New Policy Fund Reflects Korea’s Commitment To Health Biotech
Executive Summary
South Korea's plan to create a policy fund to support new growth engine industries seems to reaffirm the government's unwavering commitment to nurture the biotech and health care sectors despite the ongoing political chaos in the country.
South Korea is creating a new policy fund worth KRW300bn ($257m) to support the health biotech and 11 other recently designated "new growth engine industries", which it is hoped will help explore business opportunities and induce investment from the private sector.
The policy fund, to be led jointly by the government and financial institutions, is the first to invest specifically in the industries, newly designated by the government in December and which also include electric/autonomous cars, robots, and augmented/virtual reality.
To support growth and development in these chosen sectors, the government is seeking to aggressively improve regulations and to invest more than KRW7tn in R&D in total together with the private sector over the next five years.
Concerted Push
South Korea has created several funds in recent years specifically to support domestic biopharma and healthcare firms. (Also see "More Govt Support For Pharma As Korea Plans New Fund" - Scrip, 9 Jul, 2015.) Although these have played a significant role in supporting the growth of these sectors, they have also shown limitations in fulfilling some government objectives such as encouraging M&A due to the funds’ relatively small size and the country’s tough regulations.
Although the latest fund is larger than previous ones, it will invest across the various industries and it isn't clear at this point how much will actually be allocated to the biotech/health area.
An official at the Ministry of Trade, Industry and Energy told Scrip that the government hasn't set specific amount of cash for each designated sector, and noted that details of investment will be set by the fund’s managers.
"Fund managers will determine investment strategies including which companies will receive investment from the fund," explained the official.
Funding Partners
State entities including the Trade Ministry, Korea Development Bank, and Industrial Bank of Korea will inject a total of KRW150bn into the new fund, while the remaining KRW150bn will come from the private sector. Of the total, KRW100bn will be used for small and medium-sized enterprises as well as for venture capital invested firms.
The remaining KRW200bn will be invested in medium-sized and large firms, and investments in all cases will be made mainly in the form of support for M&A and project investment.
The government will provide various incentives to encourage voluntary investment from the private sector, including bringing in external R&D technology, and it plans to officially form the fund by the end of this year after selecting fund managers in April.
"By combining budget and funds from state-run financial institutions, this fund will serve as a primer. The fund is also created to induce investment from the private sector and enhance support for the new growth industries," said the Financial Services Commission.
Ongoing Biopharma Commitment?
The new policy fund plan seems to underscore an unwavering commitment by South Korea’s government to boost the country's biotech and healthcare sectors, despite the ongoing and widening political scandal involving President Park Geun-hye and her friend Choi Soon-sil that has virtually paralyzed the current government.
The biotech and healthcare industries are showing strong growth, while growth in the country’s traditional flagship industries such as shipbuilding, steel and chemicals is stalling.
In a New Year's address, First Vice Minister of Trade, Industry and Energy Jeong Marn-ki said South Korea's biotech industry has been growing at an annual average of 7.2% in terms of production in the past five years, proving it could become the next growth engine of the country.
In fact, exports of biotech products including biomedicines have been rising at an average of 11.5% a year in the past five years, contributing largely to the country's export-led recovery.
Under official policy goals, the biotech industry is seeking to create more than 10 companies with total annual product sales of more than KRW100bn this year.
Other Policy Measures
During a meeting with the domestic pharma industry earlier this month, the Ministry of Health and Welfare vowed to actively expand its R&D support for new drugs, as well as to expand other incentives such as drug prices and tax benefits, to encourage the development of new drugs including biobetters, biosimilars and incrementally modified drugs.
South Korea has to turn into a top international pharma nation "through the pharma industry’s continued R&D investment and global market entry," declared Sung-Il Yang, a director of the health ministry, during the meeting.
In the latter half of this year, the ministry plans to announce a second comprehensive plan to nurture the pharma industry, which will include concrete support plans for innovative pharma enterprises.
Three government ministries - health, trade, and the Ministry of Science, ICT and Future Planning - account for 80% of government R&D investment in the health and medical sectors, which accounted for 8% of the government's total R&D spending in 2015, up from just over 7% in 2014.
From the editors of PharmAsia News.