1. Background
The economy is facing a low-growth era and market competition is intensifying every day while major advanced countries are pouring out numerous measures to enhance productivity to achieve job creation and competitiveness reinforcement. The productivity of Korean SMEs, however, currently stands at about one third of that of large corporations. The government had developed and executed comprehensive measures to tackle this issue in the past, but the effects of such measures are still insufficient. Shifting from the past input-driven approaches, the government developed measures that would help productivity enhancement, such as new market development, commercialization of technology items, to name a few. These measures are intended to translate productivity enhancement into fundamental competitiveness reinforcement.
2. Detailed Initiatives
Reinforcing Tech. Development & Production Capabilities of SMEs
A. Reinforcing SME’s Tech. Development Capabilities
The government will increase its funding for technology development of SMEs from the current 12.4% of the R&D budget up to 18% by 2017. It will also draft a bill mandating that SMEs are given the first choice when transferring technologies developed by universities or institutions with the government funding to the private sector.
The government will also make it a mandatory for government funded institutions to allocate a certain percentage of their budgets to R&D cooperation with SMEs, such as joint research, technological advisory and technology transfers. Also ‘SME Technology Development Support Centers’ will be designated for each business type and run accordingly.
The government will create an environment where innovation failures are tolerated. Specifically, government will give penalty exemptions to SMEs that have carried out research studies faithfully but failed to reach the final goal. When venture capitals invest in technology development of SMEs, they will be given more leeway in technology development reviews and the documents required for submission will be simplified. Also the government will build ‘R&D clusters’ within universities that accommodate R&D functions of SMEs so that SMEs could jointly with universities conduct studies using university resources such as devices and human resources.
B. Developing and Retaining Skilled Workers
The government will support SMEs in their recruitment and training of talented workers. As a part of its plan, the government will offer scholarships to university students as an incentive to join SME upon graduation to foster customized workforce for SMEs through on-the-job trainings while encouraging students to focus on their academic achievement without any worries of getting a job. In addition, the government will develop a mechanism which allows students with technical specialties develop their skills further while serving their military service and be recruited by related SMEs later when they are discharged. For the economically vulnerable youth with no specialties, the government will run training programs to help them to serve in the military as technical specialists and work at SMEs after being discharged.
The government will also support SMEs in utilizing skilled workers and standardizing work process. With the help of skilled workforce, SMEs will be able to offer organized on-the-job training to new hires and build an expertise transfer mechanism, with which know-how of skilled workers will be compiled and disseminated. The government will tap into the pool of retirees from large corporation R&D centers to offer technical guidance on tackling the difficulties that SMEs face while doing day-to-day operations
The government will facilitate the know-how transfers on productivity enhancement and augment training programs on management of technology. In particular, the government will run ‘Productivity Enhancement Programs’ in connection with visits to best practice companies and increase management of technology courses in graduate schools for CEOs of SMEs. For employees of SMEs, the government in partnership with large corporations will open an ‘Academy of Technology Collaboration’ and offer overseas training opportunities. In addition, the government will help SMEs recruit and retain excellent workforce by introducing ‘SME-type Stock Options Scheme,’ in which an employee of an SME receives a certain amount of money that the company and employees have saved up as incentive when he/she stayed with the company for over a certain period of time.
C. Creating Smart & Safe Production Site
To create a safe production site, the government will help SMEs apply information and communication technologies (ICT) to manufacturing operations for digitalization. For SMEs which lack the resources to maintain information system, the government will support them with cloud-based digitalization which requires no separate brick-and-mortar.
The government will create a pleasant and highly efficient working environment for SMEs by helping them upgrade or automate their manufacturing facilities or improve product lines or manufacturing process on their own or through partnership with specialized production research centers.
With regard to the financial support for production line upgrade or automation, the government will increase facility investment fund from current 3 trillion won to 5 trillion won and offer special guarantees for SME funds that are spent for manufacturing process improvement using ICT or new technologies. In addition, the government will open an online intermediary marketplace (www.joongomall.or.kr) which will allow SMEs to quickly sell non-operating assets.
Supporting Commercialization & Market Creation
A. Building an Ecosystem Conducive to Technology Commercialization
The government will build an ecosystem in which SMEs commercialize promising technologies; universities and research institutions develop technologies for technology transfers; and large companies invest in promising SMEs or buy promising technology products from SMEs.
It will also improve procurement systems to ensure that excellent products of SMEs are successfully introduced to markets. In case of SME products developed for government procurement, the government will purchase them through private contracts and offer supports necessary for overseas market entry.
B. Increasing Successful Commercialization of New Technologies
The government will increase financial support for the commercialization of new technologies. As a part of its plan, it will introduce intellectual property-based financing scheme and expand credit lines for SMEs based on technology evaluation. It will also run special funding programs for SMEs with successful R&D results in partnership with private financial institutions.
Furthermore, the government will expand development support for technologies that are demanded by large companies. In partnership with large companies, the government will continuously increase ‘Public-Private Cooperation Fund’ used for SME’s technology development. The number of companies contributing to fund and the fund amount will respectively increase from the current 22 and 438 billion won to 50 and 1 trillion won by 2017. The government will ensure that the technology development funds are effectively utilized by checking whether or not large companies made purchases as promised. The government will tap into the overseas network of KOTRA to aggressively develop prospective overseas buyers.
SMEs will be encouraged to develop product designs from product planning stage rather than before product marketing stage to ensure good designs enhance added value of the products.
C. Creating New Markets Abroad
The government will offer overseas market entry support tailored to the capability of SMEs. For promising businesses, the government will help them tap into the overseas private network including large companies and Korean Chamber of Commerce to facilitate their global market entry. For green businesses, the government will offer consulting supports to help them conduct business feasibility study of foreign green projects or win supplier contracts. SMEs whose productivity continues to fall, will receive support from the government in exporting technology and setting up local production base in underdeveloped market.
Using ODA projects, such as ‘Economic Development Cooperation Fund’, the government will supply and disseminate ‘appropriate technologies’ that are fit to the local situations or are necessary for the poor people of the developing nations to help SMEs export necessary technology or make inroad into niche markets.
Creating Synergies through Convergence and Cooperation
A. Creating New Markets through Technological Convergence
The government will promote technological convergence to create new markets. As a part of its plan, it will support new technology and product development by converging information technology, bio technology and nano technology etc. and offer loan guarantees and funds for their successful commercialization.
It will also increase the number of ‘Convergence Support Centers for SMEs’ from the current 6 to 12 nationwide to offer support ranging from item development and planning to convergence expertise transfers.
B. Strengthening Cooperation between Large Corporations and SMEs for Shared Growth
The government will encourage large corporations and SMEs to improve production environment by conducting a campaign so-called ‘Industry Innovation Movement 3.0’ where large companies and their first-tier suppliers support innovation activities of their sub-contractors for productivity enhancement.
The government will compile and spread best practices of shared growth, such as joint job competency trainings, transfer of unused technologies to build a mutually beneficial environment for large companies and SMEs.
The government in partnership with large companies will strengthen quality innovation training of second or lower-tier suppliers to enhance productivity.
Another initiative of the government is building a market order where productivity enhancement efforts are rewarded. In this context, it will gradually increase the scope and number of companies inspected for consignment transactions from the current 3,000 to 10,000 by 2017.
The government will lay legal and systemic frameworks to prevent technology leaks. Specifically, the government will streamline laws and regulations regarding protection of SME technologies. It will also increase the technology escrow accounts from the current 7,000 to 19,000 by 2017 and expand the scope of technologies required to use escrow service. The government will help SMEs with high technology leak risks install security software solutions and foster internal security experts.
The government will increase support for companies suffering from technology leaks while strengthening the punishment for offenders. As a part of its efforts, the government will strengthen the regulations on the reporting of technology misuse by sub-contractors and increase penalty surcharges while beefing up the response capability of the damaged companies through legal advisory supports.
C. Boosting Cooperation among SMEs
The government will help SMEs reduce production cost by setting up ‘joint raw material sourcing centers’ to maximize the benefits of volume purchases. In addition, it will offer funding for raw material joint sourcing as well as purchase guarantees for SME cooperatives experiencing temporary credit crunch.
Business associations or unions will build Association Society Standards (ASS) and develop technology roadmap with the support from the government to ensure that specification of strategic products, including quality, function, shape and size are standardized.
Strengthening Customized Support & Policy Monitoring
A. Building a Customized Support System
The government will build a support system tailored to the characteristics of a business by addressing issues that prevented seamless
support. Specifically, it will expand the operation of the so-called ‘SME Health Management System’ to tackle issues from the perspective of customers. Also the pool of productivity experts will be enlarged and be utilized in connection with advisory services, information support as well as facility funding.
It will also track and analyze the changes of business productivity to identify areas of improvement and best practices found in the private sectors will be spread to SMEs.
B. Developing Continuous Policy Monitoring Systems
The government will set up a dedicated policy monitoring team within the Small and Medium Business Administration to manage and monitor productivity boosting policy implementation at all times.
C. Identifying and Tackling Unreasonable Regulations
In cooperation with related agencies, the government will constantly identify and rectify regulations that prohibit productivity enhancement.
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