ICT Minister Lee Jong-ho, back row center, speaks during a press conference in Sejong, Wednesday. Korea Times photo by Baek Byung-yeul

SEJONG – The government has been closely communicating with Naver over Japan's apparent attempt to exclude the company from joint management of Line, a popular instant messaging app, vowing to do its utmost to ensure that Korean companies do not suffer disadvantages in their overseas activities, ICT Minister Lee Jong-ho said Wednesday.

"We have been continuously communicating and cooperating with Naver since the end of last year. We respect Naver's managerial decisions and are providing support and communication," the minister told reporters during a press conference in Sejong. "What is most important is ensuring that our companies do not suffer disadvantages when they invest or conduct business overseas. This is the top priority of the Ministry of Science and ICT."

Lee's remarks came at a time when Naver's operations in Japan could be compromised by the Japanese government. Japan's Ministry of Internal Affairs and Communication said it asked LY Corp., the operator of the popular messaging app Line, to reconsider its capital relationship with Naver, twice on March 5 and April 16.

LY Corp. is owned 64.5 percent by the joint venture A Holdings, established by Naver and SoftBank. Since SoftBank and Naver each own 50 percent of A Holdings, both companies are the de facto parent companies of LY Corp.

The administrative guidance from the Japanese government to the Line operator stems from an incident last November when LY Corp. experienced a data breach via Naver Cloud's server.

Line is the most popular instant messaging app in Japan, with 96 million monthly active users. Based on this popularity, Line has expanded its business into fintech, e-commerce and other sectors.

Given the service's popularity in Taiwan, Thailand and Indonesia, Naver could damage its business not only in Japan but also in Southeast Asia if the company were to sell its stake in A Holdings.

If SoftBank were to acquire Naver's shares in A Holdings and become the sole major shareholder, Naver would lose its management rights to Line. The ICT minister expressed concern over this issue, saying that the government will closely consult with Naver and its counterpart in the Japanese government to resolve the issue.

"We are very concerned about this matter, and everything is being done respecting Naver's decision-making to ensure the best interest for Naver. If there are any diplomatic issues, we are communicating with the relevant ministries to resolve them," Lee said.

Naver indirectly expressed its inability to understand the Japanese government's administrative guidance as unusual without making any specific comments.

"The administrative guidance itself, demanding a reduction in capital control, is very unusual. This is a matter to be decided based on long-term business strategies and is currently under internal review," Naver CEO Choi Soo-yeon told investors during an earnings call on Friday. "Our position has not yet been finalized, but we will make it clear once it is."

However, contrary to the minister's remarks, LY Corp. CEO Takeshi Idezawa said Wednesday that the company will gradually dissolve their consignment relationship with Naver and pursue independence in technology.

"We will gradually terminate our consignment relationship with Naver and pursue independence in our technical cooperation relationship," the CEO said. He added that the company will also increase the number of outside directors to over half of the board in response to the Japanese government's concerns about data leaks, and will aim for the separation of management.

The ICT minister also shared the government's policy direction regarding science and technology policies.

In particular, Lee said that the budget for research and development will be significantly increased next year. The government had faced criticism for cutting this year's R&D budget to 26.5 trillion won ($19.4 billion), down 14.8 percent from 2023.

"It's difficult to provide specific numbers regarding the budget increase. I believe it will be announced after consultations and procedures. The important thing is that the direction of the R&D budget will change to support future-oriented aspects, creating a transparent and fair R&D support system that researchers can truly feel," Lee said.