Enhancing our global competitivenessExpectations for small and medium business policy are higher than ever. A new ministry is to be established for small and medium businesses and venture companies, and the new administration is promoting creating jobs through small and medium businesses. It is clear that small and medium businesses are a crucial solution to overcome low growth and create jobs. However, assistance for small and medium businesses should be approached from the perspective of creating values for business, not for political and organizational reasons.
According to the UN Conference on Trade and Development, simple product transactions make up a small portion of global trade. 80 percent of the trade comes from the global value chains (GVCs) that multinational companies establish to create value through purchasing parts, manufacturing, distribution and logistics. Therefore, export marketing-oriented globalization of small and medium businesses does not properly reflect global business reality.
The GVC strategy of multinational companies has three areas: trade, foreign direct investment and non-capital participation. Leading multinationals operate flexibly and selectively. When one means is restricted by regulations, it switches to another strategy. For example, when the Trump Administration’s America First policy hinders exports to the United States, production through direct investment can be a strategic alternative.
Government’s role is to provide various options for the globalization of small and medium companies from a GVC perspective. It is important to reinforce a one-stop assistance system and infrastructure to integrate trade and investment. In major economies like the United States, Japan and Germany, the ministry overseeing small and medium business does not manage export assistance, and the economic ministry provides comprehensive industrial, trade and investment support to enhance policy synergy.
In the process of organizational reshuffle, the new administration needs to consider the new trend. In the greater frame of national economy, the new administration needs to review which direction helps comprehensive strategy for the enhanced global competitiveness of Korean companies.
*Professor at the Graduate School of International Studies of Seoul National University.