The Pretense of Regional Balance Fades for Local Communities
Assemblyman Heo Seongmoo (Industry, Trade, Energy, SMEs and Startups Committee, Seongsan District of Changwon City) pointed out during the national audit of agencies under the Ministry of SMEs and Startups (including Korea Venture Investment Corp.) on the 23rd, "The Regional Innovation Venture Fund, which was created to promote balanced regional development, is 'regional' in name only, as in reality, half of the investment capital is flowing to companies in the Seoul metropolitan area."
The "Regional Innovation Venture Fund," managed by Korea Venture Investment Corp. since 2022, is an exclusive fund for regional startups and small businesses, established through joint investments from the government's parent fund (central government resources), local governments, and financial institutions. The government provides the initial capital, Korea Venture Investment Corp. manages the fund, and private venture capital firms create sub-funds to make the actual investments.
However, according to data submitted to Assemblyman Heo Seongmoo's office by Korea Venture Investment Corp., out of approximately 202.8 billion won invested through regional innovation funds over the past three years (2022-2024), 94 billion won (46%) was invested in companies located in Seoul and Gyeonggi Province.
Assemblyman Heo criticized, "The structure is such that the government provides the seed money and the private sector selects the investment targets, but in the end, companies in the Seoul metropolitan area are taking half of the regional fund, resulting in a distorted outcome."
He also pointed out that most of the fund management companies are headquartered in Seoul and Pangyo, making it easier for them to invest in metropolitan area companies rather than regional ones. Assemblyman Heo stated, "Although it is called the 'Regional Innovation Fund,' in reality, it is closer to a 'Metropolitan Area Reinvestment Fund.' The reason regional funds are not circulating within the regions lies in the institutional design."
He specifically cited the investment standards of the "Gyeongnam-KDB Regional Innovation Venture Fund," which will begin investing at the end of this year, as an example. "Although it targets 'Gyeongnam strategic industries (such as aerospace and smart shipbuilding)' and 'future new industries (such as AI, robotics, and semiconductors),' there are no restrictions regarding the location of the companies, so investments can also be made in metropolitan area companies," he explained.
Assemblyman Heo emphasized, "The system intended for balanced regional development is, in reality, operating in favor of the metropolitan area. Now, we must move beyond formal, industry-based criteria and shift toward an investment structure that creates an innovation ecosystem where regions can grow independently."
He added, "Korea Venture Investment Corp. must first correct the institutional design to ensure that government investment capital is truly used to foster regional companies, technologies, and talent."
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