Let small businesses growThe presidential transition team and the government are pouring out ideas to aid small- and midsized enterprises after President-elect Park Geun-hye vowed to pay special attention to the sector. Self-dubbed as the president for the SME industry, Park chose the Korea Federation of Small and Medium Business as her first destination to visit officially as a president-designate. The transitional team invited the Small and Medium Business Administration for a presentation to the president-elect first among government offices. The administration reported that it plans to expand financing for SMEs, as well as other radical support measures, such as easing the inheritance tax to pave the way for family ownership and businesses in the SME sector. Some are proposing to upgrade the vice-ministerial-level to the ministerial-level commission to bestow more power in promoting SMEs. A boom may be emerging for the SME industry.
We encourage Park in her direction to foster more SMEs as a new engine for growth. We agree that policy steps must be taken to demonstrate her goal. But we caution against pumping out random and half-baked ideas couched in the name of policies for SMEs. What her administration should do is first draw up a big picture and direction in fostering the industry and prioritize steps to ensure efficacy and productivity in generating the best outcome. Reckless aid could mass-produce redundant and uncompetitive micro-enterprises and hamper the necessary support from reaching potentially promising companies.
Over-pampering can prevent small companies from building self-resilience and strength to grow up on their own. Excess financial support in fact can turn smaller businesses to rely on the government and public support. Before increasing financial support, the government needs to examine whether the current funding system is actively and effectively working and if not, overhaul the entire system.
The government currently designates what business field smaller scale companies are suitable for. The policy aimed to protect the sector has been the biggest stumbling block to its growth. Once the business outgrows the capital categorized as mid-sized, the company must withdraw from the business. The policy which has been scrapped was revived in the name of promoting industrial growth. The government should study ending the policy altogether. The transition team, however, has misunderstood the effectiveness of the system and plans to make the policy into a statutory law. What the small business sector needs is deregulation not higher fences.