“Small and medium-sized enterprises are the roots of the Korean economy and the future of the Republic of Korea.”
On the 28th, about a week before the 21st presidential election, three experts in small and medium-sized enterprises and small business identified "strengthening the capabilities of small and medium-sized enterprises" as the top policy task for the next government’s Ministry of SMEs and Startups.
While the Korean economy has grown centered around large corporations, it is necessary to strengthen the capabilities of small and medium-sized enterprises that will lead innovation and serve as the foundation for the manufacturing industry’s revival, so that the economy of the Republic of Korea can take a leap forward.
In a telephone interview with ChosunBiz, small and medium-sized enterprise expert Choo Moon-gap, Deputy Minister of the Korea Federation of Small and Medium Enterprises, and Kim Ki-chan, a professor at Catholic University of Korea (president of the World Association for Small and Medium Enterprises), along with small business expert Mo Jong-rin, who is known as the 'economist of alleys', participated.
Experts noted that "we need to move beyond growth centered on large corporations and strengthen the capabilities of small and medium-sized enterprises to change the landscape of Korea's manufacturing value chain." They argued that the next government should more forcefully pursue policies for the growth of small and medium-sized enterprises.
In particular, they emphasized that the Ministry of SMEs and Startups should reorganize and usher in a 'Small and Medium Enterprises 2.0 era'. They stated that the support for small businesses should shift from simple cash assistance to a method focused on revitalizing ecosystems centered around commercial districts for growth.
◇Separation of small and medium-sized enterprises and small businesses is “out of touch with reality”
On the 22nd, the National Assembly Futures Institute, a think tank under the direct control of the Speaker of the National Assembly, raised the topic of a reorganization plan for the Ministry of SMEs and Startups to cultivate and support small and medium-sized enterprises and small businesses. The proposal suggested transferring core functions such as fostering small and medium-sized enterprises to the Ministry of Trade, Industry and Energy, and separating small business policies into a separate agency.
However, experts emphasized the need to strengthen the role of the Ministry of SMEs and Startups, stating that it is "an out-of-touch idea with reality."
Choo Moon-gap, the Deputy Minister, said that "integrating the Ministry of SMEs and Startups with the Ministry of Industry into one body, while we are in a situation where we need to strengthen small and medium-sized enterprises that play the root role of the Korean economy, is an unrealistic proposal.” He added, “We must transition to an economy structure centered on small and medium-sized enterprises for the revival of Korean manufacturing, and we need to strengthen the role of the Ministry of SMEs and Startups to lead this.”
The Deputy Minister continued, saying, "To revive the manufacturing industry, we must revive root industries such as molding and casting that are at the base." He pointed out that "the manufacturing industry accounts for 20% of the gross domestic product (GDP), making it critical, but root industries are collapsing due to low wages and a lack of young people entering the sector."
Strengthening the value chain of Korean manufacturing through the revival of root industries should become a core task for the Ministry of SMEs and Startups after the presidential election.
The Deputy Minister cautioned, "If Korea's root small and medium-sized enterprises continue as they are, the country will fall further behind in competition with the United States, which has recently pursued a robust tariff policy for manufacturing revitalization, and China, which has ascended as a manufacturing powerhouse with its 'Made in China 2025’ strategy."
Kim Ki-chan, a professor, proposed strengthening the global competitiveness of small and medium-sized enterprises as the top policy of the next Ministry of SMEs and Startups.
He emphasized that "the Ministry of SMEs and Startups must lead the transition to a second industrialization era and not just focus on domestic demand and welfare, but rather as a growth ladder that connects technology, trade, brands, and people to the world."
Professor Kim noted that, although the Ministry of SMEs and Startups was elevated from the Small and Medium Business Administration to a ministry in 2017, the globalization achievements have stagnated or regressed over the past seven years. The proportion of exports in small and medium-sized manufacturing sales dropped from 14.8% in 2017 to 8.2% in 2024, and the number of exporting small and medium-sized enterprises has remained at about 95,000 for the past ten years.
Professor Kim stated that a 'Global Strategy Office' must be established to manage small and medium-sized enterprises' research and development, trade, ESG (environmental, social, and governance), and artificial intelligence (AI) capabilities comprehensively, and that they must actively target the rising middle class in Southeast Asia, which is expected to exceed 300 million by 2030.
◇Concerns over separation of small businesses... need for policy decentralization
Professor Mo Jong-rin expressed concerns about weakening the status of small business policies if the Ministry of SMEs and Startups’ policies for small businesses were separated.
Professor Mo stated, "It is preferable to maintain the separation of the Ministry of Industry and the Ministry of SMEs and Startups while strengthening the expertise of each ministry." He stressed that "downgrading the Ministry of SMEs and Startups to a vice ministerial agency could diminish the importance of small business policies, which is inappropriate."
He emphasized that "especially while the Ministry of Industry focuses on enhancing the efficiency of existing strategic industries such as steel, shipbuilding, and semiconductors, the Ministry of SMEs and Startups should concentrate on creating new business models created by entrepreneurs capturing market opportunities, namely the transformation of startups and small businesses into creators, and the growth of local brands, thus fostering a new corporate ecosystem."
Professor Mo also advocated for the decentralization of small business policies. He said, "Since the majority of small businesses are rooted in the local economy, we must move away from an individual support method centered on the central government and shift to a management and support system at the city and district level."
He continued, saying, "In the face of online business and the threats from large corporations, we must support merchants in transforming their identity to 'creators'. It is essential to create unique cafes, experience spaces, and cultural content to cultivate alleyway commercial districts and provide unique neighborhood experiences."