Reward system needed to boost innovation

This is the 10th in a series of letters by experts to President-elect Park Geun-hye. — ED.

By Amy Jackson

Amy Jackson
AMCHAM President

Dear Madam President-elect,

On behalf of the American Chamber of Commerce in Korea (AMCHAM), I send my sincere congratulations on your election as the new President of Korea. As a professional woman who has worked with and in Korea for over a decade, your election is especially meaningful to me personally.

At a time when the global economy is still experiencing a slow recovery and Korea is working to tackle a number of economic and social issues, the U.S. business community welcomes your emphasis on welfare reform and creating a level playing field for all businesses, regardless of their size or market power. Above all, we note with great enthusiasm your emphasis on innovation and research and development (R&D) as a key driver of economic growth and job creation. We believe that the recently enacted Korea-U.S. Free Trade Agreement (KORUS FTA) is already helping Korea achieve these important goals.

AMCHAM and its members also recognize the importance of innovation. U.S. companies have long been leaders in innovation, and since AMCHAM was founded in 1953. Our members have been proud partners to Korean consumers and companies, assisting as Korea worked tirelessly to transform itself into an economic powerhouse.

Our members have created tens of thousands of jobs, introduced new products and services, and have put a strong emphasis on corporate social responsibility (CSR) activities in Korea through AMCHAM's charitable Partners for the Future Foundation and through countless individual member companies' programs. U.S. companies have also helped spread innovative ideas and techniques within ‘Corporate Korea.'"

Last year, we formed a new "AMCHAM Council on Innovation for the Future" in order to promote innovation and further collaboration between the Korean and U.S. business communities through best practice sharing and proactive outreach.

As you have pointed out, innovation will be crucial for Korea to achieve continued economic growth, create more jobs and foster stronger, more competitive small and medium-sized enterprises (SMEs). The key to creating a truly innovative economy is to ensure that there is an enabling environment for innovation."

Creating an environment in which people can take a new promising idea and turn it into a successful product or service requires many things, including a good education system, an atmosphere that encourages risk-taking, funds that entrepreneurs can easily access, sufficient reward and protection for innovative ideas, and government policies that encourage rather than stifle new ideas becoming reality in the marketplace. In this vein, I would like to make two practical suggestions.

First, to promote innovation, Korea must ensure that a strong system is in place that provides adequate reward for innovation and protection of intellectual property rights (IPR). This will create necessary incentives for innovation, as well as help ensure that innovative companies, including SMEs, can compete fairly and continue to invest in R&D without fearing IPR infringement.

When innovative ideas are rightly rewarded and protected, more Korean companies will put real money into R&D. Further, more foreign businesses will set up R&D centers here and partner with Korean companies in diverse areas.

This will help foster growth in sectors already identified as Korea's future growth engines such as pharmaceuticals, biotech, and green energy. While IPR protection in Korea has improved markedly over the past few years, there are still issues that must be addressed. The government should lead by example. Continued tolerance for use of pirated software in some government agencies, for example, seriously diminishes the government's professed intention to promote innovation in information technology (IT) and other sectors.

Secondly, pro-innovation policies need to be carefully designed allowing for feedback and input from all stakeholders in a transparent manner, before being implemented. Even after a policy is implemented, a constant cycle of feedback ― assessment ― fine-tuning will be needed.

This process will help the government avoid unintended consequences that can occur when policies are developed without input from all affected parties. Further, deliberative policy-making will ensure the predictable, transparent and consistent marketplace that companies need when they consider investing in new areas.

Predictability of the operating environment is also a key decision factor when foreign companies decide where to invest. According to the World Economic Forum Global Competitiveness Report 2012-13, Korea ranked 133rd out of 144 countries for "Transparency of Government Policymaking" index (far below its overall ranking of 19th). The U.S. business community looks forward to working with you and your team as you develop and implement new policies to ensure Korea grows as an economic powerhouse of Asia.

AMCHAM's new Council on Innovation for the Future, which is composed of senior representatives from leading U.S. companies in Korea as well as the Korean government, is planning new events that we hope will spread an "Innovation Fever" in Korea. This year, we will host an "Innovation Camp" for students from universities outside of Seoul, as well as launching a Service Day where AMCHAM members' employees will gather to serve the local community in an innovative way.

Once again, our Chamber congratulates you. We stand by to assist you in any way we can, and will work tirelessly as your partner to help bolster employment, assist SMEs in finding new export opportunities and encouraging more foreign direct investment in Korea. We look forward to an ongoing dialogue on these issues with you and your new Cabinet going forward.