(Unofficial translation)

Financial professionals and business leaders, I am glad to meet you all.

On the night of December 31, 1879, 290 light bulbs lit up the American state of New Jersey. It was a historic moment as Thomas Edison unveiled his incandescent bulbs to the world. The acclaim was short-lived. Edison soon ran into yet another hurdle. He lacked finance to mass-produce his light bulbs. 

What opened a pathway for Edison at that time was the idea and technology themselves. With his technology patents for the incandescent light bulb put up as collateral, he was able to take out loans and receive funding to establish an electric company, a precursor to General Electric. He can be referred to as the first beneficiary of “innovative finance.” Had it not been for innovative finance, it would not have been possible for us to use incandescent bulbs, a game changer for the way humans live. 

In the era of the Fourth Industrial Revolution, ideas equal competitiveness. It should become possible to take on challenges with ideas alone. Only with the creation of an environment that enables ideas to turn into products can we become a leader in the era of the Fourth Industrial Revolution. “Finance” should acknowledge the value of ideas. Finance should solidly buttress and lead innovation.

To promote the second venture boom, we need – in addition to corporate and government efforts – finance that emboldens an embrace of challenges and encourages innovation. Today, following the strategy to promote the second venture boom announced earlier this month, I will present a vision for innovative finance.  

Nowadays, finance has become very close to our everyday lives. Things once only possible by a visit to a bank can be done on a smartphone – “a bank in my hand.” 

Physical distances have been shortened considerably, but psychological ones are still vast. Startups filled with self-confidence about their dreams, ideas and technologies still find the steps to bank entryways too high.

Countries around the world have already been stimulating innovative startup sectors by spurring innovative finance. Leading global financial institutions are providing unsecured loans to innovative businesses after evaluating their corporate value or future growth potential. Apple and Amazon, both having started as business ventures, were able to turn their ideas into business models with the help of innovative finance and grow into the global businesses they are today. 

In Korea, however, the tendency of financial institutions to only lend on the basis of real estate collateral and past performance records still holds innovative startups back. Unlike conglomerates that can offer sufficient collateral, innovative startups and SMEs are given a sliver of a chance to secure financial loans. It is no exaggeration to call the situation “financial polarization.” Innovation would rapidly follow should this divide be resolved.

Financial professionals and business leaders,

Innovative finance is the artery for startups and SMEs. Only when this financial artery is unclogged can the heart of innovation beat continually. 

My Administration is pursuing innovative finance that can lead future technological innovation by departing from the outdated financial practices of the past. It intends to transform finance in a way that befits the new era.

First, we will completely innovate “the banks’ lending system.” 

In the case of such leading, innovative companies as Amazon, Facebook and Google, their market values are much higher than their net asset values. This is because the market factors in both their technological prowess and future growth potential.
 
Now, we, too, need to assess the future growth potential of businesses in terms of their ideas and technologies, instead of their real estate collateral and track records.
 
Starting this year, a "package collateral system" will be fully implemented. Then, it will become possible to raise funds by comprehensively utilizing various assets, including movable property, such as machines and inventory, as well as accounts receivable and intellectual property rights.
 
We will also establish an "integrated credit review system." Technology evaluation and credit assessment will be integrated so that businesses possessing technological prowess can earn higher credit ratings. 

We expect this new system to help facilitate financing for those startups with advanced technology. The state-owned financial institutions that provide financial backing for policies will be the first to adopt the new system, followed by an increasing number of private financial institutions. Over the next three years, 100 trillion won in new funds will be provided to innovative SMEs. 

Our country is highly innovative as evidenced by the fact that it is the world’s fourth-largest filer of patent applications. Local consumers are eager to try innovative products. If innovative ideas are properly assessed by banks and commercialized, they are highly likely to succeed. Reforming the banks’ lending system will accelerate innovation.
 
Second, we will ensure that sufficient venture capital is provided to innovative businesses. 
 
The Government will significantly widen the doors for KOSDAQ listing: The criteria for the bio industry and other innovative industries will be differentiated to better reflect their profitability, original technologies and future financing potential.

Innovative companies have been unable to meet the criteria for stock exchange listing due to requirements that were formulated in the past based on conventional manufacturing industries. The new measure will make it possible for a large number of those innovative businesses to enter the KOSDAQ market and raise funds. Over the past three years, only 38 bio- and Fourth Industrial Revolution-related companies have been newly listed on KOSDAQ, but 80 such companies are expected to be added in the coming three years.
 
More and more businesses will come to benefit from the “fast-track listing system” as well. We will ease listing requirements so that KONEX-listed companies can make a rapid leap into KOSDAQ. Last year, the system enabled just one new KOSDAQ listing, but the number of companies is expected to rise to 30 by 2022.
 
We will also revamp how the “growth support fund” is operated and increase it to 12 trillion won over the next five years, so innovative businesses will be able to receive sufficient financial support. Private equity funds that can afford to take on the risks associated with innovation will be granted greater investment autonomy, and the supply of private venture capital will be increased by strengthening incentives for investments in innovative companies and business ventures by mega investment banks.
 
In addition, we will gradually lower the securities transaction tax and work out a plan on how to adjust the roles of transaction and capital gains taxes in the mid to long term. The capital market tax system will be restructured to be conducive to venture capital investments. The Government will also boldly remove financial regulations that hinder venture capital investments through a system that shifts the responsibility for proving the necessity of existing regulations to government officials.  

Third, a sufficient amount of necessary funds will be provided to innovate manufacturing and service industries. 

Preemptive support for manufacturing and service industries will offer opportunities to help SMEs and mid-market companies advance and strengthen research and development. 

Over the next three years, 12.5 trillion won in government financing will be provided to SMEs and mid-market companies engaged in Korea’s key industries. Very long-term financing, with a maturity of up to15 years, will be supplied to enable businesses to carry out structural reforms in the long term. I expect that 40,000 new jobs will be created as a result. 

To help facilitate capital market-backed business restructuring, the corporate structure innovation fund – now valued at 1 trillion won – will be gradually increased to 5 trillion won. Sixty-trillion-won worth of government financing will be provided to promising service industries such as tourism, health and medical services, cultural contents and logistics over the next five years to serve as pump priming for service industry innovation. I anticipate that 130,000 jobs will be created over the next five years. 

There can be failures in the process of pursuing innovation or financial institutions can suffer losses. The Government will improve financial supervisory methods in an innovation-friendly way. For losses incurred by financial companies while actively supporting innovative industries, relevant executives and staff will be exempted from their liabilities, except in cases of willful misconduct or gross negligence.   

Distinguished financial industry and business leaders, 

There has been scathing criticism of finance: “It lends umbrellas on sunny days and collects umbrellas on rainy days.” 

Now this must change. “Finance should be warm-hearted enough to serve as umbrellas on rainy days,” and, taking it a step further, I hope that it will become “innovative enough to help forecast future sunlight beyond rain clouds.”   

I ask all of the financial industry leaders here to actively take part in endeavors to spur innovation.  
 
All of you financial industry leaders have already opened the bank settlement systems and expanded inclusive finance. I ask you to move forward still. I also ask you startup and SME leaders to step further toward the forefront of innovation in return for the efforts of the financial industry. 

The Government will also actively help the financial industry and business leaders innovate by upgrading the system and strengthening our pump-priming role through government financing. In particular, concerted efforts will be made to maintain a driving force behind innovative finance by creating a public-private joint task force comprised of Government and financial institution representatives. 

Among us are the ruling party floor leader and chief policymaker as well as the chairs and members of the National Assembly’s Strategy and Finance and National Policy committees. Concerning matters that require legislation, I ask you to engage in consultations in the Assembly and provide support where needed. 

I urge financial industry and business leaders, the National Assembly and the Administration to work in unison so that innovative finance can lead to innovative growth. I hope that the public will also join in all of these efforts. 

Thank you.