreationJob Creation

Overview of the Starting-a-Business SystemOverview of the Starting-a-Business SystemIIII

1. Overview of the Starting-a-Business System 1. Overview of the Starting-a-Business System

Advance preparationAdvance preparation

KoreaKorea

CorporationestablishmentCorporation

establishment

CanadaCanada

Factory establishmentFactory establishment

PreparationPreparation

RegistrationRegistration

Business LicenseBusiness License

Follow-upFollow-up

Name search (Registry)

Authentication of articles of association and record of minutes

Imposition and payment of registration tax

Registration of establishment (Registry)

Business license (tax office)

Social Insurance

Report rules of employment (Labor office)

Payment of registration taxand registration (Industry Canada)

Business license

Advance preparationAdvance preparation CorporationestablishmentCorporation

establishment Factory establishmentFactory establishment

Selection of industrial site

(120 days)

Selection of industrial site

(120 days)

Approval of factory

establishment(30 days)

Approval of factory

establishment(30 days)

Factory construction

Registration of factory

Feasibility study and industrial site study (90 days)

Examine land use and environment compatibility (30 days)

Application Deliberation Approval

An advance environment and disaster impact analysis (30 days)

Construction Permit Commencement Completion Move in

Installation of machinery/equipment for operation

1. Overview of the Starting-a-Business System 1. Overview of the Starting-a-Business System

2. Complexity of Corporation Establishment 2. Complexity of Corporation Establishment

1 Complicated procedureComplicated procedure

32 different documents for submission to 7 different organizations

97% of applicants hire legal agents

Case Laonfarm visited 3 different cities and 4 different organizations for business registration (125 ㎞ )Laonfarm visited 3 different cities and 4 different organizations for business registration (125 ㎞ )

Hwa-Sung CityHwa-Sung City

Hwa-Sung City, Bong-Dam Eup

Hwa-Sung City, Bong-Dam Eup

Corporation registration taxCorporation registration tax

Su-Won CitySu-Won City

A notary’s officeBank for paymentA notary’s office

Bank for payment

O-San CityO-San City

Registration officeRegistration officeHead OfficeHead Office

37.18 ㎞70 mins

37.18 ㎞70 mins

15.34 ㎞ 27 mins15.34 ㎞ 27 mins

17.43 ㎞ 40 mins17.43 ㎞ 40 mins

Individual visit to the organizations 17 days (Vs. Canada: handled online within 3 days)

2. Complexity of Corporation Establishment 2. Complexity of Corporation Establishment

2 Inappropriate regulations remainInappropriate regulations remain

Minimum capital requirement (50 million Won)

Hinder small venture start-ups

Restrain use of similar names in the same district

waste of time and money administratively

Authentication of articles of association and minutes Extra cost incurred (1.4 hundreds thousand Won)

3 Heavy cost burden on starting a start-upHeavy cost burden on starting a start-up

Direct Expenses (mil) Indirect Expenses (mil)

Authentication Registration Financial Cost* Fees

Korea

Canada

0.26 0.24 0.30 0.50

- 0.35 - (0.30)

1.30

0.35

Sum(mil won)

※ Applicants hiring agent for registration in Korea* Extra financial cost due to minimum capital requirement

3. Complexity of Factory Establishment 3. Complexity of Factory Establishment

1

2

Lack of usable industrial estatesLack of usable industrial estates

Individual industrial sites are allowed in size of less 300 ㎢ in management areas Regulations piled on regulations concerned unplanned development (54 acts) * Management Area: quasi-urban area and quasi-agricultural area required systematic development and management in the past

Introduce district industrial policy for systematic management of individual industrial site No case reported

Restricted information on landRestricted information on land

Information on permitted land use as determined in the Land UtilizationManagement Act or according to urban planning ordinances is limited at best Finding proper site takes too long (120 days)

Case Even though TaeJin Corp. searched through 20 industrial sites for two years, they failed to find a feasible location. * Machine tool manufacturing, Si-Heung City, Gyeonggi Province, Searched for a 6,600 ㎡ site

Even though TaeJin Corp. searched through 20 industrial sites for two years, they failed to find a feasible location. * Machine tool manufacturing, Si-Heung City, Gyeonggi Province, Searched for a 6,600 ㎡ site

3. Complexity of Factory Establishment 3. Complexity of Factory Establishment

3 Excessive regulations for Environment Conservation at industrial sitesExcessive regulations for Environment Conservation at industrial sites

79 types of industries suffer from double regulation according to the Land Utilization Management Act and the Environment Conservation Act

Environment and natural disaster impact studies are mandatoryThus, a great burden on small venture start-ups * Environmental impact assessment: 20 lists, 300 pages, 20 mil Won Natural disaster impact assessment: 19 lists, 50 pages, 10 mil Won

Some industries are not allowed in industrial site as accorded by urban planning ordinances (guides & notices)※ Ready-mixed asphalt and concrete and 31 more industries are not allowed according to urban planning ordinances (DangJin Gun, Chung-Nam)

Case HS Bio Corp. gave up on plans to establish a factorydue to categorization as one of the 79 prohibited industries

IIIIII Improvement MeasuresImprovement Measures

Simplify corporation establishment processSimplify corporation establishment process

Enlarge individual industrial estatesEnlarge individual industrial estates

Deregulate assessment of impact of environmental and natural disaster impact studies

Deregulate assessment of impact of environmental and natural disaster impact studies

Strengthen start-up support systemStrengthen start-up support system

Business-friendly environment for starting a business

Business-friendly environment for starting a business

GOAL

GOAL

STRATEGY

STRATEGY

1. Vision 1. Vision

2. Reorganize Corporation Establishment System 2. Reorganize Corporation Establishment System

Simplify CorporationEstablishment ProcessSimplify CorporationEstablishment Process

Customized service for business start-ups (off-line)

Customized service for business start-ups (off-line)

On-line business start-upadministrative system (StartBIZ)

On-line business start-upadministrative system (StartBIZ)

SME Start-up Service center (as of Apr 16, 2008)

One-stop service

Need to visit single website (Single Window)

Easy access to on-line administrative services

One-stopon-lineservice

One-stopon-lineservice


ComparisonComparison

Name searchName search

Imposition and paymentof registration tax

Imposition and paymentof registration tax

Authentication of articles ofassociation and record

of minutes

Authentication of articles ofassociation and record

of minutes

(Before) (After)

Registration of establishmentRegistration of establishment

Business licenseBusiness license

<Individual Visit> <One-stop Application>

On-lineOn-line

Do away with minimum capital (50 million Won)requirement (Revision of the Commercial Act)

Efficient corporation establishmentEfficient corporation establishment

Business friendly environment for start-ups

Business friendly environment for start-ups

Company establishment with capital of only 100 Won will facilitate start-ups of small ventures

* Abolishing minimum capital requirement is the current trend of the times (75 countries out of 178)

Do away with prohibition provision of using similar name

(Only USA and Canada prohibit using the same name

along with Japan as of 2006)


Simplify Corporation Establishment

Simplify Corporation Establishment


Curtail the periodand expense of

corporationestablishment

Curtail the periodand expense of

corporationestablishment

Do away with authentication of articles of association and minutes

Give benefit to small start-ups less than 1 billion Won in capital

Do away with mandatory of purchasing public bond

Give benefit up to 53,000 start-ups

Curtail the issuing period of business license(5 days 1-3 days)

Simplify CorporationEstablishment

Simplify CorporationEstablishment

Efficient corporation establishmentEfficient corporation establishment


Curtail the Duration, Procedures andExpense of Corporation EstablishmentCurtail the Duration, Procedures and

Expense of Corporation Establishment

Before After


Name SearchName Search AuthenticationAuthentication

Minimum Capital Purchasing Bond

Registration TaxRegistration Tax


32 documents1.3 million Won 32 documents

1.3 million Won 12 documents60,000 Won

12 documents60,000 Won

ReduceDocuments

+Curtail

Expenses

ReduceDocuments

+Curtail

Expenses


Name SearchName Search AuthenticationAuthentication

Minimum Capital Purchasing Bond

Registration TaxRegistration Tax


3. Reorganize Factory Establishment System 3. Reorganize Factory Establishment System

Subsidize expenses infrastructure from the local gov’ts.

Systemic provisionof industrial estatesSystemic provisionof industrial estates

Provide more industrial estatesas a mini industrial complex

Provide more industrial estatesas a mini industrial complex

Enlargement ofProvision of

Industrial Sites

Enlargement ofProvision of

Industrial SitesProvide Incentives and Deregulation for the AreaProvide Incentives and Deregulation for the Area

20% of annual provision of industrial estatesas mini industrial complexes

10 district and complex 150 million ㎡ in total`

Soften the standard infrastructure in the districtunit development plan Green area 20% 15% Roads 10~20% 5~10%

Development policy for manufacturing industry in the 80s Designate and Support Enterprise Zone

Development policy for manufacturing industry in the 80s Designate and Support Enterprise Zone

In case of UK and USA


Ease regulations on environmentand natural disasters

Ease regulations on environmentand natural disasters

Reduce theBurden of

Small Venture Start-ups

Reduce theBurden of

Small Venture Start-ups

Entry barriers to be removedEntry barriers to be removed

Do away with guides and notificationsDo away with guides and notifications

Environmental Impact Analysis: Not required for an industrial estate smaller than 5,000 ㎡For an industrial estate of 10,000 , it will be simplified

First Stage (June 2008): 79 56 industries

Second Stage (Dec 2008): Gradual abolishment

Natural Disaster Impact Analysis: Not required for an industrial estate smaller than 10,000 ㎡

Deregulate environmental impact analysis & scrap natural disaster impact analysis

Deregulate environmental impact analysis & scrap natural disaster impact analysis


Strengthen Start-upSupport System

Strengthen Start-upSupport System

Operate Support System for Industrial Site Selection

Operate Support System for Industrial Site Selection

CustomizedFactory

EstablishmentSystem

CustomizedFactory

EstablishmentSystem

Develop On-line Business Start-up System Develop On-line Business Start-up System

From Application to Approval

(Apply Proceeding Verification Approval)

On-line real time notification

Backup all the necessary requirements, jointly in cooperation with local gov’ts. and relevant organizations

Backup all the necessary requirements, jointly in cooperation with local gov’ts. and relevant organizations

In case of Alabama, USA

Provide information on the area for such use according to the Land Utilization Management Act

Establish “Business Start-up Promotion Agency” within the local gov’t

IVIV Expected EffectExpected Effect

Ⅳ. Expected Effect (Quantitative) Ⅳ. Expected Effect (Quantitative)

Start-up Environment: 110thStart-up Environment: 110th

Administrative Expenses: Save up to 130 billion WonAdministrative Expenses: Save up to 130 billion Won

10th ` 10th `

Reduction of DurationReduction of Duration Reduction of ExpensesReduction of Expenses

167 days68 days

Save 99days Save 25.24 million Won

Corporation Establishment 17 days 3 days

65 daysFactory Establishment 150 days

44.3million Won

19.06 million won

Corporation Establishment 1.3 million Won

60,000 Won

19 million WonFactory Establishment 43 million Won

Ⅳ. Expected Effect (Qualitative) Ⅳ. Expected Effect (Qualitative)

Deregulate Corporation Establishment and Operate on-line Business Start-up Administrative System (StartBIZ)Deregulate Corporation Establishment and Operate on-line Business Start-up Administrative System (StartBIZ)

Provide industrial sites for small business start-ups and reduce the difficulties regarding approval and licensingProvide industrial sites for small business start-ups and reduce the difficulties regarding approval and licensing

Easy Access to free on-line administrative services

Facilitating economic development and job creation through small business start-ups

Provide industrial estates of mini-size industrial complex style

Reduce the burden from small venture start-up, while Gov. go through all the necessary investigation

VV Implementation ScheduleImplementation Schedule

Do away with minimum capital requirements (May 2008)

ImmediateenforcementImmediate

enforcement

Act Revision(Dec 2008)

Act Revision(Dec 2008)

System Development

(Jan 2009)

System Development

(Jan 2009)

Ⅴ. Implementation Schedule Ⅴ. Implementation Schedule

Establish and operate "SME Start-up Service Center (Apr 2008) &“Business Start-up promotion Agency” (May 2008)

Introduce revisions to the bills in the 18th National Assembly

Do away with prohibition provision of using similar name and authentication of articles of association and the book of minutes,while replacing minimum capital requirement with a bank balancestatement

ISP strategy development for system development with pilotservice expected to launch in 2009

On-line corporation and factory establishment service

Thank youThank you