Without customers, even the best technology cannot grow. Startups in emerging industries like AI and robotics often struggle to enter the market due to a lack of delivery records. When the government becomes the first customer by purchasing innovative products, public institutions can verify their performance, allowing companies to use this as a stepping stone to enter the private and global markets. At the center of this initiative is Baek Seung-bo, the head of the Public Procurement Service. He is transforming public procurement from a simple purchasing administration into a national growth strategy that creates an initial market for the AI industry. The question is clear: Can South Korea cultivate global AI companies through public procurement?
What startups need most is not funding, talent, or technology, but customers. No matter how good a product is, a company cannot grow without buyers. This is especially true for new technologies and products like AI and robotics, which find it difficult to prove their performance and safety in the market. The government and public institutions require delivery records, and large corporations are hesitant to purchase unverified products. This creates a paradox where innovative companies cannot generate sales without a track record, yet they cannot establish a track record without sales.
This is where Baek Seung-bo's focus lies. The government must become the first customer by purchasing products, thus supporting innovative companies. When the Public Procurement Service identifies promising AI products for pilot purchases, public institutions can use them in the field, allowing companies to verify performance, address issues, and secure delivery records. Government purchases do not end with buying a single product; they play a crucial role in confirming the technology's potential and building market trust. Public procurement should no longer be seen merely as an administrative process for buying goods cheaply, but as a national growth strategy that fosters new industries and nurtures innovative companies.
South Korea's public procurement market exceeds 200 trillion won annually, encompassing central government, local governments, and public institutions. How this immense purchasing power is utilized will shape the future of the industry. Traditionally, public procurement has prioritized price and stability, viewing the purchase of already verified products as the safest choice. However, if the government only buys verified products, innovative companies will struggle to enter the public market. Innovative products cannot be perfect from the start; they must undergo a process of use and improvement in the field to reach higher levels of completion. Baek Seung-bo believes that new procurement policies are necessary for new technologies.
The core of Baek Seung-bo's strategic public procurement emphasizes using public procurement as an industrial policy rather than merely a purchasing administration. The government's substantial purchasing power should create an initial market for the AI industry and serve as a catalyst for company growth. R&D support alone cannot complete an industry. Developed technologies must become products, and those products must be used in real markets for the industry to grow. The final piece of the AI industrial policy puzzle is the market, and the Public Procurement Service is the agency that can open that market first.
AI products must be evaluated based on their data utilization capabilities, learning potential, continuous performance improvement, and scalability. Evaluating them using the same criteria as traditional goods makes it difficult to accurately assess their technological innovation. This is why the Public Procurement Service is establishing a separate evaluation track for AI products. By identifying companies with strong technologies, the government can purchase their products, and public institutions can use them to verify performance and address issues. Once the effectiveness of a product is confirmed, purchases can be expanded to other public institutions. Creating this growth ladder significantly increases the survival chances of AI startups, and companies with established delivery records can gain the trust of private enterprises and financial institutions.
Until now, AI policy has focused on R&D and funding support. Now, a policy is needed where the government and public institutions purchase developed products. The paradigm of AI industry nurturing policy must expand from support to procurement, moving beyond just providing development funds to creating markets for products.
AI is ushering in a physical AI era, integrating into robotics, automobiles, factories, and agricultural machinery. For South Korea, a manufacturing powerhouse, there is a significant opportunity to leverage its strengths in manufacturing and hardware capabilities in the software-centric AI competition. However, new technologies require validation to enter the market. Autonomous equipment, service robots, smart safety devices, and AI medical devices must be tested in real-world settings such as roads, hospitals, factories, and public facilities to properly verify their performance and safety.
The government and public institutions can become the world's largest AI validation market. Local governments can test AI traffic systems, public hospitals can validate AI medical devices, fire departments can assess AI safety equipment, and rural areas can trial autonomous agricultural machinery. Through public procurement, South Korea can transform into a vast physical AI testbed. The best way to grow the AI industry is not merely to showcase technology but to use it, identify problems, and improve it, and the Public Procurement Service must create that pathway.
The ultimate goal of South Korean AI companies is not the domestic market but the global market. Overseas customers place significant importance on which institutions have used the products and what results have been achieved. The purchasing records of government and public institutions can become a powerful asset of trust. The role of public procurement should not end with product purchases; it must connect the growth ladder from public institution purchases to the private market and from the domestic market to the global market. The accumulated validation data and delivery records in the domestic market should support public procurement abroad and exports, creating a structure where the experience of public institutions serves as a guarantee for companies' overseas expansion.
The Public Procurement Service must support AI companies while also utilizing AI within its own administrative functions. By analyzing vast amounts of contract, price, and bidding data, it can propose appropriate prices, predict price fluctuations and supply conditions by item, and provide tailored procurement information to companies. Establishing an AI consulting service to guide complex procurement procedures will lower the barriers to entry into the public market. Baek Seung-bo emphasizes that the AI era demands a paradigm shift in public procurement, advocating for a transition from a digital procurement service to an AI procurement service. By delegating repetitive tasks and data analysis to AI, procurement officials can focus more on supporting companies, policy decisions, and solving on-site issues. AI is not meant to replace officials but to assist them in making more accurate and faster judgments.
Analyzing extensive bidding and contract data can help identify unusual transactions and collusion more quickly. AI can detect patterns that are difficult for humans to find, such as repeated wins by specific companies or excessive contracts compared to market prices. Transitioning from post-investigation to pre-detection can also help prevent procurement corruption. However, AI should not make all decisions; it should remain in a supportive role, assisting officials in identifying anomalies. There is a risk that normal companies could be suspected due to incorrect data, so final verification and accountability must rest with humans.
Addressing the concentration of the AI industry in the metropolitan area is another challenge. Regional companies often struggle not due to a lack of technology but because they lack opportunities to validate their products. The Public Procurement Service can support regional AI, robotics, hydrogen energy, and smart agriculture companies in entering the public market, and if local public institutions and governments use regional innovative products first, companies can gain validation opportunities and delivery records nearby. As companies grow, good jobs are created, allowing young people to stay in the region, and an innovative ecosystem can emerge connecting local universities, research institutions, companies, and public institutions. Public procurement can thus be linked to regional balanced development.
South Korea's industrial policy has long been centered on R&D funding, policy loans, and startup grants. While these are necessary policies, what is more important to companies is having customers that generate sales. The government's role in the AI era must also expand from being a funding provider to a purchasing entity. When the government becomes the first customer and verifies performance, companies can use this as a stepping stone to enter the private market and eventually the global market. This is the most significant meaning of the AI innovative procurement that Baek Seung-bo is promoting. While subsidies are temporary, customers and markets continuously foster company growth. The focus of AI industrial policy must also shift from supporting technology development to demand policies that purchase and utilize technology.
The competition in the AI industry is as much about the speed of development as it is about the speed of validation and market entry. South Korea possesses a world-class digital infrastructure, a strong manufacturing base, and excellent talent, along with a public procurement market exceeding 200 trillion won. By utilizing the government, local governments, and public institutions as validation sites for new AI technologies, South Korea can become a vast AI testbed. As companies develop technology, the government purchases it, public institutions use it, and companies improve their products with real-world data, validated products can then spread to the private and global markets. If an ecosystem is created where the government is the first customer, public institutions serve as validation sites, and private companies are the dissemination agents, the likelihood of South Korea producing world-class AI companies will increase significantly.
Baek Seung-bo's task is not merely to ensure the government purchases the necessary items but to cultivate South Korea's future industries through public procurement. The establishment of an AI-specific innovative product track, pilot purchases, the development of physical AI, the discovery of regional innovative companies, and the transformation of procurement administration into a growth ladder for the AI industry all point toward a single goal. When the government becomes the first customer and public institutions validate products, companies can then enter the private and global markets.
Transitioning from a government that provides subsidies to one that purchases products, and from a government that supports companies to one that creates markets, is essential. The government should be the first to purchase products from companies with good technology, public institutions should become vast testbeds, and validated AI products should enter the global market. This is the starting point of the AI procurement revolution that Baek Seung-bo must lead.
Baek Seung-bo is an expert in procurement administration. He has served as the Director of the New Technology Service Bureau at the Public Procurement Service, the head of the Seoul Regional Public Procurement Service, and the Deputy Commissioner of the Public Procurement Service before being appointed as the first Commissioner of the Public Procurement Service under the Lee Jae-myung government in August 2025. He has contributed to designing the next-generation national procurement system incorporating new technologies like AI and facilitating the entry of startup and venture companies into the public market. Since taking office, he has been promoting AI innovative procurement by expanding the evaluation track for AI products and pilot purchases, utilizing public institutions as validation sites to help innovative companies secure initial markets and delivery records.
* This article has been translated by AI.
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