The Thomson Reuters Foundation, together with Global Social Entrepreneurship Network (GSEN), conducted a global survey to find out what is ‘the best country to be a social entrepreneur’. Of 44 countries, Korea, to some surprise, was deemed the 7th best country to be a social entrepreneur.

Thomson Reuters Foundation research on best country to be a social entrepreneur

We talked to actors within Korea — investors, government officials and, of course, social entrepreneurs themselves — to share their reflections on being the 7th best country to be a social entrepreneur. What can other countries learn from Korea and how can the sector continue to grow?

Social entrepreneurship in Korea

As a movement, the social entrepreneurship ecosystem has grown tremendously since the introduction of the 2007 Social Enterprise Promotion Act. As the only country in Asia to legally define “social enterprise,” government policy has supported the creation of the social sector, including financial benefits for social enterprises that attain government certification. The rigorous certification process can take years to complete. In addition, the Korean government has invested heavily in the creative economy, encouraging a growing ecosystem of start-ups and social enterprises. With links to the recent political scandal and impending impeachment of President Park, government sponsored programs are coming under scrutiny and have an uncertain future.

Despite the buzz that Korean social entrepreneurship may be stemming unemployment and that Korea is a new innovation hub within Asia, many in the ecosystem feel there’s still a long way to go. Experts we consulted were “extremely surprised” and in some cases “shocked” to hear that Korea was named 7th in the recent Thomson Reuters poll. We spoke to some players within the ecosystem. Here’s what we learned:

Social entrepreneurship is bolstered by government support

Government policy is coordinated by the Korea Social Enterprise Promotion Agency (KoSEA) which aims to ‘foster and promote social enterprises effectively’. The high position from the global survey was clearly due to being one of the few countries in the world with a policy framework for assessing and certifying social enterprises.

The training, technical assistance, and financial support from the government (mainly delivered through intermediate organisations) encourages social entrepreneurs to take on risk and has created a robust ecosystem to support them. Local government is very active as well. The Seoul Metropolitan Government (SMG) established the Seoul Social Economy Center (SSEC), which provides technical support, capacity building, and connections to local social enterprise networks. In 2015, the Seoul Metropolitan Government purchased nearly 70 million USD worth of goods and services from social enterprises, according to the report “Status of Social Economy Development in Seoul.” Daniel Jintaek Oh of The Test Kitchen confirms that government takes its role as customer seriously: “Yes, they buy our products.”

Understand Avenue. A place in Seongdong-gu where social enterprises can offer there products.

The strong government support comes with caveats, however, as more social entrepreneurs are foregoing certification. The strict standards are pushing social entrepreneurs to seek other ways to demonstrate their commitment to business and social objectives. One social entrepreneur commented: “The government doesn’t understand what social entrepreneurship is about.” With the added pressure of social returns, some argue that the government financial support may be a crutch that is helping to keep the sector afloat.

More business skills needed

Coming in at #26 for attracting a skilled staff and #30 for making a living, social entrepreneurs are seen as being too soft. Few Korean social enterprises have been able to scale to other markets.

According to Hyekyung Hwang, Co-founder of Hive Arena, social entrepreneurs need more mature models that are scalable and sustainable, differentiating separate social enterprises from non-profits. Few social ventures have the long-term business and market experience that can support growth. Marie Myung-Hee Lee of the Work Together Foundation noted that social enterprises are too similar to non-profits. Seen as a separate movement from start-ups and non-profits, social enterprises in Korea are not viewed as “real businesses” under the current government social enterprise certification criteria.

HIve Arena, a buzzing co working space in Seoul

Growing private-sector ecosystem and impact investment

While Korea’s social enterprise ecosystem was built through government investment, a growing group of private-sector enterprises has begun to emerge in Seongsu-dong, a trendy neighbourhood in Seoul. Heyground (a project of Root Impact) will help bring together 24 of the largest social enterprises in South Korea under one roof in 2017.

Bright future ahead?

While one can question if Korea is the 7th best in the country in the world to a social entrepreneur, it’s clear that the ecosystem has developed impressively since 2007. Government policy is in place, investors step up and the idea of social entrepreneurship is gaining traction among youth who seek purpose in their professional life. But to really take it to the next level a few hard challenges need to be confronted. Here are a few of our ideas which can help the Korean social enterprise sector develop further:

Involve experienced business leaders

Most social enterprises are founded by (young) idealists, but these change makers often lack the ‘hard’ business skills which are needed to survive in the competitive Korean market. At the same time there’s a large pool of business leaders from the chaebols which are interested in bringing more purpose to their work. These groups can be linked to combine best of both worlds.

Align government policy more with need of social entrepreneurs

Government policy has been crucial to the development of the social enterprise sector, but complaints about the lack of alignment with entrepreneurs on the ground are severe. First step is to review if the certification process can be redesigned to make it more accessible and if non certified social enterprises can be supported as well.

Celebrate failure

Most (social) enterprises fail. Always and everywhere. But in Korea, failure is everything but celebrated and this is an important reason why people don’t start new social enterprises. It should be understood that ‘failure’ is part entrepreneurship and that the experience of setting up a start-up is very valuable for future employers. In a culture that equates success as money or power, failure is seen as reflection not only on one’s work but also on one’s character.

The Korean social entrepreneurship ecosystem is currently developing from a government project to a bottom up movement where private sector actors take the lead. If public and private initiatives can learn from each other and create a joint movement, the future of the Korean social enterprise sector looks very promising.

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Diana Won is a former Luce Scholar and has gained insight in the Korean social enterprise sector during her work as a consultant at MYSC.

Stefan Panhuijsen is the Head of Policy at Social Enterprise NL and is currently based in Seoul for six months where he studies the Korean social enterprise sector.