Korea fosters SMEs to be global hidden champions
Korea fosters SMEs to be global hidden champions
  • koreaittimes
  • 승인 2013.07.25 22:46
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SEOUL, KOREA - Phrases such as, “creative economy” or “economic democratization” can be easily found on newspapers or other news outlets these days. They are among the visions presented by the incumbent President, Park Geun-hye since she took office.

The President has emphasized that small and medium-sized enterprises (SME) have served as the growth engines for the Korean economy as they account for 99.9% of the Korean businesses with a total value amounting to KRW 21.5 trillion.

As SMEs take up such a large portion of the Korean economy, there is no doubt that there must be various pending issues facing them. Among the major issues include “fostering a business-friendly environment where it is easy for talented and potential entrepreneurs to start businesses and for failing companies to get back on their feet” and for “economic democratization and co-prosperity between conglomerates and SMEs,” just to name a few.

The Small and Medium Business Administration (SMBA), a government-run advocate body for Korean SMEs, has continuously come up with comprehensive ways to deal with such issues facing SMEs throughout the nation.

“The SMBA is working in close collaboration with related governmental offices to push ahead ways to solve impending problems, such as vitalizing “Angel investment” (providing capital for start-ups), providing startup funds for young entrepreneurs, and easing regulations on M&A (Merger and Acquisition),” said SMBA administrator Han Jung-wha in a recent interview with Korea IT Times.

SMBA administrator Han Jung-wha in a recent interview with Korea IT Times.

“We are also working to create a business environment where large companies and SMEs can compete in a fair way. Our ultimate goal is to make a creative economy where SMEs can grow into leading roles in the business sector and small business owners feel happy with what they do,” Han added.

To make that happen, the SMBA has put forth a series of plans; strengthening SMEs’ business capabilities to advance into overseas markets, generating a smooth flow of funds for venture start-ups, encouraging foreigners to start business, and improving productivity among SMEs.

Han acknowledged that more in-depth discussions on future visions and strategies should be done to put all these plans into action.

In an effort to help venture start-ups develop into successful businesses, the SMBA is in the progress of introducing a program called “Professional Angel System” which encourages successful venture enterprises to invest in start-ups and serve as a mentor by sharing their business knowhow.

The organization has earmarked KRW 40 billion for the year of 2013, which will be used to help struggling businesses to get back on their feet.

When asked why in 2012 venture companies recorded the lowest sales (KRW 100 billion) since 2005, Han attributed it to the global economic recession and the shrinking of consumer sentiment. However, he pointed out that another reason lied in the lack of core abilities among SMEs to take a step forward to become global leaders.

“Our goal is to bring the number of successful domestic mid-sized enterprises to 4,000 by 2017,” said Han. “To this end, our organization holds meetings to get feedback from mid-sized companies in other regions and related organizations, and also takes field trips to operating companies.”

The SMBA not only assists these mid-sized companies domestically, they also make a huge effort to turn them into globally recognized brands by supporting them in conducting Research & Development (R&D), secure talented employees, and globalize themselves.

With any project there is a plan to attract more Angel investors, Han replied, “We will try our upmost to revitalize Angel investment, backed up by efficient institutional strategies.”

According to the “ways of circulating funds for venture start-ups” announced last May, the ratio of tax deductions on Angel investment is to increase to 50% out of investment from 30%.

In addition, professional Angels are to be fostered in an effort to accumulate examples of successful Angel investments which will in turn motivate potential future Angel investors to ramp up their investment activities.

Regarding M&A, “We will take our cue from other related organizations which carry out educational programs targeting CEOs of SMEs and venture companies and will add mandatory M&A courses to all of our start-up educational programs,” Han said, putting great emphasis on the importance of M&A in business.

He was also quoted as saying that the role of M&A service centers for SMEs should not be limited to just supporting and promoting roles, they should also serve as a M&A hub to educate potential businesses on the importance of M&A.

As Korea is a nation with a high reliance on foreign trade, the globalization of SMEs is not just an option but a necessity to make inroads on larger markets around the world.

The government is also stepping forward to help more stable SMEs advance into global markets with a variety of support projects, among which is a package program to provide foreign trade education, promotional design, and local marketing at once.

This year’s program, dubbed as the “Global Highway Program,” will offer concentrated support in the fields of R&D, finance, and marketing to a selected group of start-ups armed with the high potentials to become global leaders.

According to Han, the SMBA has put in place the World Export Incubators Network in 11 countries, which enable first-time exporting companies to carry out local marketing in an effective way, even though they lack experience exporting.

“We have also established a system in collaboration with other organizations involved in the field, such as the Korea Trade-Investment Promotion Agency (KOTRA), to prevent any overseas trade-related mishaps, which will go into effect in August,” Han explained.

The SMBA plays a crucial role in the effort to create a business environment where entrepreneurs can start business without the burdens of possible failures. 

“To achieve this ultimate goal, it is necessary for both conglomerates and SMEs to have a “co-prosperity culture’ mindset,” Han said. “We will try our best to solve three long-lasting economic issues disadvantageous towards SMEs -- unfair trade, imbalanced market, and the unreasonable economic system.”


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