Promotion of Mid-size Business
Mid-size enterprises with annual sales under US$200 billion can now partially participate in the competitive market among small and mid-size businesses. Also, about 160 additional mid-size enterprises are now eligible to receive benefits under the “Research & Development Investment Tax Deduction,” since eligibility requirements have been changed. Previously, enterprises with sales records for the last three years under US$300 billion qualified, but the amount has been raised to US$500 billion. This is the way the government will support legislation through a separate service in order to enact the “Mid-Size Enterprise Special Law” pursued by some political parties.
On September 17, the government announced the “Stepping Stones for Mid-Size Enterprise Growth” plan at an economic ministerial meeting hosted at the Central Government Complex.
Deputy Prime Minister and Minister of Strategy and Finance Hyun Oh-seok said, “Mid-size enterprises are becoming more influential to our economic growth, but when compared to those of advanced nations, still fall behind in number, size, and global competitiveness,” and added, “The government will make a supportive environment to relieve the burden on mid-size enterprises trying to grow into global professionals.”
This plan mainly focuses on providing and enforcing customized supporting services so that mid-size enterprises can strengthen their global competitiveness.
First, R&D investment in the lowest 3% will be increased to the lowest 5% by 2017. Also, the government will continue to try distributing professional researchers in several mid-size enterprises. The World Class 300 Project initially planned to be completed in 2020 has been rushed for completion in 2017.
About 400 companies with the potential to export US$100 million worth of goods will be selected for concentrated support and cultivation until 2017. The eligibility for Bank of Korea’s inclusive finance, which conveniently lends money regardless of its purpose in terms of trade finance, has been expanded from companies with current sales records of less than US$50 million to US$200 million, allowing many mid-size enterprises to be eligible.
By the end of this year, US$500 million worth global funds in cooperation with the sovereign wealth fund will become available to support mid-size enterprises’ international business expansion. The “Mid-Size Enterprise Growth Fund,” which is aiming to be 50 billion won (US$46.4 million) this year, will be increased to 130 billion won (US$120 million) next year.
The difference between mid-size enterprises and small to mid-size business will also be clarified. The government will announce its final differentiation criteria by November, after services and public hearings. However, some mention that it is unfortunate the government did not make any noticeable improvements to the amended tax bill when it comes to the family business succession inheritance deduction eligibility changing from “sales under 200 billion won” (US$185.8 million) to “under 300 billion won” (US$278.7 million).
Administrator Han Jung-hwa of the Small and Medium Business Administration said, “This comprehensive countermeasures will solve the Peter Pan Complex of companies avoiding growth, and cultivate strong mid-size businesses to act as a spine for our economy by providing enforced customized support services depending on their growth levels,” and added, “We will try to cultivate mid-size enterprises and especially increase the effectiveness in future legislation.”