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[EDITORIALS]Smaller firms need help

Published: 09 Nov. 2003, 23:59

There is increasing concern that small and medium-sized firms, especially in manufacturing, are collapsing. Omens are everywhere. According to the Korea Federation of Small and Medium Business, the average rate of operation for such firms has persistently stayed below 70 percent. This means one out of three factories is not operating. The Bank of Korea says the number of small and medium firms at risk of bankruptcy has risen 26 percent over the year. There is concern that small and medium firms with domestic markets will go bankrupt, one after another, at the end of the year in the “worst recession since the founding of Korea.” More and more factories are put up for sale. This does not seem to be only because of the recession; bigger firms seem to be climbing out of their slumps, and the average rate of operation for the entire manufacturing industry is 78.7 percent.
Even more worrisome, almost 90 percent of small and medium firm owners feel they are in a crisis, and a considerable number is considering leaving Korea or closing their businesses. In fact, the rate of investment abroad among these firms, only 20 to 40 percent of that of bigger firms in the 1990s, actually surpassed that of bigger firms this year.
At one time, these firms were the primary beneficiary of government support. But they have lost the attention of policymakers. High labor costs and land prices, labor strife and the overall social tendency to avoid the manufacturing industry have made things worse.
Behind the growth of the Korean economy was the sweat of these businesses. Small and medium firms comprise about 75 percent of the manufacturing industry in number of employees, and produce about 50 percent of added value. Consumption is not budging, despite the favorable level of exports, because small and medium businesses are directly linked with low-income households.
We must not let this collapse happen. The government should assist firms with temporary labor problems and technological or financial difficulties. Without small and medium firms, there can be no big firms, and in a few years we will have no jobs and the Korean economy will have no future.