Administration vows to hunt down, weed out SME impostors

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Administration vows to hunt down, weed out SME impostors

The Small and Medium Business Administration (SMBA) said yesterday it will identify and weed out businesses from the public procurement market that should not be classified as small and medium enterprises (SMEs).

The SMBA will investigate the 27,000 SMEs that participate in the SMBA, Korea Federation of Small and Medium Business (Kbiz) and public procurement market.

In the meantime, there have been cases of conglomerates trying to maintain SME status through corporate divestiture to?participate in public procurement market and benefit from state support.

As a result, the SMBA changed decrees and reformed the Market Assistance Act to prevent large corporations from bidding.

About 100 employees of the SMBA and Kbiz will spend about a month on the investigations, focusing on companies that split off from conglomerates to determine whether they have practical dominant-subordinate relationships with the parent corporations.

More specifically, large corporations will be investigated over?whether they guaranteed debt or loaned assets that exceed the amount of SMEs total shares or investment.

In addition, conglomerates will be questioned about whether they have invested 51 percent of the cost to establish a small or medium?business, including plant, production equipment, installation, loans and debt guarantees.

Large enterprises also must disclose whether they have the right to appoint and dismiss CEOs of the SMEs and 50 percent or more of their senior executives.

Besides, the SMBA and Kbiz plan to focus on probing whether representatives of large corporations and the largest shareholders concurrently serve as executives of SMEs or have been dispatched to smaller subsidiaries.

The companies determined to be financially supported by parent companies will be banned from the public procurement market and lose their SME certifications.

Currently, the public procurement is about 98.8 trillion won ($88.6 billion) per year and has been an important tool for providing business for SMEs, which accounted for 67.7 trillion won, or 67.8 percent of sales, in 2011.

“Through this investigation, we will bar these fake SMEs from infringing on the public procurement market and lay the foundation for fair competition,” said Han Jung-hwa, an SMBA administrator.



By Kim Jung-yoon [kjy@joongang.co.kr]

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