Korean mid-size companies call for revamp in policies that protect smaller peers

(Ministry of SMEs and Startups)

South Korean mid-size enterprises are calling for a revamp in the country’s policies that support only small companies as protection measures based on company size may distort the market and weaken industrial competitiveness.

Maeil Business Newspaper has learned on Wednesday that the Ministry of Trade, Industry, and Energy has delivered an opinion to the Ministry of SMEs and Startups that opposes the SME-focused designation of competition products for 2025-2027.

The industry ministry wants mid-sized and large companies to be able to participate in an open tender for 12 products, including electric vehicle chargers, PVC water pipes, asphalt concrete, commercial gas stoves, and concrete piles, citing safety concerns, market dependence, and risks of monopoly and collusion.

If designated as competition products by the SMEs Ministry, only SMEs can bid on these public procurement contracts.

Introduced in 2007, the policy was designed to help SMEs whose market access had been hindered by large or import companies.

With current designations expiring at the end of this year, the SMEs Ministry is reviewing new products for the next three years, assessing the need for support based on requests from SMEs and consultations with stakeholders. A final decision is expected by the end of November.

Critics argue, however, that limited competition over the years has led to issues, including technological lag and collusion among companies.

Asphalt concrete, which is heavily dependent on government procurement, is one example. The market is dominated by small companies with regional monopolies, and 95 percent of public procurement is through a monopoly supply structure managed by cooperatives.

The federation of asphalt concrete cooperatives, representing about 500 SMEs, recently asked the Ministry of SMEs and Start-ups to extend the designation of the competitive product for another three years.

Asphalt concrete has been designated as a competitive product since 2007, allowing industry players to participate in public tenders through the cooperatives.

The government has partially opened the market to medium-sized companies in 2022 in limited areas, including Seoul.

The Federation of Middle Market Enterprises of Korea opposes the continuation of the designation, arguing that the monopoly of the cooperatives restricts competition and hinders the development of the industry.