Changing Paradigm

Joo Young-sup, Administrator of Small and Medium Business Administration (SMBA).
Joo Young-sup, Administrator of Small and Medium Business Administration (SMBA).

Joo Young-sup, Administrator of Small and Medium Business Administration (SMBA), is recognized as a suitable “relief pitcher” for the government and enterprises to break through the economic crisis since he had served as the CEO of a variety of businesses and is well aware of the circumstance of small and medium-sized enterprises (SMEs). The BusinessKorea interviewed Joo about his venture and SME globalization policy which has been aggressively pursued since his inauguration early this year.

You have met many CEOs of SMEs, small business owners and merchants in the traditional market after taking office. What were their main concerns?

First of all, most of SMEs were worried if they would suffer from a decline in exports due to the recent low growth in China and the prolonged global economic slowdown. Therefore, I have decided to promote the globalization of SMEs and expand their exports. In order to do so, the technology competitiveness is the most important, next to marketing, workforce and funds. Lastly, we will support them by reforming by reforming the system institutionally.

I think it is vital to decrease the number of the self-employed flowing into small businesses and traditional markets. We will help them find another jobs in SMEs or startups, which are created through programs to strengthen the export competitiveness of the SMEs and develop the ecosystem of venture startup. Also, we will ease excessive competitions among existing small business owners and boost sales by raising their product or service competitiveness.  

What are you going to place a high priority on as the SMBA head who has a strong background in business?

The day after I took office, I have come up with measures to change the paradigm of SMEs by enhancing capabilities of the private sector, creating a result-oriented system, focusing on customer needs and developing the global competence. SMBA already unveiled the ways to change the paradigm for the self-employed, SMEs’ exports and R&D policies, including the program that promotes SMEs’ exports by making use of trade specialized companies in the private sector. Moreover, it will soon announce a paradigm shift policy for venture startups.

Recently, SMBA announced “Startup Promotion Policy Innovation Strategy.” Please explain it in detail. 

Major advanced countries are overcoming the economic crisis by promoting startups. In a bid to break the crisis that our economy is facing currently, we need a “third-generation entrepreneurs” who are in high demand in the global market environment. To this end, we plan to support for the “entrepreneurial virtuous cycle ecosystem” through a systematic innovation of technology business promotion policy. The key to “Startup Promotion Policy Innovation Strategy” is to help technology-based businesses turn into global star venture firms. The SMBA will promote technology-based businesses targeting global markets, instead of domestic market-oriented startups, fostering “star venture firms” with the global market competitiveness. 

What are the measures to encourage people to set up a new business at the current economic slowdown?

The government has made every effort to create a startup venture ecosystem, which facilitates the circle of startup establishment-investment-collection-reinvestment, in the last three years. As a result, the number of new businesses grew from 74,162 in 2012 to 93,768 in 2015, and the number of startup clubs also increased from 1,222 in 2012 to 4,070 in 2015.

From now on, we should kindle the startup atmosphere in order to vitalize the technology-based economy and create jobs. So, we are planning to reorganize the support system which will be able to help highly educated technical experts, such as professors and researchers, enter the startup market, and develop it into the result-oriented system.

We will expand the government-led startup base and reform the system based on the private and market-oriented programs like TIPS. Moreover, we will strengthen the performance management by inducing employment and export indexes for startups. In a bid to support startups seeking to export and global market expansion from the early stage, SMBA will expand “Born Global Startup Promotion Program” and increase the amount of support funds from 3.3 billion won (US$2.8 million) for 62 teams in 2015 to 10 billion won (US$8.47 million) for 130 teams in 2016. In addition, we will continuously arrange and carry out exit strategies, including M&As and public offerings, as well as relieve regulations.

The exit market should be activated in order to create a virtuous cycle in the startup ecosystem. What are the plans in your mind?

In the venture capital system of the advanced countries, it is easy to collect the investment money through M&As. However, there is a very small number of M&As of SMEs and venture firms in Korea. In order to stimulate the demand of M&As, SMBA extended recently the grace period of regulations from three years to seven years, which are levied on large businesses when they take over SME or venture businesses. Also, we plan to strengthen tax reduction incentives for technology innovative M&As.

Most importantly, there should be trust among all elements in the M&A ecosystem, such as SMEs, venture companies and conglomerates and systems, in order to vitalize M&A. Large companies should not illegally extort the talent and technologies of SMEs and venture firms at a giveaway price, and the government should institutionally impose tough sanctions against illegal seizure of technical experts and technologies. So, relevant government agencies have jointly come up with “SME Technology Protection Comprehensive Measures” to prevent the usurpation of SMEs’ technologies by illegal methods or force. In addition, we will increase M&A funds from 148.8 billion won (US$126.1 million) this year to 200 billion won (US$169.49 million) next year in order to activate the growth-oriented M&As by helping SMEs and venture companies secure technologies and enter the global market. 

The government has recently changed the conglomerate-centered export strategy to the SME-centered one. Please tell us about the background and support programs for SMEs’ sales outlet expansion this year.  

Since large companies, which have led the nation’s exports, are recently expanding overseas production, it is now difficult to expect an export rebound through them. Therefore, we have been seeking a solution for the recovery through SMEs. The government aims to increase the number of small and medium-sized firms by more than 5,000 and reach US$200 billion (236 trillion won) by the end of this year.

The government launched a public hop shopping and opened “IM Shopping,” a Tokyu Hands-typed policy store last year. It will operate the three-dimensional sales network in earnest this year by making cross broadcastings, entries and registrations possible among on-and-offline distribution channels including public home shopping, policy store and mobile shopping, Using the policy store named “Happy Department Store” as a base, we will hold buyer meetings and showcases for 14,000 products from 2,200 businesses. In addition, we will drive public organizations to buy over 10 percent of the total purchase in the public procurement market.  from SMEs.

Is there any plan to resolve problems in which highly educated experts avoid SMEs?

The government first will foster experts with customized education programs reflecting demand of SMEs by linking schools and works. We will supply 40,000 technical man powers for SMEs a year by connecting high schools specialized for SMEs, national public industrial high schools, technical colleges to working spots. The government also will enhance the compensation system for workers by expanding the performance compensation fund called “Co-op for Tomorrow,” which is raised jointly by companies and workers at the rate of two to one for next five years and provided to workers when they work until the expiration. In addition, we will extend special offers of housing to workers in SMEs. Lastly, SMBA will provide education and experience programs to middle school, high school and college students, while positively improving the corporate awareness of SMEs through promotion via mass media.

What do you think about implementation of R&D projects for SMEs?

According to “SME Policy Reform Plan” revealed on March 31, we rearranged the support plan by strengthening innovative and strategic R&D investment portfolios, focusing on performance creation-centered investment for new growth engines and exports, implementing industrial ecosystem-centered R&Ds through the industry-school-research cooperation, connecting R&D and commercialization, planning and operating the R&D activities based on the private-led system, and innovating the evaluation and management systems centered on specialty and performance.

 

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