The government's policy package to support struggling smalland medium-sized enterprises, albeit somewhat belated, deserves a favorable evaluation. Unlike the indiscriminate support measures of the past, the latest is tailored to businesses with diverse characteristics and in different stages of growth. Also noteworthy is that the government will positively help promising companies while facilitating the demise of marginal ones. Reflecting the officials' sincerity in drawing up the package, it is based on an extensive survey of more than 7,300 firms.
But it is still hard to tell how effective it will be in resuscitating the SMEs whose very survival is currently under threat. To help ease their financial difficulties, the policy includes creating an investment fund of 1 billion won, expanding credit lines, prolonging loan maturities and increasing credit guarantees. These measures, however, will be of little immediate help to firms barely managing to stay afloat with personal borrowings by executives and employees due to a lack of operational funds.
Particularly worrisome in this regard is the risk-averse tendency of local financial service firms, which avoid lending to promising but poor SMEs due to their lack of expertise in correctly evaluating the borrowerstechnological abilities and growth potential. The financial institutions, instead of focusing on low-risk retail banking in pursuit of only safety and profitability, need to become more willing to help break the bottleneck for small businesses and grow with them.
No less important is the role of government supervisors in the financial industry. The Financial Supervisory Commission currently calls for lenders to refrain from retrieving loans from SMEs facing a financial pinch. But this is not enough. The government should revise the regulatory system to reflect the banks risk-taking in small business loans when rating the lenders performance. It also ought to listen to SMEs' requests for the evaluation of corporate values based not only on financial sheets but also on business prospects and technological expertise.
The government alone cannot cultivate technologically competitive small businesses. The cooperation of large businesses is essential. Large companies tend to slash supply prices every year, aggravating the already difficult financial situations of subcontractors. Some conglomerates even take away the hard-won technology of smaller firms without paying due rewards. The government needs to establish a fairer order between the strong and the weak in the corporate world to ensure prosperity for all.
/ By The Korea Times