Flexible digital rules could add 21,000 jobs in Korea: Oxford Economics

gettyimagesbank

A more flexible digital regulatory environment could increase startup formation in Korea by 15 percent and venture capital investment by nearly 20 percent, creating about 21,000 additional startup jobs by 2035, research showed Thursday.

The findings come from a new Oxford Economics study, "Digital Regulations and the Startup Ecosystem in South Korea," which examined how regulatory choices could affect the country's startup sector.

Under a more enabling policy framework, Korea could see about 240 additional startups formed each year and 2.4 trillion won ($1.7 billion) more in annual venture capital investment between 2026 and 2035.

By contrast, a more restrictive approach could reduce startup formation by 8 percent and investment by 10 percent. That would amount to about 130 fewer startups and 1.3 trillion won less in investment annually, as well as around 12,000 fewer startup jobs by 2035.

The report said Korea's digital regulatory system places strong emphasis on privacy, security and national interests, drawing in part on approaches pioneered in the European Union.

"South Korea's startup ecosystem is among the strongest in Asia, but our research suggests that regulatory design is becoming a key determinant of future growth," said Henry Worthington, managing director of economic consulting at Oxford Economics. "While regulation remains essential for building trust and protecting consumers, the economic stakes are significant."

The report found that compliance burdens and uncertainty over returns are making it harder for startups to operate. Some 86 percent of respondents said digital regulations create operational constraints, with nearly one in four describing the impact as major or severe.

More than three-quarters said compliance accounts for over 5 percent of operating costs. Among that group, 44 percent said it exceeds 15 percent.

Nearly eight in 10 startups have reorganized their operations in response to existing rules, including by introducing new compliance procedures, moving to compliant cloud infrastructure and hiring external legal or advisory services.

Regulation is also affecting access to capital. Fifty-eight percent of venture capital firms said it makes investment returns more uncertain. Under a more stringent regulatory environment, the share of startups expecting investment to increase would fall from 43 percent to 31 percent.

"The policy challenge is not less regulation, but better-designed regulation," the report said, calling for flexible frameworks, greater international alignment and policymaking shaped by continued industry engagement.

Digital Property Asia, a coalition of small and medium-sized enterprises and startups across the Asia-Pacific that promotes dialogue between the digital industry and policymakers, commissioned Oxford Economics to conduct the study. It drew on a survey of 500 startup ecosystem participants, expert interviews and quantitative modeling.