Spotlight Interviews with Co-operators

Interview with Hyun-Gon Jung, President of KoSEA (Korea Social Enterprise Promotion Agency)

“Spotlight Interviews with Co-operators” is a series of interviews with cooperators from around the world with whom ILO officials have crossed paths during the course of their work on cooperatives and the wider social and solidarity economy (SSE). On this occasion, the ILO interviewed Hyun-Gon Jung, President at Korea Social Enterprise Promotion Agency (KoSEA) in the Republic of Korea.

Article | 11 April 2023

Could you tell us about your career and how you got involved in the social economy?

In 2013, I established a social cooperative for social activists called, “DongHang Activist Cooperative,” which aimed to create a mutual. The framework act on cooperatives which was enacted in 2012 allows mutual-aid among members of social cooperatives. At the time, 20,000 activists working for nonprofit organizations were beneficiaries of mutual-aid initiatives. I participated in the establishment of the cooperative as the operating chairman of the Civil Society Network in Korea, an umbrella organization for nonprofit organizations. The people who joined me at the time included representatives from self-help groups, consumer cooperatives, and foundations. In Korea, mutual-aid associations are still immature.

In 2014 and 2016, I participated in a consumer cooperative education project. Consumer cooperatives were successful both as associations and businesses and were now moving out into the local community. It was an intensive education program for the presidents of local consumer cooperatives, consisting of a first-year course on accounting and management and a second-year course on the public nature of society. I oversaw organization and delivery of the second year. This was a time when I was inspired to create a social economy ecosystem.

Since 2017, the government's social economy policy has been putting together social enterprises, cooperatives, community businesses, self-help businesses, and social ventures as social economy enterprises and creating a social economy ecosystem in local communities. I dealt with social innovation for about three years at the Office of the Prime Minister and the President's Office during that time. The only way for citizens' rights to increase is through participation in economic activities. As expectations for the social economy grew, I eventually ended up at the Korea Social Enterprise Promotion Agency.

Korea's social economy has received attention for its rapid growth. Please introduce the development process and overall landscape of Korea's social economy.

There is an Eastern proverb that says, "If you transplant the same kind of citrus seed to a different area, it becomes a tangerine depending on the soil and natural environment." This means that people and institutions also change according to the environment. As such, development of the social economy reflects different histories and traditions of each country.

It's widely considered that Korea’s social economy has developed in a top-down manner and led by the government, which is partly right. A case in point is National Agricultural Cooperative Federation (NACF) founded in 1961. NACF in Korea has become the world’s third largest enterprise with two million members and a total asset of 600 trillion won (by NACF estimate) but the Federation grew based on government infrastructure. Besides NACF, National Federation of Fisheries Cooperatives (1961) and Cooperatives Association of Small and Medium Businesses (1961) are also social economy entities created at a time when the government had strong control.

Currently, Korea’s social economy is often called “development from the side” as its growth resulted from a combination of government policy and civil society. The role of civil society is first identified in a credit union founded in 1973. However, voluntarily organized entities are seen after the historic movement in 1987. Back then, we had a popular uprising across the nation and the 40-year long authoritarian regime collapsed. Against this backdrop, consumers led a movement for eco-friendly food, resulting in legislation and foundation of consumer cooperatives. The cooperative now has around 150 cooperatives and 1.3 million members in the area of food and is expanding its presence with 100 cooperatives in medicine.

When we talk about the social economy, Social Enterprise Promotion Act in 2007 and Framework Act on Cooperatives in 2012 are mostly mentioned. In particular, the Framework Act on Cooperatives allows anyone to establish cooperatives on condition that there are over five founding members. Social Enterprise Promotion Act is noteworthy in that the government directly certifies and supports social enterprises based on the act. Since 2017, various government documents introduce a new category of “social economy enterprises”. Apart from social enterprises and cooperatives, the documents include community companies, self-sufficiency companies and social ventures. The government provides support to all, but there is a difference in receiving support. Community companies are supported by the Ministry of the Interior and Safety, self-sufficiency companies by the Ministry of Health and Welfare, and social ventures by the Ministry of SMEs and Startups. This illustrates that social economy is getting more government-wide support.

As of 2020, statistics indicate that 32,000 social economy enterprises employ 314,000 people. This means employment in social economy enterprises exceeds 1 per cent of total employment in the country. However, not all social welfare institutions and non-profit organizations, which are generally recognized by OECD and ILO, are included in the statistics, as most of them are not registered as social economy enterprises. This explains why it is essential to define the identity of the social economy in Korea.

As a scheme for supporting the social economy, is the Social Enterprise Promotion Act adequate? As you mentioned, social economy enterprises defined by the government remain small in size. What is missing in the system?

Social enterprises in the Social Enterprise Promotion Act refer to an enterprise doing business while serving social purpose, which is not any different from other countries. Yet, they distinguish themselves in the way they receive support. The government has the authority to certify social enterprises and provide direct financial support to those enterprises certified. Providing direct government support has a historical context in Korea.

In 1997, Korea was hit by the Asian financial crisis. Many businesses went bankrupt and unemployment skyrocketed. To overcome the crisis, the government began the public employment project which provided short-term jobs. In 2003, the Ministry of Employment and Labor attempted to differentiate its project by naming it “social job”. Since then, the government has been keenly aware of the need to continue to generate jobs with financial support.

Meanwhile, the realm of civil society was creating social services including housing improvement, welfare and nursing care, and recycling while accommodating the government’s public employment project. These first became self-sufficiency communities and later grew into a company. Social enterprises began taking shape. These social enterprises take care of those in need and the government serves as a catalyst to help them stand on their own feet. This is what “Social Enterprise Promotion Act” in 2007 is about. Once a business is certified as a social enterprise, its new hires are partly supported by the government in wages for the first three years. The Ministry of Employment and Labor’s “social jobs” project has the same logic.

The certification system, by its nature, is limited. Considering social enterprises alone, since the first certification in 2007, 3,534 social enterprises are doing business as of the end of 2022 and they employed 67,000. Around 6,500 social enterprises including roughly 3,000 preliminary social enterprises are creating up to 100,000 jobs. This number is presented as proof of progress made through government support but it’s still small. These entities grow gradually, not exponentially.

What needs to be improved in Korea’s support system is funding. Research and development and talent equipped with new technology is key to success in the market. Such scaling-up needs funding. However, funding including policy financing, on the ground, fall far short of the social economy market’s need. Especially, the financial market relies on the short-term profit. Still, social economy isn’t well understood in policy financing which helps funding.

Korea creates and runs an executive organization for the development of the social economy at the government level. Could you please tell us about KoSEA, and how it works?

Founded in 2010, based on Article 20 of Social Enterprise Promotion Act, Korea Social Enterprise Promotion Agency (KoSEA) is a public organization stipulated by law. With its 130 employees, it works closely with the Ministry of Employment and Labor.

We always bear three words in mind: support for startups, support for growth and support for creation of an ecosystem. Of these three, support for startups is our primary focus. The agency identifies nearly 2,000 social economy enterprises per year. We increase our contribution to society by generating more jobs through social economy enterprises.

The Ministry of Employment and Labor and Korea Social Enterprise Promotion Agency are deliberating on how to cooperate with social economy enterprises in the phase of growth. What we most focus on is how to open up joint channels of sales for social economy enterprises. Its size reaches 2 trillion won in 2022 but is not enough to drive the growth momentum of the social economy enterprises. Getting recognition from the general public is key to expanding the channels, which is why KoSEA launched a center to measure social value in 2023.

KoSEA’s strategy is to support the creation of a local ecosystem for the social economy. To this end, we proactively communicate with volunteer organizations, religious institutes, and civil society. We work toward closer relationships with chambers of commerce and industry, enterprises owned by local governments and public institutions. It’s a given that social economy becomes a key partner with local governments.

I know that Korea hosted the 33rd World Cooperative Congress of the International Co-operative Alliance in 2021. What do you think is the achievement for Korea?

The Congress was held for 3 days from 1st of December, 2021. I feel honored and privileged to have been a partner to this effort. For us who have a short history of cooperatives, the Congress felt like a crash course where we could learn a lot at one time. As the congress sent strong alternative messages such as sustainability, labor rights and inclusive local communities, the cooperative movement in Korea was inspired and encouraged. We felt supported in that Korea is not alone in dealing with the issues. In particular we felt connected in addressing issues of inequality and quality of jobs. Changes like platform labor are related to digital transformation, where Korea is fast advancing, the cooperative solutions in the platform economy were well received and appreciated.

My special memory is having delivered a presentation under the theme of “The current state and challenges of cooperative in Korea” in the government roundtable, a side event of the congress. I pointed out one of challenges facing us. Korea has two types of cooperatives; one is founded under the special law regime and the other is founded under Framework Act on Cooperatives within the jurisdiction of the Ministry of Economy and Finance. The division was revealed at the congress. My belief is that we need to deal with the identity issue by fulfilling each principle made between cooperatives.

In hindsight, there is one thing we would have done better. That’s the theme for session 4, “reliable public-private partnership”, which might have drawn much attention from cooperatives in other countries. In this vein, it must have left significant impression when then President Moon urged to enact Framework Act on Social Economy, one of the biggest challenges facing Korea’s social economy, in the opening ceremony. It’s a shame that we have yet to make any achievement.

What do you think is needed for the development of the social economy in Korea and share with us your insight on what role KoSEA can play in contributing to the development.

Pressure to make success in the market is one of the latest changes we have seen in Korea’s social economy. And there is skepticism about the government support. I understand that in Europe, success of the social economy enterprises came first and building on the success, social contribution for those outside the entities were pursued. Korea has done the other way around. As social purpose took precedence, limited government support was planned at an early stage of startups. In Korea, success in the market is viewed as something you can achieve phase by phase.

I think that we should work to be successful in the region, first. By doing so, social economy can take the initiative in forging an ecosystem of local economies. We think healthcare and caring services can be an enabler. There are several reasons why we think the two projects are highly likely to make success in the market. First, you can feel vitality on site. The sector of caring services including Health Welfare Social Cooperatives is seeing an increasing number of businesses, and innovations. This is the focus of KoSEA commitment. Local governments’ purposes are focused on health and welfare of residents, which paves the way for reliable public-private partnerships. The central government has made strengthening social services its national agenda. The conditions are getting ripe.

How can they be funded? The top priority is to make sure that policy funding at government level provides social economy with enough opportunities. For this, we should change the system that limits market competitiveness of the social economy. The major sticking point is prohibiting credit unions from investing in other corporations. It lays bare how cooperation between cooperatives is hindered. I’m concerned that cooperatives don’t have full access to loans because investment made by members are in liability. As ESG is going mainstream in global businesses, developing indicators to measure the value of the social economy is drawing much attention. KoSEA is operating SVI (Social Value Index), an index to measure social enterprises and Coop-Index, an index for self-evaluation of cooperatives but I think we need to step closer to the global standards. I know that ICA is also racing to develop global standards. I believe such a process of standardization can be an opportunity for Korea and the international community to enhance the understanding of the social economy.

I personally wish that mutual-aid societies would be allowed. It began in 2013 but wasn’t done yet. What’s regrettable is that mutual aid projects allowed for National Federation of Fisheries Cooperatives are allowed for neither cooperatives founded under Framework Act on Cooperatives nor consumer cooperatives. Particularly, in accordance with law, consumer cooperatives are allowed to engage in mutual aid projects. However, all projects have come to a halt as the government did not make an enforcement ordinance.

What direction should we take in our work? I think resolving inequality and creating quality jobs should be high on the agenda. What we fear in face of change triggered by climate crisis and digital transformation is ultimately inequality. That’s why I wish that the social economy will be able to meet the calling of our time.