[Open Forum] Are SME Policies and Institutions Headed in the Right Direction?

There are countless businesses in our country. And one of the most commonly mentioned ways of classifying these businesses is by size: small and medium-sized enterprises, mid-sized enterprises, and large enterprises. There has also been a movement at the government level to foster small and medium-sized enterprises. In addition, systems have been created for them and passed into law. This raises a question: have the many SME-related systems and benefits introduced so far truly been designed in the right direction?

Policies and benefits for SMEs exist in many different forms. Policymakers have also created numerous systems intended to help SMEs. Various benefits are provided both to those who work at SMEs and to those who run them. Employees may receive support through income tax reductions, and companies may receive subsidies for hiring young workers.

A representative example is the delivery price indexation system. Under this system, when an SME enters into a contract with a large enterprise, if the price of raw materials changes during the contract period, that change is reflected in the delivery price. The delivery price indexation system has already been passed into law. The SME community welcomed it, while some groups, including large enterprises, took a negative view. Since it has been enacted into law, it is likely to remain in place going forward. Given that it was a policy long desired by the SME sector, some clearly believe it is necessary. But can this system really have only positive effects economically?

Among the many businesses in our country, SMEs account for a large share. Accordingly, it may seem natural to create systems for them so that they can grow further. This is because emphasizing, in various ways, the many systems and positive aspects for those working at SMEs may help eliminate negative perceptions.

Of course, some may ask: people working at large enterprises already earn significantly more than those working at SMEs, so is there any reason to provide them with benefits? In a sense, this perspective is understandable. But when one considers the effort individuals put into joining large enterprises, and the investment made for companies to grow into large enterprises, dividing benefits in such a binary way may result in reverse discrimination.

To help companies grow and create many jobs, it is necessary to provide benefits to young people working at SMEs and to establish systems that help SMEs grow. If SMEs that receive such benefits grow, some of them may become mid-sized enterprises and, in the distant future, even large enterprises. However, it is not right to classify firms in a simplistic binary way and provide unconditional benefits to SMEs.

What is clear is that those who run and work at SMEs, as well as those who run and work at large enterprises, are all workers in the end. Therefore, rather than granting unconditional benefits under a system of reverse discrimination and binary division, the government should lay the groundwork for companies to grow through competition.

I believe the essential goal of a company is to achieve growth through profit. Both large enterprises and SMEs can grow on the basis of profit. However, current business-related policies in South Korea tend to regulate large enterprises while providing unconditional benefits to SMEs. Some people may believe this direction is correct. But large enterprises, too, should be allowed to achieve even greater growth. As for SMEs, only a minimal foundation should be provided for them, and they should be encouraged to grow through a process of competition and more competition. Only if policies proceed in this direction will each company be able to grow in a way suited to its own characteristics.

Suhyun Jung

Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [자유발언대] 중기 관련 제도, 과연 옳은 방향성 갖고 구성됐나

Author: Su-hyeon Jeong

Date: 2023-07-21

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=6&idx=25899