Cooperation in SMEs Between Korea and Latvia

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Cooperation in SMEs Between Korea and Latvia

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Forum on the 20 th Anniversary of Diplomatic Ties Between Korea and Latvia. Forum on the 20 th Anniversary of Diplomatic Ties Between Korea and Latvia. Cooperation in SMEs Between Korea and Latvia. Dr. Oh Dong Yoon. Korea Small Business Institute. Contents. Introduction. Cooperation. - PowerPoint PPT Presentation

Transcript of Cooperation in SMEs Between Korea and Latvia

Page 1: Cooperation in SMEs Between Korea and Latvia

Cooperation in SMEsBetween Korea and Latvia

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Contents

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1. Development History2. Profile

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Business consolidation for export promotion Inactivate SMEs

SME manufactured daily items key role in light industries

Economies of scale pursued for export growth larger businesses SME less active

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Policies for the development of heavy / chemical industry and quantitative growth of SME

SME produced parts and materials consumed in the heavy and chemical industry, replacing imported parts and materials (localization)

Korean government active promotion policies to nurture SMEs active start-up and facility investment by SMEs rapid growth of SME

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SME restructuring and Improved responsiveness to market opening

SMEs dealt with adjustments to rapidly changing industry environment

Policy shift: protect and support SMEs induce competition and cooperation support self-reliant and innovate SMEs

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% of number of SMEs(to the total number of enterprises): 99.9%

% of number of employees in SMEs(to the total number of employees in the whole enterprise): 87.4%

% of those were 99.3% and 75.1%, respectively in 1994

Small and Medium Enterprise(%)

Small enterpriseMedium en-

terprise TotalMicro enter-prise

Number of enterprise 87.6 (91.8) 96.6 (98.7) 3.3 (1.1) 99.9 (99.8)

Number of employed 40.5 (29.7) 61.2 (50.4) 27.2 (17.0) 88.4 (67.4)

Source: 1) Korea; 2009 Profile of SMEs, K-biz (2011). 2) ( ) is in 2008 figures for EU SMEs, Financial sector is excluded. Annual Report on EU SMEs, Eurostat (2009).

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More than 50% of SMEs are engaged in subcontracting relationship while only 30% of European SMEs are

Most subcontractors are 1st tier subcontractors (68.3%), while % of 2nd tier and 3rd tier subcontractors are 24.7% and 7.0%

Source: 1) Korea; 2009 Profile of SMEs, K-biz (2011). 2) EU 27: EU SMEs and Subcontracting, EIM (2009).

Engaged in any subcontractingNot engaged in

any subcon-tractingContractor

onlySubcontrac-

tor only Both Total

Korea 8.9% 29.6% 13.6% 52.1% 47.9%

EU-27 14% 16% n/a 30% 70%

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Manufacturing sector(%) 2000 2003 2006 2009

Debt ratioL-E 225 113 85 96SME 193 166 145 148

Net profit to net worth ratio

L-E 31 47 54 51SME 34 38 41 40

SME wage to L-E wage

ratio(average)SME 56 52 53 50

Export oriented, emphasizing the role of Large enterprise

Performance of the model has been quite successful

Source: 2009 Profile of SMEs, K-biz (2011).

Pressure on margins exerted by contractors are common phenom-ena

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As a ‘New Development Model’ for sustainable growth

Shift of paradigm from competition between companies to competition between company network Cooperation of suppliers are needed to secure competitiveness of Ko-rean enterprises

Boost vitality of business ecosystem to create sustainable growth engine of the economy Vitality of SMEs is the key to the creation of new jobs

Foundation for a society where fair competition, equal opportunity, and sharing of fruit according to their contribution can be realized

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From ‘old habit of relying on government support’ to ‘voluntary/ ongo-ing innovation to reform their entrepreneurial spirit’ Transparency in accounting and business practice, compliance, etc.,Innovation for technology and productivity upgrading, etc.,

Invest in a higher value-added industry (green, higher value-added parts and components)Improve work environment, invest to develop a fine training/education program for employees Need to provide an environment to attract young people

Information sharing (technology, market, etc.,), production sharing

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To induce voluntary involvement of entities in the collaboration scheme, but not in supporting the scheme directlyTo provide legal/administrative support to induce the scheme to be in ef-fect

Prohibit on-site visit/request of cost & technology information without written notification Impose heavy compensation load or responsibility for damage caused by illegal dispossession/appropriation of technology

Extended application of ‘subcontracting law’ to the lower tier subcon-tractorsIntensify surveillance on unfair business practice of large distributors

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1. Globalization2. Advantage & Disadvantage

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However, Korea has been striving to encourage collabora-tion scheme between large enterprise and SMEs . And, Ko-rean government was very cautious of selecting implementa-tion method

Again, the core spirit of this scheme is voluntary involve-ment of entities of the scheme, and the role of government should be restricted as a mere supporter

It seems like that the scheme has been quite successful so farHowever, there could be some side effects in the future

To break off subcontract relationship with L-ESMEs cannot survive in domestic market

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37.7%

33.3%27.3%

20.0%

19.3%

Lack of Information

Weak Brand Power

Absence of Overseas Sales Network

ISO Standards Certification, Trade & Technology Barriers and Regulations

Difficulty in Entering New Markets

Source: Survey: Globalization, K-biz (2010).

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To use various SME policy instrumentsTo advance to other countries, especially ASEAN by FTA

Korea SMEs are not willing to cooperate with foreign companiesbecause of lack of experience

Too high proportion of heavy and chemical industry

To advance to US, China and Japan by FTA in the near future

Korea EU(%) Light Heavy Light Heavy

Enterprise 34.6 65.4 49.6 50.4

Value-added 27.4 72.6 38.7 61.3Source: KSBA. European Commission, SME Performance Review.

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1. Public Procurement2. Purchasing Assurance3. Who Will You Call?

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• Size : about 103 billion in US dollars

(c.a 11.5% of GDP)

• Amount of SME products purchased record by government institutions : about 62 billion in US dollars

(c.a 60% of total public procurement) Source: KSBA

Since 1981 this program has been ongoing to support the stablemanagement for SMEs market expansion

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• Under US $0.18million contracts competes only between SMEs (Large enterprises are excluded)

• Restricting joint bidding between large enterprises

• The product which is eligible to improve its quality & technological development sets for the ‘excellent joint brand’ cooperated with more than 5 SMEs

• Help to find public market through giving advantages not through bidding but with special appointment when public purchasing

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• Defense Ministry, KEPCO (Korea Electric Power Corporation), KOGAS (Korea Gas Corporation), and Korea Railroad Corporation etc.

• To develop a new technology with the assurance that they will purchase the technological products.

• Under this program, the SMBA finances the technological development of SMEs, while public institutions purchase the products for a certain period of time.

• As of 2007, about 55 institutions are participated as purchasing corporations, and the SMBA has supported ca. 170 technology development projects (budget ca. US $ 30 million) and plans to expand the participation of government agencies, public institutions and private businesses in this program.• 75% of entire R&D expenditure (max. US $ 100,000, 2 years) is granted

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www.kbiz.or.kr

www.korcha.net

www.korcha.net

www.sbc.or.kr

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you will find some difficulties

Exhibition, Seminar, Forum etc.

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