The number of new businesses established in South Korea in 2024 is expected to be the lowest since data began being compiled in 2016, the Ministry of Small and Medium Enterprises and Startups (SMEs) said on March 1 amid predictions of an economic downturn.
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| High interest rates, fluctuating exchange rates, inflation, low birth rates and an aging population have contributed to the decline in startups. (Source: Yonhap) |
The trend of declining startups has been going on for the past five years in South Korea. The number of startups decreased from 1.48 million in 2020 to 1.42 million in 2021, 1.32 million in 2022, 1.24 million in 2023, and 1.18 million in 2024.
SMEs claim that high interest rates, exchange rate fluctuations, inflation, low birth rates and an ageing population have contributed to the decline in start-ups. Specifically, the number of new businesses decreased in the wholesale and retail sector by 7.1%, accommodation and food services by 7.7% and real estate by 8.6%.
The decline in wholesale and retail startups is due to the impact of the economic recession, weakened consumer spending, and the collapse of e-commerce platforms TMON and WeMakePrice.
In the accommodation and food services sector, rising costs, a weakening won and inflation, coupled with falling consumer purchasing power and increased competition, have led to fewer new businesses.
The Korea Times quoted an SME official as saying that unfavorable external environment, high inflation, high interest rates, stagnant real estate market, rising raw material costs and weakening domestic demand were factors influencing the decision to start a business.
Experts also warn that stagnant startup activity will negatively impact the job market in the long term.
As of 2021, the number of small and medium-sized enterprises in Korea was 7.71 million, accounting for 99.9% of the total number of enterprises. Enterprises in this group employed up to 18.49 million workers, accounting for 80.9% of the entire workforce in Korea.
According to Kim Dae-jong, a professor at Sejong University’s College of Business, the statistics show a direct link between startup growth and job creation. When startup activity is not very promising, the employment rate for college graduates also drops to a worrying level.
Professor Kim Dae-jong emphasized that Korea's high corporate tax rate is also a factor that hinders the entrepreneurial spirit of businesses.
Currently, Korea’s tax rate is higher than the average of the Organization for Economic Cooperation and Development (OECD). Therefore, Korea needs to loosen restrictions, especially in industries related to the digital industrial revolution, to create a favorable environment for startup growth and employment.
Source: https://baoquocte.vn/han-quoc-doi-mat-voi-noi-lo-tri-tre-hoat-dong-khoi-nghiep-306055.html
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