Korea to foster midsized firms to add 130,000 jobs by 2022
[THE INVESTOR] Korea will foster global, competitive midsized companies through financial and regulatory support with the aim of creating an additional 130,000 jobs over the next five years, the government said on Feb. 5.
The Ministry of Trade, Industry and Energy announced its plan to increase the number of midsized companies from 3,558 in 2015 to 5,500 by 2022, with the additional goal of increasing the number of companies generating more than 1 trillion won (US$910 million) in sales from 34 in 2018 to 80 by 2022.
Midsized companies are defined here as those that are not small companies nor affiliates of large companies. They should generate 40 billion won to 150 billion won in sales or have 500 billion won to 10 trillion won in assets.
Such firms are touted as the backbone of the national economy by the administration, and currently hire 1.15 million employees in Korea, accounting for 5.5 percent of total jobs.
They export goods and services worth US$92.9 billion per year, accounting for 17.6 percent of total exports. However, their number stands at merely 3,558, accounting for 1 percent of the nation’s total firms, compared to one-fifth in Germany and Japan.
The government said what drags down the growth of midsized firms are strong regulations and a high reliance on large companies. More than half of the midsized firms are family-oriented and generate less than 100 billion won in sales per year.
To foster the companies to be globally competitive, the government said it would provide financial and regulatory support.
The ministry said it would first select 500 small companies that have the potential to jump into global markets.
The firms will be provided with diverse financial support including 2.5 trillion won from the Korea Development Bank and 19 trillion won from Korea Trade Insurance Corp. as trade insurance. They will also be given favorable interest rates and fee exemptions from the Export-Import Bank of Korea.
As for improving research and development, the government will set aside 2 trillion won for midsized firms by 2022. Among them, 400 billion won will initially be injected into the robots, electric and autonomous cars, bio and electronics areas.
The investment will be made mainly in new industries, including self-driving and new energy sources, and nonmanufacturing sectors such as software and knowledge services.
Laws that have been a burden to mid-sized firms will also be revised.
“We noticed many firms falling to the ‘Peter Pan syndrome’ as the bigger the company becomes, the more regulations and the less benefits it will have,” said Lee Dong-wook, chief of the midsized firm policy of the Industry Ministry.
In Korea, when a small firm grows to become a midsized firm, it faces less support and more regulations. This has made companies refuse to grow or split their firms.
“We will improve support and revise relevant laws to strengthen stepping stones to make companies grow from small to mid to global firms,” Lee said. With respect to this, nine regulations will be revised this year to provide more tax and financial benefits when a small firm grows to become a midsized firm.
The new ministry plan was mapped out by a task force comprising 90 experts from the Ministry of SMEs and Startups, the Fair Trade Commission, the Korean Intellectual Property Office, the Association of High Potential Enterprises of Korea, the Korea Institute for Advancement of Technology, KOTRA and other related organizations and colleges.
By Shin Ji-hye/The Korea Herald (firstname.lastname@example.org)