14x in 7 Years
The gap between the annual sales of larger and smaller South Korean companies skyrocketed from 30 trillion won (US$27 billion), 934 trillion won vs. 904 trillion won, to 427 trillion won (US$384 billion), 1,708 trillion won vs. 1,281 trillion won, between 2008 and 2015. During the same period, the average of the former increased from 803.02 billion won (US$722.7 million) to 1.1107 trillion won (US$ 999.63 million), whereas the average of the latter fell from 2.84 billion won (US$2.30 million) to 2.67 billion won (US$2.40 million).
At present, small and medium-sized enterprises (SMEs) account for 81.01 percent of South Korean companies. However, the former’s sales account for only 28.7 percent of the combined sales of the latter. In contrast, large South Korean corporations represent 0.3 percent of the latter and 39.2 percent of the combined sales. Such a heavy dependence on large companies implies that their risks can have a significant impact on the national economy as a whole.
Nevertheless, the South Korean government’s policy is still much friendlier to major business groups. Its tax deduction for them increased from 3.5 trillion won (US$3.15 billion) to 5.7 trillion won (US$5.13 billion) between 2008 and last year, but that for smaller companies edged up from 2.2 trillion won (US$1.98 billion) to 2.3 trillion won (US$2.07 billion) during the period. “The tax deduction per 100 million won [US$900,000] in sales amounted to 1.39 million won [US$1,251] in the case of the top 10 large businesses, whereas the amount was limited to 180,000 won [US$162] for smaller firms,” said Minjoo Party of Korea lawmaker Kim Du-kwan.
It is also said that the government’s subsidies for SMEs are flowing to big businesses. The Ministry of Strategy & Finance of South Korea prepares 15 trillion won (US$13.5 billion) to 16 trillion won (US$14.4 billion) a year as subsidies, but the profitability of SMEs is continuing to deteriorate, and some experts point out that this is because the subsidies are absorbed by big businesses.