SEOUL — Song Jong-ho, Administrator of the Small and Medium Business Administration (SMBA) sets the major new-year policies to help SMEs(Small and Medium sized Enterprises) cope with the current global financial crisis, buttress the youth’s business setup, stabilize the economy for medium and low-income classes, and promote 'eco-systemic development", a term coined by the Korean government to refer to development of SMEs and large conglomerates both.
Supporting SMEs affected by the global financial crisis
The SMBA’s slogan in 2012 for SMEs competitiveness and preemptive measures to the current global financial crisis is “Make SMEs Healthy and Embrace Small Enterprises”, aimed at crisis management for SMEs. Song explains, “this will be backed by our three major tasks, which covers, first, the introduction of ‘SMEs Soundness Management System’, second, security of occupational safety nets for small enterprises, and, third, facilitation of the youth’s business setup.”
According to Song, the first will be based on the support tailor-made to SMEs specializing in root industry such as molding and welding. The SMEs Soundness Management System covers support over the three stages of diagnosis, prescription, and recovery. The second will be promoted based on increased sales through Onnuri gifts, certificates exclusively developed to promote sales at local traditional markets (KRW 250 billion as of 2012) and Nadle stores, previously known as smart shops to compete with mega stores in local areas, introduction of Small Enterprises Fund (Account), and more subscriptions to Mutual Aid of Small Enterprises. For the third task, Loan Payment Adjustment Funds (KRW 50 billion) and Business Re-foundation Funds (KRW 20 billion ) will be introduced to alleviate the burdens upon business failures. 13 more Youth Business Incubation Centers will be established and KRW one trillion will be allocated for the youth’s business setup. The support will cover Youth Business Funds (KRW 730 billion), angel funds (KRW 160 billion), and R&D funds (KRW 94 billion).
Funds allocated to cope with the global financial crisis
The recent financial crisis originating from Europe resulted in slow exports by SMEs and further decreased in domestic demand, which is expected to lead to further deterioration of financial status of Korean SMEs during the first half of the year.
According to Song, for more stable funding to SMEs against the global financial instability, KRW 81.5 trillion will be provided and more stable liquidity will be guaranteed with KRW 3.3 trillion of policy finance and KRW 71.2 trillion of guarantee funds. Also the takeover size of account receivable ledgers will be increased from KRW six trillion in 2011 to KRW seven trillion in 2012 to strengthen the SMEs management safety nets.
Funding will be provided with a focus on SMEs and startups specializing in the areas of great potentials for growth, covering strategic industries such as green, new growth, cultural contents and knowledge services (75%). Guarantees for startups, green growth and employment generation will be increased from 13.8 trillion in 2011 to KRW 14.4 trillion in 2012 for business establishment, KRW 4.5 to 6.8 trillion for green growth, and KRW 6.5 to 7.3 trillion for job creation.
Song said, “Funds amounting to KRW 210 billion for the youth’s business setup will be separately allocated. At the same time, we will establish ‘the SMEs Emergency Task Force Team’ and hold meetings of ‘the Commission on Emergency Financial Support to SMEs’ for close monitoring of their financial status. Also, more flexible funding management will be guaranteed to solve liquidity issues.”
SMBA’s new-year plan to promote the youth’s business setup
The youth’s business setup plays an important role to generate newly added value and qualitatively and quantitatively sound employment when growth without employment deepens. The national awareness led to establishment of ‘Youth CEO Programs’ last year to provide education, spatial arrangement, R&D support and funding to young people wishing to set up their own businesses.
According to Song, in 2011, 220 young people benefited from this program in Ansan and other local areas and this year, the program will be expanded to more local areas such as Gwangju and Daegu.
Song said, “This year, we will arrange the conditions for willing and able young people to set up their businesses more conveniently and alleviate the burdens when their businesses fail. Our budget for this plan in 2012 is KRW 1.6 trillion, an increase by 149% from the previous year. Also, local SMBA offices and the Youth Business Incubation Centers will establish local ‘Agency councils to Support the Business Setup’ for closer cooperation among related agencies. At the same time, any honest entrepreneurs will find the environment more accommodating even upon their failures as we will establish Loan Payment Adjustment Funds (KRW 50 billion) and Business Re-foundation Funds (KRW 20 billion). Finally, the existing joint surety for funding to SMEs will be improved.”
Major policies for small enterprises and traditional markets in 2012
Korea’s 5.22 million small enterprises constitute a foundation of its economy (38.9%). Small enterprises take up 87.5% (2.69 million) of all enterprises in Korea.
Despite government measures to strengthen SMEs competitiveness based on deregulation and establishment of Nadle Stores, the competition becomes even fiercer as large conglomerates occupy more of their market portions and introduce new business types.
Song said, “In 2012, we will develop our performance for small enterprises and traditional markets even further and focus on establishing stronger safety nets in their businesses. In 2011, Onnuri gifts and Nadle stores resulted in tangible effects such as increased sales of small enterprises and traditional markets. As for Nadle stores, 87.2% reported their sales increases and average sales volumes increased by 23.2%. The number of stores will increase to 10,000 in 2012 from 5,300 in 2011. The sales volume of Onnuri gifts will also increase from 200 billion to KRW 250 billion this year.”
In addition, the SMBA plans to establish Small Enterprises Fund (Account) and guarantee more subscriptions to Mutual Aid of Small Enterprises, a planned increase from 120,000 to 180,000 subscribers, which will provide a more stable business environment. “Finally, our education (245 thousand beneficiaries) and SMEs TV will help them speedily learn the governmental policies. Incorporation of their representative organizations under the laws will improve communication and cooperation, too,” explained Song.
Eco-systemic development of SMEs and large conglomerates
In 2010, the Commission on Partnered Growth was launched for the private sector to promote the governmental policy aim titled ecosystemic development covering both SMEs and large conglomerates. In 2011, it designated 82 business areas most appropriate for SMEs. Also, the Act on Subcontractors was revised to establish the institutional foundation for fair trade in March 2011. The revision covers authorization of cooperatives to ask for cost adjustment, conversion of the responsibility to prove unfair amount reduction, three-time compensation for abuse of technological materials, and expansion of application of the Act to transactions among SMEs.
Song said, “In Africa, they say ‘Walk alone if you want to be fast. Walk together if you want to go further.’ As the subjects of global competitiveness convert from individuals to corporate networks, we need strategies to develop both SMEs and large conglomerates together. What SMEs need is not the allocation of profits generated by large conglomerates. It is proper return that will lead to further technological development and job creation. Consistent ecosystemic development can be achieved only when it is embedded in each corporate culture. With this in mind, we will expand our programs promoting win-win situations between SMEs and large conglomerates.”
In association with large conglomerates, the SMBA plans to increase funding for R&D and new product development where large companies guarantee purchase of certain quantities from SMEs. Song said, “we will try to remove unsound differentiations of SMEs in credit card fees while establishing TV home shopping exclusively for SMEs in January 2012, too.”
