SMBA needs competition

In line with President Lee Myung-bak’s vision for a “fair society,” the Small and Medium Business Administration has backed off its proposed revision to the law covering government assistance to small and midsize companies.

The purpose of the SMBA’s proposal was to eliminate what it deems as the government’s excess protection of small companies and beef up competition among them. The revision was basically aimed at providing support to innovative companies, rather than helping all of them.

It would have represented a groundbreaking change, allowing small companies to achieve sustainable growth by strengthening their own competitiveness.

But faced with strong opposition from industry groups, and together with President Lee’s new emphasis on a “fair society,” the SMBA has reportedly abandoned the effort to revise the bill.

This is the wrong strategy.

The revision was the natural result of a deep self-reflection on our policies covering small and midsize companies over several decades. The government’s support for those enterprises is, of course, significant. But despite the government’s huge assistance, most of them are still lagging behind. Many companies are so small and poor that they are still begging for government assistance to cover their own manpower costs.

In the past ten years, the number of companies with fewer than 20 employees on the payroll has increased by 10 to 20 percent, while the number of companies with more than 100 employees has decreased by more than 10 percent.

This is largely due to the government’s overprotection, as it chose “compassionate” policies toward these companies. The government’s budget for them has also increased drastically.

Additionally, these companies can receive government assistance in more than 1,000 ways.

If the small and medium-sized companies are still struggling despite such hefty government assistance, it’s obvious that the current policies aren’t working very well.

Simply put, the government ignored a basic principle of selectivity when it comes to fostering these companies.

Therefore, it is very regrettable that the SMBA is backing off the proposed changes now.

We believe that’s not what President Lee really wants. He emphasizes the need for restructuring small and midsize companies while stressing fairness. The SMBA should therefore do its best to develop policies that stress self-sustainability, encourage competition and facilitate restructuring.